Remember Monty Hall? He was co-creator and game show host for “Let’s Make a Deal”, one of America’s all-time favorite game shows. Contestants were asked to decide which door they wanted. Behind the three doors were some booby prizes and some very valuable items. Problem was- the contestants didn’t know what was behind the doors.
Today, we’re changing up the game. Money Hall is going to ask you to decide which door you want. Behind doors 1, 2, and 3 are three very different financial advisers, all of whom want to manage your money. But today you’ll have an advantage. Money Hall is going to open each door for you and give you a detail of the adviser behind each door before you make your choice.
Money Hall: “Ready, let’s open Door #1. Financial adviser #1, please tell us about yourself.”
Financial adviser #1: “I’m a broker with XYZ Bank. I’ll do my best to sell you the products and services of XYZ bank. However understand that my primary obligation is to my employer.”
Money Hall: “Let me add some other important information about adviser #1. Adviser #1 is paid based on fees and commissions he or she generates for XYZ. He or she is required to make “suitable” recommendations to investors. However, he or she has no obligation to put your interests first. Investments don’t have to be the most appropriate, merely “suitable.” The “suitability standard” favors the brokerage firm and its employees over the investor. It also creates a conflict of interest between the adviser and the investor. Finally, XYZ bank considers its’ compensation to be “fee-based”. This means it receives fees from customers, commission payments on annuities and insurance contracts, and revenue sharing payments from mutual funds it recommends to its customers. Adviser #1 is a CFP® practitioner.”
Money Hall: “Thank you, adviser #1. Now let’s open Door #2. Financial adviser #2, please tell us about yourself.”
Financial adviser #2: “I work for LMN Company, a Registered Investment Advisor. We don’t sell products. We are fiduciaries and put our clients’ interests first.”
Money Hall: “Let me add some other important information about adviser #2. Adviser #2 is required by law to act solely in the interests of clients and disclose any potential conflicts of interest. LMN is a fee-only RIA. Its only income comes from fees paid by clients. It receives no commissions or revenue-sharing. Adviser #2 is a CFP® practitioner.”
Money Hall: “Thank you, adviser #2. Now let’s open Door #3. Financial adviser #3, please tell us about yourself.”
Financial adviser #3: “I’m an owner of ABC Company, a Registered Investment Advisor. I have signed a fiduciary oath stating that I will always put our clients’ interests first. Our firm works hard and uses a systematic, prudent process in all areas to fulfill our fiduciary commitments to our clients.”
Money Hall: “Let me add some other important information about adviser #3. Adviser #3 is similar to financial adviser #2 in that he or she is required to act solely in the interests of and with undivided loyalty to their clients and disclose any potential conflicts of interest. In addition, though, adviser #3’s firm consistently uses a fiduciary quality management system (analogous to ISO 9000) to organize, formalize, implement and monitor the proactive financial planning and investment management it performs for its clients. ABC is a fee-only RIA. Adviser #3 has the CFP®, CFA, and Accredited Investment Fiduciary (AIF®) designations.”
So, it’s now your choice. Door #1, Door #2, or Door #3? Who will manage your money? Who do you want to be your trusted adviser? Who will always put your interests first? Who will always disclose potential conflicts of interest? Who has a proactive process to make sure they fulfill their fiduciary obligation to you? And, who has best demonstrated their commitment to you and excellence in their profession through their multiple credentials and experience?
Did you make your selection? We hope the choice was clear. If it was, you might be as happy as this couple:
BTW, if the adviser behind Door #3 sounds like someone you know, it is. Brett and I are CFP® practitioners, CFA charterholders, and AIF® designees. DWM believes effective relationships between investors and advisers are built on trust. That trust is grounded by a commitment by the adviser to act solely in your best interests.
However, it goes beyond that commitment. It requires the application of a prudent process consistently applied, which we do every day. We value greatly our role as wealth manager and fiduciary with our clients as it puts us in a special relationship of trust, confidence and legal responsibility. It’s a role we don’t try to avoid, it’s one we cherish.