“Choices are the hinges of destiny.” – Edwin Markam
Imagine you’re navigating a seemingly infinite number of career options. Maybe there are several companies that want you to lead the next stage of their growth. You know not all options are in the best interest of your career, and you want to make decisions that’ll help you achieve your long-term goals and solve your immediate challenges.
To help you evaluate your options and decide on the best course of action, you decide to hire a career consultant. You quickly discover there are three types of consultants you can work with:
- Consultant #1 takes the time to get to know you, your current challenges, your skills and, perhaps most importantly, your long-term goals. This agent has no incentive to steer you toward a specific company.
- Consultant #2 has more of a checklist mentality. This agent’s interaction with you is simply a series of individual transactions and doesn’t include an ongoing strategic approach to your career. This agent is also paid a commission when you sign with a particular company.
- Consultant #3 wears two hats. Sometimes this agent functions like Consultant #1, taking a long-term, strategic approach to your career planning. At other times, this agent functions like Consultant #2, executing transactions and being paid commissions. Your biggest challenge is in distinguishing when this agent is wearing hat #1 and when this agent is wearing hat #2, because the difference is significant and really matters.
Which agent would you choose? For most of us, the choice is obvious. But what if you used the same criteria when evaluating financial advisors? At Creative Planning, we believe the differences between your real-world options for financial advisors are very similar to the differences between the examples described above.
Financial advisors typically fall into three categories: independent investment advisors, broker-dealers and dually registered advisors. Below, we illustrate the differences between these three types of advisors and how these differences can impact your long-term financial goals.
Spoiler Alert: Creative Planning fits into the independent investment advisor category (the financial planning equivalent of Consultant #1 above), which is the type of advisor we believe is appropriate for most people.
Option #1: Independent Investment Advisor
Key Attributes
- Fiduciary advisor required to meet the fiduciary standard
- Strives to build long-term relationships
- Typically paid a quarterly or annual fee
- Seeks to avoid and/or minimize conflicts of interest
Potential Impact
- Advice from a fiduciary
- Lower costs
- Higher probability of achieving long-term goals
Option #2: Broker-Dealer
Key Attributes
- Typically operates on a transactional basis
- Typically paid a sales-based commission
- Legal obligation to you is limited to the time of the transaction
Potential Impact
- Built-in incentive to sell you specific products
- May sell proprietary products
- Lack of an ongoing strategic approach to your financial goals
- Your portfolio may include investments that don’t align to your current situation or future goals
Option #3: Dually Registered Advisor
Key Attributes
- Serves as both a broker-dealer and an independent investment advisor
- Legal obligations to you change as the dually registered advisor alternates between the two roles
Potential Impact
Requires you to constantly confirm whether they’re acting as a broker-dealer or as an independent investment advisor. The difference between the two is very important.
Why Creative Planning?
Creative Planning is a fiduciary. Our employees are fiduciaries. We don’t sell our own investment products. We’re not incentivized to recommend one particular investment product over another. We make customized recommendations to help you achieve your goals after we take the time to understand what those goals are and where you stand on the path toward achieving them. We deliver a depth and breadth of services and capabilities that many independent investment advisors are simply unable to provide. These services and capabilities include not only financial planning but also tax, trust and estate, insurance, retirement planning, investment management and more. And we offer all these services while providing a personalized experience for each client.
