Its important to understand that there is a subtle difference between Fee-only and Fee-Based Advisors.
Fee only Financial Planners are just that. They charge by the hour or per service and are not licensed to sell investments or insurance. Some work with Financial Advisors and their clients (the HNW and UHNW) as they have complex planing issues that require a specialist. There is a very small number of Fee Only planners in Canada due to our relatively small market.
Fee Based (what STL is referring to) is where an Advisor is registered to sell investments (probably insurance as well) and charge a % of AUM. I am currently in the process of converting to the Fee Based model. I agree, in general, this is where the industry is headed.
@ geo - if you are looking for a referral for a Fee Only Planner I have a name that I can pass along. PM me if your interested in more information.
Not variable annuities or structured products, or other products that are considered securities. They can only sell those if they’re dually registered with a BD which is a rapidly growing subset of the RIA market, but still very small.
There are some do it yourself investors that prefer to manage their own investments and to pay directly out of pocket for a one time financial / estate plan.
Again, in Canada (Ontario) Insurance products woud be considered an outside business activity (OBA). This would include life, disability and CI insurance. Advisors tend to hold an investment and insurance license as seperate entities so that you can be full service.
I know. It’s an insignificant amount though…at least in the U.S. anyway. That’s one of the worst business models for both the advisor and the client that I could think of.
I think a lot of “cfa types” are far to quick to shrug off the value that IA’s add, especially for the general public. I can personally think of a few IA teams to recommend to family and friends, and have done. Yes there are many horrendous ones that I would not trust $100 with, you just have to do your proper due dil. As said previously, they really show value in the HNW segment. Not to mention, IM is just one aspect of financial planning.
@Mike79: I know your teams have access to Estate Planning Specialists (or whatever your firm chooses to call them), but how accessible is an actual Estate Lawyer for you? I’ve worked on far too many cases where I have to get my internal legal team involved because the IA can’t get answers through their internal resources. And I’m talking about large IIROC firms such as SCM and RBCDS
We have access to a team of specialists within our group that would include Lawyers and Accountants. I also have a Lawyer outside of the firm who works with a Law firm who specializes in estate planning who can help implement recommendations if required. The key here is to find good Lawyer who has the right experience and is a good fit for you to refer to. (Like you would qualify him and feel comfortable referring a client to him to implement xyz strategies for his estate planning).
What’s coming out of this discussion is that there are plenty of good reasons to talk to someone who has a financial advisor *function*, it’s just that these people often won’t have the “financial advisor” job title. Moreover, having “financial advisor” as title doesn’t necessarily mean that they are qualified to do what you need; indeed, if they are called a financial advisor, there’s good reason to check further into their qualifications.
I look at it like this. I have a friend who’s a lawyer from a nonhacksaw law school. They got a DUI awhile back. They fought it in court. And guess what, they retained a top shelf lawyer to help them fight it. I was told good lawyers never represent themselves in personal matters. Don’t ask me why, just something I was told.
We as CFA financiers think we are all powerful and all knowing about all aspects of financial management both retail, institutional, and and corporate. This is a dangerous way to think. You need checks and balances if only to ensure your hubris is not bigger than your D.