Broker or Advisor? Fee-based or Fee-Only? We know sorting through all of the fancy titles and industry jargon can make choosing a financial advisor feel like a mistake waiting to happen.
Be cautious. Be skeptical. But don't give up. Because we also know that honest, objective financial expertise has been a very wise decision for our clients - and we believe if you have accurate information, you can make a wise decision too.
If these 3 things make sense, then you're on the right track:
1. OBJECTIVITY: If you want financial guidance that is never influenced by a sales agenda, choose an advisor who doesn't even have a sales license.*
Fee-Only Advisors are the ONLY financial professionals who believe a "fiduciary duty to serve your best interest" means never accepting sales incentives.
2. INDEPENDENCE: If you want investment choices that are never dictated by a company profit agenda, choose a company that doesn't profit from your investment choices.*
Independent Advisors with no Brokerage or Wall Street affiliations (disclosed in fine print on their business cards) are the ONLY professionals with access to investment choices from the whole universe of financial institutions.
3. EXPERTISE: Before you trust anybody with your family's money, take the time to verify:
FirsTrust Advisors are accredited experts with 20+ years of experience, references from local clients, attorneys and CPAs, and Public Disclosure Reports showing they have never been disciplined for violating a client’s trust before.*
Quick story: It's 1980-something; and I can vividly recall standing in a cruise ship casino among a crowd of passengers who appear hypnotized by a large wheel, spinning on the casino wall. It looks kind-of like the Wheel-Of-Fortune, but the wheel contains the numbers 1 through 100, and the objective is to correctly pick which number will be at the top of the wheel once it stops.
An attendant in a tuxedo spins the wheel while a few gamblers place their bets. But the majority of the crowd just stands there, gazing at the wheel, each holding a little yellow pencil and a white note card that says "Number Tracker" across the top in bright red letters.
Each time the wheel stops, Tuxedo yells-out the winning number, and the spectators bow their heads to scribble something on their Number Tracker cards. My curiosity grows, and I finally have to ask why:
“Excuse me, Sir,” I said to the elderly man standing next to me, “May I ask what everyone’s doing?” He reluctantly revealed his Number Tracker card and said, “We're tracking the numbers."
As I studied his card, I saw that he had been marking an X across the numbers that had won in recent spins. “Number 34 just came up on the last spin," he said, "so I know that I should not bet on it right now.”
“Why not?” I asked.
He raised his eyebrows and glared at me over his glasses. “Odds are against it", he said. "How likely is it that 34 will come up again on the very next spin?”
I quickly answered, “One in a hundred”.
He looked to the ceiling for patience, and calmed himself with a deep breath. "Now look," he said, "statistically, the chances of number 34 coming up twice in a row are pretty slim - so I crossed it off my card. Understand?"
"Actually," I replied, "every time the wheel spins, each number has a one-in-a-hundred chance of winning - it doesn't matter which number won last time."
The man threw his hands in the air and sarcastically barked, “Oh, I see; you’ve got it all figured out and the rest of us are just a bunch of dummies, huh?”
He returned to his task as I stood there with one of those "Are you serious?" looks on my face.
And then it suddenly occurred to me:
Who gave all these people the little yellow pencils and the "Number Tracker" cards?
That’s right - the casino did. They know that humans tend to validate risk through irrational behaviors, so the house promotes it. They capitalize on it. And they even distribute the tools for people to do it with.
Is this illegal? No.
But that doesn't make it right!
The same shameless profiteering has become a cornerstone of the Wall Street culture, and the once respected brokerage firm has become a pyramid-schemed product distributor at the expense of well-intended advisors and innocent investors.
Just look at that picture.
True wealth comes from family. It comes from making a positive difference in the lives of others. And it comes from that sense of integrity you get from just doing the right thing.
At FirsTrust, we earn true wealth by doing the right thing for our clients.
Even as we watch the brand-name banks and brokerage firms make a LOT more money than we are, outraged by how they profit from misleading and pillaging the unaware consumer, we just keep doing the right thing...
...because what we get from doing the right thing is priceless.
WE will never allow our objectivity to be compromised by taking kick-backs, sales commissions, gifts or promotional incentives.
Other countries restrict the use of the title "Financial Advisor"; if they are unqualified by education and experience or receive any sales-related compensation, they must call themselves something besides "Advisor" so the conflict of interest is clear and obvious to the consumer - not buried in the fine print.
Why don't we do that in our country? Because self-regulated Wall Street firms (yes, you know their names) spend gazillions of dollars lobbying to prevent it. This isn't the first time (go ahead and Google "the Merrill Lynch Rule") and it probably won't be the last.
Wall Street is one of the most horrendously conflicted places on Earth, and the companies that profit from it deploy insurmountable resources to intentionally cloud the facts.
The "fee-based" community claims that proper disclosure makes everything OK. After more than 30 years in this business, however, I've never met an informed investor who agreed to pay a fee for advice AND a commission for following it.
So even when it seems like everybody else is doing it too, be smarter. Even when your portfolio is going up and everything seems fine, read the fine print. Ask tough questions. And seek objective guidance from an independent expert with no dog in the fight.
Why am I still in this business if I so despise its traditional culture?
Because this is where we can make a BIG difference.
No - it's not okay to promote consumer confusion and then profit from their lack of understanding.
That's NOT doing the right thing, and our firm won't let it happen to our clients.
I guarantee it!
If you've actually taken the time to read my story and want to hear it from me personally, call me. 386-788-3737. Ask for Susie, tell her I invited you to call me - and I'll be honored to speak with you.
Michael T. Koenig
FirsTrust founder & CEO
PS: A "WORD OF WISDOM" FOR INDUSTRY PROFESSIONALS:
I believe most of you are intelligent, honest and ethical. So just answer this one question:
Are you aware there is a very strong inverse correlation between what is best for your clients and what pays you the most money?
The way I see it, there are only 3 possible answers:
a) Many of you are unaware; proud of your new "advisor" job at a big name financial institution, and blissfully drinking the company Kool-Aid until one day you realize your company shareholders care more about their profit than your clients', and you've inadvertently become a corporate sales rep. I was too at one point, so my advice for you is to step outside the box and look at all of the healthier, less expensive choices out there that you could offer your clients if you were independent. Next, take a close look at your Broker-Dealer's "trade away" rule - which prohibits you from obtaining these better choices for your clients. And finally, you may want to ask yourself, "How can I be held to a "fiduciary" standard but literally prohibited from doing what's actually best for my clients?"
b) Many of you are semi-conscious about it; aware but hopelessly addicted to the fancy title, company logo and hefty paycheck. I was too at one point, so my advice for you is to wake up and recognize, at the end of your career, that the most positive difference in your life will come from making the most positive difference that you can in the lives of your clients. If you really want to do the right thing for your clients, take a minute to actually read all the conflicts of interest that your company discloses in fine print - and then go ELIMINATE them. If you truly want to but don't know how to get started - call me.
c) And there's a good handful of you who are fully aware, just don't care, and surround yourselves with open cookie jars yet claim to never have your hands in one. I've got nothing to say to you.
For those of you in categories A or B, my word of wisdom for you is to simply start with baby steps. With every client you speak to, begin continuously asking yourself, "what would I do if it was MY money?". And then listen to your own words of wisdom.
Because I promise you, at the end of the day, true wealth really has nothing to do with money.
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