It’s all about choices

Curt Pouyer |

My brother-in-law and I get along famously and always we find ourselves enthralled in political conversation, usually following a couple cocktails.  We are both on the same side of the fence and are always questioning “why do people do this or that when they have this or that?”  My brother's answer and go to phrase is “it’s all about choices!”, simply meaning the choices we make define who we are and what we do.  So true, no matter what we are doing we make choices on a daily basis that are definitive in some manner.  Some examples of those definitive choices could be deciding to go to church on Sunday morning, going to work, paying bills or maybe purchasing a toy, all of which define who you are.    

It is my job to help my clients define themselves with their investable assets by choosing an investment plan and strategy.  This could be producing more income, saving more money, creating more wealth or all of the above.  We all want to make the right choice with our money but sometimes we find ourselves stuck and in turn procrastinating.  When it comes to investing there are many choices we have to make.  Hiring the right institution, finding the correct advisor and what investments are right for you. I want to help explain some of these options so you can make the best choice to define your needs.

First, it is imperative to find an advisor that utilizes the “Fiduciary Standard”.  The Department of Labor defines a fiduciary as an advisor that acts in the best interest of their clients and represents their clients’ interests above their own.  Also states that retirement advisors cannot conceal any conflict of interest and all commissions earned within retirement plans and planning must be clearly disclosed in a dollar amount.  Not only should this be expected as a normality but should be boasted with pride from an advisor and their firm.  

Acting in a fiduciary manner, in the simplest explanation, means that an advisor is obligated to recommend investments that are appropriate for you as an individual and put the client’s needs above the advisor’s own interests, or should I say “compensation”.  Alternatively, most advisors or brokers are held to a “suitability standard”. This standard has more room for error, meaning that an advisor only has to reasonably believe that their recommendations are suitable based on the client’s financial objectives.  This standard is usually motivated through commission compensation.  There are efforts to make the “fiduciary standard” law, but for now the only license held that is legally obligated to adhere as a fiduciary in all accounts is the Series 65 advisor.

There are several options for institutions that can custody your assets.  There are full-service brokerage firms, independent brokerage firms and Registered Investment Advisory firms.  The first two have services that can help from the first dollar invested, to and through retirement and progressing to generational planning.  There is a choice of using an affiliated advisor or opening an independent account you can manage on your own.  An advisor with a full-service broker dealer has all asset classes available but is usually motivated to represent their clients with a mutual fund/ETF strategy.  In and of itself this is not a bad strategy but on top of the mutual fund expenses this strategy is usually compensated through commissions and other management fees which makes it expensive for the investor.  Advisors with independent firms are more likely to represent their clients through all asset classes; mutual funds, ETF’s and stock.  If you are interested in managing your own account, broker dealers of both types offer extensive research information and current financials on all the investments offered.  These two types of broker dealers can but are not legally obligated to act as a fiduciary outside of retirement accounts.  Most, but not all of these brokers business models are commission motivated through the mutual funds and insurance products they offer.  

Registered Investment Advisory firms are independent entities that employ Investment Advisor Representatives to plan, invest and manage your investable assets.  These advisors are the only legally obligated advisors to represent the “fiduciary standard” in every aspect of your investment strategy.  RIA firms do not custody your assets in and of themselves.  When you hire an RIA firm you are simply allowing the representative to make investment decisions in your best interests on your behalf.  Registered Investment Advisory firms may have a specific custodian or may have many custodians to choose from.  For example, Montgomery Wealth Management uses Charles Schwab because their commitment and service to our clients is second to none.  RIA’s make their money through “fee based” management and advice and are usually at the higher price range in comparison to their peers because of the tailored approach to each portfolio.  All fees are predetermined before signing on the line.  Registered Investment Advisors have options from every asset class and usually deploy strategies such as they pertain to you. RIA’s are motivated through their clients because the better the client's account performs the more the RIA makes and vice versa.

In closing, all of these options have their pros and cons and therefore can help or hinder in one form or another. In other words, “it’s all about choices”.  I hope this information helps you make choices that define your financial peace through an investment strategy that helps you reach your goals in the most lucrative way. 

Please reach out with any comments, questions or concerns. It’s all about choices