Franklin providing more services as Fee Only Advisor.
My oldest daughter, Sydney is now a teenager in high school. Jack and Walker both seem to be growing up too quickly as well. But they are not too old to still LOVE Ice Cream. We cannot keep ice cream, cookies or sweets of any kind in the house for very long. We've found the key to keep them eating healthily is to limit their temptation by not having these items in the house. When they were younger, if they could have had ice cream for breakfast, lunch and dinner, I believe they would have. They would have gladly consumed the sweet stuff all day long if given the opportunity. This was not what was best for them, however.
Because we love our children, we encourage them to eat well but we also make sure to primarily stock our pantry and refrigerator with healthy items. In this way they learn to enjoy being healthy and we as parents are promoting what was in their best interest. We are able to accomplish this most easily by eliminating the temptation.
Acting as a fiduciary for our clients, we are required to do what is in their best interest. I decided late last year that I wanted to eliminate as many temptations as possible keeping us from putting our client's interests first. Even though Certified Financial Planners and Registered Investment Advisors are considered fiduciaries, as long as we kept sweets in the pantry, there was still the temptation to promote something for our clients which, although popular, might not be optimal.
Are we allowing clients to gorge on the desert bar of the financial industry or are we advising them to do what is best for their financial future?
These are the types of questions I kept asking myself. Eliminating temptation was one of the many reasons I decided to become a fee-only financial advisor.
As I heard another advisor put it recently,
"Even though we are drinking water in the bar, there are too many drunks so let's not go into the bar."
A Client-first Approach
Today's investors know more about what they deserve from their advisor than ever, and transparency has become an expectation.
As clients learn more about the services for which they are being charged, they deserve to know what's in their best interest. They deserve to be served in the best way possible. They deserve to know their advisor is doing everything he or she can to provide value beyond a doubt for a reasonable fee.
We, as a profession, need to continue our push to create transparency and better client relationships. That is the driving force behind becoming Fee-Only. Clients will be able to see all assets through a single pane of glass.
Why Do Some Companies Encourage Conflicts?
A 2016 poll by the American Association of Individual Investors found the majority of respondents (65%) mistrust the financial services industry to some degree. With a scarred reputation like that, not even the most robust product offering or technology can overshadow a feeling. If we're not acting in the best interests of our clients at all times, we're falling short of the fiduciary standard we all follow so intentionally. Yes, the mandatory fiduciary standard for retirement plan advisors may have seen its last shimmer of light in 2018, but that doesn't mean advisors should hold themselves to less. If you're waiting on a law to be passed in order to do what's in your clients' best interests, it won't be long before you are the one that goes extinct.
As we have noted in previous articles, many times the brokerage firms and insurance companies are intentionally at odds with what is best for the client. In Wall Street's Pigs and Wolves and Do You Really Know What You Own? we outlined many ways brokerage firms package proprietary products and dupe the investing public into buying overly-hyped, inflated offerings.
The Road to a Better Client Experience
We added TD Ameritrade as an additional custodian to save costs and provide more robust technology solutions for our clients. We have been able to pass on these savings to our clients because of the lower expense structure.
We have grown weary of firms that intentionally pay next to nothing on cash balances and refuse to allow us to offer better rates. We want to open up our offerings to allow us to better serve clients within their retirement plans. We also want to uncover ways to further reduce costs for business client's retirement plans and within the annuities clients may already own. As a fee-only Registered Investment Advisor, this can now be done.
Clients can now take advantage of these new benefits:
Cash-Max - Within TD Ameritrade accounts we are now able to direct cash balances above a certain threshold to competing bank programs to offer higher interest FDIC money market / savings rates.
As of May, 2020 we are able to increase cash yields to 1.44% for idle cash with FDIC Insured cash balances of up to $1.75 Million per individual.
Easy-K - We have previously been able to advise on retirement plan assets for clients. In addition to this, we are now also able to place trades within these retirement plans for those clients who wish to take advantage of this service. To date we have primarily been advising on Fidelity 401k accounts but plan on extending this service over the coming months.
We are also now able to offer Retirement Plan services for company retirement plans at less cost. Previously, our custodial firm (LPL) required that we charge additional expenses through these retirement plans with a portion going to the firm. We are now able to offer these services at less-cost, as fee-only advisors.
Annuity-Rescue - For those clients who own annuities, we are now able to reduce internal costs with several carriers by converting these annuities to fee-only annuities. In addition, we are also able to continue to provide advice on a greater range of annuities through our new relationship with Fidelity and affiliates.
Although we still believe that annuities tend to be over-prescribed for clients and mis-understood, we feel we can mitigate some of this by helping clients reduce their overall cost and provide more guidance through this program.
Important Disclosure Information for the "Backstage Pass" Blog
Please remember that past performance may not be indicative of future results. Indexes are un-managed and cannot be invested into directly. Index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investments. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Franklin Wealth Management), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Franklin Wealth Management. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Franklin Wealth Management is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of Franklin Wealth Management’s current written disclosure statement discussing our advisory services and fees is available for review upon request.