Are All Financial Advisors “True” Fiduciaries?

Jim Lorenzen, CFP®, AIF®

The short answer is ‘no’.   Mark Tibergien, CEO of Pershing Advisor Solutions, is quoted in this month’s issue of Wealth Management saying, “When we look at those who are breaking away [from traditional brokerages] and forming their own firms, we recognize that they are making a fundamental change from being an employee to being a business owner, from being a broker to being a fiduciary advisor and from being a product advocate to being a client advocate.”

According to the article, written by Mindy Diamond, president of Diamond Consultants, a nationally-recognized boutique search and consulting firm in Morristown, N.J. specializing in the financial services industry, here are just a few of the things she mentions to look for:

  1. Ability to serve the client first. Captive advisors, she says, essentially serve as product advocates for the firm and are limited to the products and platforms approved by their firms.  Independent advisors, on the other hand, serve as client advocates with access to the whole of the market – the ability to ‘shop the street’ for products and solutions that best serve the client.
  2. Higher level of transparency. At an independent firm, safe asset custody is separate from the advisor’s business and product manufacturing, creating a process of checks and balances.
  3. A clearer payment structure. Unlike the wirehouses, independent advisors aren’t paid according to a grid – a performance measurement based on selling ability and not meeting the client’s needs.  Higher production levels result in a higher percentage commission payout from the firm to the advisor.   Independent advisors are business owners with fully disclosed compensation that’s easy to understand.
  4. Ability to select the technology and services that best suit their clients – not what the ‘house’ provides.

It’s worth noting that independent registered investment advisors (RIAs) have legal fiduciary status automatically.   This may not be true in all instances when the advisor is considered an RIA representative only for the planning stage but reverts to registered representative (RR) status for product selection and implementation.

It pays to know who you’re dealing with.

Jim


Jim Lorenzen, CFP®, AIF®

Jim Lorenzen is a CERTIFIED FINANCIAL PLANNER® professional and an ACCREDITED INVESTMENT FIDUCIARY® serving private clients since 1991.   Jim is Founding Principal of The Independent Financial Group, a  registered investment advisor with clients located across the U.S.. He is also licensed for insurance as an independent agent under California license 0C00742. The Independent Financial Group does not provide legal or tax advice and nothing contained herein should be construed as securities or investment advice, nor an opinion regarding the appropriateness of any investment to the individual reader. The general information provided should not be acted upon without obtaining specific legal, tax, and investment advice from an appropriate licensed professional.

Ageing Issues Make Financial Planning More Important than Ever!

Jim Lorenzen, CFP®, AIF®

When I was a  kid, no one I knew had Alzheimer’s.  Heck, no one my parents knew had it.  In fact, I don’t think anyone even knew what it was!

There may have been a few special-needs children around, but I never saw one in either elementary or high school.   Attention deficit disorder (A.D.D.)?  Never heard the term.

What a difference a generation of changes make:  changes  in health care advances as well as in people’s lifestyles.  People are living longer – that’s a good thing; but new challenges face us all.

According to the Alzheimer’s Association, Alzheimer’s is now the 6th leading  cause of death in the U.S.  Between 2000 and 2016, deaths from heart disease actually declined by 11%; but deaths from Alzheimer’s increased 123%!

5.7 million Americans are living with Alzheimer’s today.  One in three seniors dies with Alzheimer’s or another form of dementia.  16.1 million Americans are providing 18.4 billion hours of unpaid care for loved ones suffering from Alzheimer’s and dementia.  It’s not covered by Medicare, and all those politicians who want to “reform” health care are  amazingly silent about solving this problem.

Virtually every family I know has been touched by Alzheimer’s (including my own) or special needs issues affecting children or grandchildren (again, including my own).

Many ‘baby-boomer’s’ have become known as the ‘sandwich’ generation – taking care of both parents and children or even grandchildren, due to the combination of increased longevity coupled with these new medical challenges families are facing.

It’s never been more important to have a long-term multi-generational financial plan in-place.   Many parents, for example, don’t realize that may have created plans for their special-needs child’s financial security that will actually disqualify the child’s eligibility for government benefits in the future… and that their plan needs to preserve that eligibility while seeing that the child will be secure all the way through the child’s own retirement.  Who pays the rent and utilities when the child is older and the parents are gone?  Where  does the child  live?  Who pays the rent or mortgage.. or property and other taxes?   How about transportation – for life?

Indeed, the challenges today are greater than  ever before because the issues are different.  When should a person begin planning?  Now.  It doesn’t  matter your age.  Do it now.

It’s not about being an investment guru; it’s about having a strategy tied  to a plan – and arranging assets to accomplish long-term objectives.

Do it now.   Okay, I’ll shut up.

Jim


Jim Lorenzen, CFP®, AIF®

Jim Lorenzen is a CERTIFIED FINANCIAL PLANNER® professional and an ACCREDITED INVESTMENT FIDUCIARY® serving private clients since 1991.   Jim is Founding Principal of The Independent Financial Group, a  registered investment advisor with clients located across the U.S.. He is also licensed for insurance as an independent agent under California license 0C00742. The Independent Financial Group does not provide legal or tax advice and nothing contained herein should be construed as securities or investment advice, nor an opinion regarding the appropriateness of any investment to the individual reader. The general information provided should not be acted upon without obtaining specific legal, tax, and investment advice from an appropriate licensed professional.

Retirement Withdrawal Strategy May Need a New Twist!

Jim Lorenzen, CFP®, AIF®

The right retirement withdrawal strategy shouldn’t follow conventional wisdom blindly.  What’s right for you might be very different.

Conventional wisdom says retirees should withdraw funds from taxable accounts first, tax-deferred accounts (IRAs, 401(k)s, etc.) second, and tax-free money (Roth IRAs for example) last.

But, should you do it that way?

The current tax laws aren’t permanent.  These current low rates some taxpayers enjoy may not last forever.  Maybe it might make sense to withdraw money from tax-deferred accounts during years when you can take full advantage of these low marginal rates.

Another idea:  Convert funds from tax-deferred accounts to a Roth IRA to take full advantage of the 15% tax bracket (be sure to pay the taxes from other taxable money); or, you may want to reserve funds in a tax-deferred account to accommodate the possibility of large tax-deductible expenses, such as medical costs which can occur later in life.

These are  ideas only.  Your situation is unique.  Don’t do anything without talking to your team:  You financial, legal, and tax advisors can help you craft the strategy that’s right for you.

Jim


Jim Lorenzen, CFP®, AIF®

Jim Lorenzen is a CERTIFIED FINANCIAL PLANNER® professional and an ACCREDITED INVESTMENT FIDUCIARY® serving private clients since 1991.   Jim is Founding Principal of The Independent Financial Group, a  registered investment advisor with clients located across the U.S.. He is also licensed for insurance as an independent agent under California license 0C00742. The Independent Financial Group does not provide legal or tax advice and nothing contained herein should be construed as securities or investment advice, nor an opinion regarding the appropriateness of any investment to the individual reader. The general information provided should not be acted upon without obtaining specific legal, tax, and investment advice from an appropriate licensed professional.