Presentation on theme: "What it means to you! “What’s What?” & “Who’s Who?” Financial Services can be very complex and obscure for even sophisticated members of the investing."— Presentation transcript:
“What’s What?” & “Who’s Who?” Financial Services can be very complex and obscure for even sophisticated members of the investing public. You don’t need to understand everything, but its critical to understand the motivation behind the person offering you financial products or advice!
Broker vs. Advisor Broker (the Suitability Standard) Offers products for sale from a range of companies her or she represents Is paid commissions from those companies as calculated as a percentage of the amount you invest.
Broker vs. Advisor Advisor (the Fiduciary Standard) Offers “best advice” taking into account the needs of each clients individual situation. Is paid by a residual fee that is calculated as a percentage of the total assets under advisement.
What’s What Bottom Line: Fiduciary is client focused “advice in the best interest of the client including the disclosure of any possible conflicts of interest” Suitability is product focused “does the client have enough assets to purchase this financial product”
Who’s Who Understanding who’s helping you with your financial decisions is paramount! Advisors or Advisory Firms – offer unbiased advice in the best interest of a client and charge a fee for that service. Brokers or Representatives – “represent” the broker- dealer they work for and sell you financial products for commission. You pay for each buy and sell, as well as other hidden fees.
Why Care? There are two main reasons for ensuring you’re working with a Fiduciary Advisor 1. Cost: In many circumstances these “Retail” products sold by brokers have upfront commission and undisclosed internal costs that can erode your net returns. Wall Street Journal article – “The Hidden Cost of Mutual Funds” – March 1 st 2010.
Why Care? 2.Motivation: Brokers get paid to sell you products. Their motivation is to sell you more and more products and trades shares to earn commissions Advisors are paid for the advice and management they give you.
Informed Investors Informed investors ask better questions and can better ascertain the type of “Advisor” they want to work with for life.
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