What is an Independent Financial Advisor?

You may have heard that you should work with an Independent Financial Advisor, but what does that even mean? Trying to find one can be even trickier because there are multiple definitions of an Independent Financial Advisor. Here are a few tips to help you understand if you are working for one or not. This can also help you understand if one is right for you. Being able to work with financial advisors in my career has helped me identify what the differences are between someone who is independent and someone who is not. Trusting someone to create a retirement plan and financial plan for you is important, but so is who they are working for.

An Independent Financial Advisor is a financial advisor that essentially works for their client, not their firm. They are typically independently owned by the advisor which gives them the freedom to choose which investment options to offer their clients. Not only the investments, but also the tools to use to help their clients. They are able to give independent advice without trying to fill quotas and can often give advice in multiple different ways. Some Independent Advisor firms can have multiple advisors working independently for their clients.

There are clear flags that give away whether or not they are an independent financial advisor. First off, if they work for a large life insurance company, bank, brokerage, or investment firm, then they are definitely not independent. Ever wonder why the person who works for XYZ is always offering their own companies product? Some financial advisors with these companies will make claims that they are independent and can offer outside products or investments, but they seem to always offer the company they are under first. That is because they are incentivized to do so or they have quotas that have to meet. Even mutual fund companies will pay these big firms to put their mutual funds on the top shelf to offer you. If you want to make sure you are getting the best thing for you, there usually is a better way, and a bigger company doesn’t always mean better.

When working with the large firms, you may also just be another number to them. When they have billions and billions of dollars and you have $500,000 with them and you decide to leave, are you really making that big of an impact on them? When you are working with an independent financial advisor, they are typically heavily invested in you as a client and usually make sure you are getting taken care because you mean a lot more to them than a number.

An Independent Financial Advisor will also show you multiple options with many different tools. It usually isn’t a one size fits all mentality. There is no such thing as all annuities are bad or all stocks are bad, it is all about how the product or investment will be used for your particular retirement plan. They should be using multiple private wealth money management strategies and many different insurance carriers if they are offering annuities. If they are showing you multiple options with many different companies, then chances are they are working as an Independent Financial Advisor.

If you are looking for an Independent Financial Advisor, look for one that has a fiduciary duty. A fiduciary is legally obligated to put your interests before their own. When you combine an Independent Financial Advisor with a Fiduciary, you are better off getting a financial plan that is going to be best suited for you with minimal costs, fees, and risk. Make sure they list any conflicts of interest as this can also be another stumbling point in making sure they are acting as a Fiduciary and independently. Ask for an ADV form, which they are legally obligated to give you, and it will list all the conflict of interests as well as any previous disciplinary action.

I don’t know if an independent financial advisor is for you, but they tend to have more advantages over the ones that aren’t. Understanding who they work for and what they offer will give you a better direction in making sure you are working with a financial advisor that has your best interests in mind. Adding in the fiduciary capacity and will find a financial advisor that will your retirement plan together with your goals in mind to help you achieve your objectives.

Video Transcription

Hi Vince Oldre, certified financial planner with Assured Retirement Group. I want to talk to you about what an independent financial advisor is.
Now there’s a lot of financial advisors out there. How do you know if you’re working with an independent advisor or not? Now an independent financial advisor is typically owned by the financial advisor. It could be a larger independent financial firm with many advisors but they’re not working for the company. They’re working for you and often they have tools that they’ll use to work for you, not you as another number. They also will be able to offer many different products or investments based on your situation. They usually do not have quotas or they do not have companies that are telling them exactly what they should be selling. So how do you know if you are working with an independent financial advisor even though they might call themselves an independent financial advisor or not. Now some flags or red flags that are out there is that they might work for a large bank or a large insurance company or even brokerage or investment firms. Now they could still be independent however, if they’re working for one of those large companies, what we find is that a lot of times you’re going to be offered products that are from that exact company. Now that doesn’t mean it’s the best thing for you, it just usually means that the best thing they have for you.
That doesn’t mean they’re trying to not look out for you but if there’s something better out there for you they typically aren’t going to search for it. They’re going to use what they have in-house. Why, because they might have quotas or they might have incentives to sell those products more than others. The other problem when you work with a larger firm like that is you might just be another number. When you’re working with a smaller independent advisory firm usually you’re taken care of, hopefully like family not as another number.
Now as an independent financial advisor you also need to look for someone that has your best interest at mind. You should find an independent financial advisor that has a fiduciary duty, which means they have to put your interests before they own. They are legally obligated to do that. Now you might say well why aren’t all financial advisors looking out for my best interests and they should. But legally a fiduciary has to look out for your best interests, so when you look for an independent financial advisor or if you’re working with one or think you might be working with one, make sure they’re also a fiduciary.
Now if you want to learn more about some other things when it comes to retirement, please watch our other videos and if you want to come to one of our workshops or even our retirement one on one workshop where we host at an Educational University make sure to sign up, as those tend to fill up and we’ll give you the course materials to look for an independent financial advisor.
Until then, I thank you for watching and we’ll see you next time.

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What is an Independent Financial Advisor?
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