Both John & Paul make some excellent points. Johns information format is comprehensive and sets clear expectations from the start. With that being said, Paul nailed the truth about the industry, stay away from the big-box shops. The retail (individual) side of the financial service industry is ripe with conflicts of interest and driven by asset gathering. In full disclosure, I worked for large financial institution for almost 10 years before I went independent. As an independent company, we are not owned or financially supported by any bank, broker-dealer or insurance company. As a Registered Investment Advisor we are monitored and regulated by the State of Texas Securities Board. And as a proponent of genuine, unbiased investment advice, we are always willing to go the extra mile for the average investor.

So glad to see these discussion occurring, thank all of you for your input as well as your questions. People should not be scared of the financial service industry, the industry should be scared of people.

http://www.simpleinvestmentsolutions.com

JRS

I really like your post and I think it does a great job in covering the basics when it comes to choosing advisors. I’m just confused as to what someone like me, a recent university graduate, should do when choosing an investment advisor. I don’t want any acknowledgment of fiduciary responsibility or any of other special services that come along with having a fully managed account, but I was looking for someone to get me started. How does someone like me who is just starting off go about getting an advisor who can help with me basic things like asset allocation and paying off my college loans. Would you recommend sticking to the big advisor/brokers such as Schwab & Fidelity? My biggest worry about them is that their advisors aren’t really “advisors” but more sales-people, at least that’s the feeling that I’ve gotten when speaking to some of them.

What are your thoughts on this?

You have written an excellent piece on Choosing an Investment Advisor! However, you may want to consider the firms recommended at the end. You recommended starting with the large investment houses. As you may know, there are no “pure” investment advisors working at Smith Barney or Merrill Lynch as all investment professionals with the large Broker Dealers are Brokers/Registered Representatives. Some may also be Investment Advisory Representatives of the Broker Dealer’s Registered Investment Advisory Arm, but there are no advisors at these firms who are not also brokers.

This is not a semantic issue and I would recommend you to take a look at the following TD Ameritrade brochure on the differences between Registered Representatives (who represent and are legally obligated to their Broker Dealer) and Registered Investment Advisors (who have a fiduciary responsibility to put their clients interest first). Click http://www.tdainstitutional.com/pdf/FinancialAdvice.pdf to review the two page piece.

There are good brokers at Merrill Lynch and Smith Barney, but they are commission compensated sales people who may choose their capacity and responsibility depending on the client and personal choice. I would not use the term “advisor” when referring to any broker, even if they use that title on their business cards. They do not normally, and rarely choose, to accept fiduciary responsibility for the products they sell or the recommendations that they make. The SEC link in your blog contains solid information on choosing an advisor, not a broker. Most of the information it contains does not apply to brokers!

Everything else in your blog entry was outstanding and most investors would benefit from using it in their initial interviews with investment professionals. The differences between advisors and brokers is not understood by most investors simply because the industry allows terms like “advisor” or “consultant” to be used by commission sales people.

Best regards,

Paul Puckett, Principal, Beacon Wealth Advisors, LLC