WE DO BETTER WHEN YOU DO BETTER! One of the more prominent recent TV commercials comes from a well-known Wesst Coast adviser whose spokesperson proudly announces that they do better when their clients do better. Surprise, surprise, with rare exception that’s the fee arrangement used by the overwhelming majority of firms in this industry. Typically, advisory fees are set as a percentage of assets under management. Although a midpoint would probably be about 1% annually, as assets to be managed reach higher levels, fees are reduced. Yet, this commercial seems clearly aimed at convincing less knowledgeable investors that by some minor miracle the firm behind it is giving you a better deal. That’s hardly the case. Though fee arrangements usually follow a common path, they may reflect the asset allocation if the split varies markedly from the norm. One example would be accounts that are heavily biased toward fixed income. For those, the fees would be lower. Another
HOW TO SELECT A FINANCIAL ADVISER Financial advisers usually come under the following headings: stockbrokers, Registered Investment Advisers, and individuals with the following designations: CFP ®, CFA, CLU, ChFC. Most other lettered designations are misleading. Some, in fact, are available online for only a small fee and a 10-question test. The most common financial adviser is a stockbroker. Years ago, a stockbroker was known as a customer’s man. That was in the good old days when trading commissions were fixed and the cost of individual trades was $100 to $200 or more. These days, commissions are rarely over $10 and often free, regardless of the size of the order. The key hurdle for prospective stockbrokers is the Series 7 exam. It’s a 3 hour and 45 minute test that is little more than a check on one’s memory. The material covered includes such areas as industry regulations, basic economics, security types, and simple investment concepts. It does not in any way confir