Most financial planners work within a corporate environment for massive broker-dealers or insurance companies. Within those structures, the best interests of the client can sometimes come second to the firm’s desire to maximize profit. Public shareholders, a corporate board of directors, and multiple levels of managers all add layers of influence that may detract from an advisor’s ability to provide conflict-free advice that puts clients first. Members of the San Diego Financial Advisors Network all work for (or own) independent firms in order to be free of such complications.
Focus on clients, not corporate employer
As independent financial advisors, we work for our clients rather than for a corporate entity. Our loyalty is to our clients, and we adhere to a strict fiduciary standard while serving them. We have no pressure from managers or sales quotas to distract us from our primary responsibility to take care of clients, and are incentivized to keep our clients for the long term by providing excellent service.
Wide range of solutions
Since we are not affiliated with any financial product providers, we are not limited to a specific list of whatever investment or insurance products our employer allows. We are free to recommend a much broader range of solutions, which may not even include the sale of any financial product at all. If you go to a Ford dealership looking for a car, they won’t be able to sell you a Toyota or a Chevrolet even if specific models from those companies might be a better fit for your needs. The same principle applies to financial products and services.
This freedom results in better advice and better outcomes for clients.
Dedicated service with less turnover
Across the financial advising industry, there tends to be a tremendous amount of employee turnover. Many of the large firms have a history of hiring large groups of new financial advisors, throwing them all right into it after receiving some basic sales training, and keeping the few who generate enough revenue to survive. Most of them end up leaving the industry entirely. Even among those who do survive, it’s not uncommon to switch firms every few years to earn massive signing bonuses or to work within what they perceive will be a better corporate environment.
If clients decide to stay with the advisor, then they’ll likely need to go through the hassle of signing stacks of paperwork to move their accounts over. They may also have to alter some of their financial plans to fit within the offerings of the new firm. If clients decide not to stay with the advisor, then they’ll either be “orphaned” at the old firm (and no longer receive dedicated service) or they’ll have to start from scratch building trust and a relationship with the new advisor.
Working with an independent financial advisor does not guarantee that they will stay in the industry or at their current firm, but smaller independent firms do have a tendency to have much lower turnover and provide better training to increase their chances of success. Moreover, much of this training will be oriented towards effectively serving clients rather than just selling to them. This gives clients the opportunity to develop deeper relationships with their financial planner, and a greater degree of trust.
Flexibility in how we serve clients
Financial advisors at large firms are provided with specific tools and software to run their office and serve clients. They often have strict policies against advisors using unapproved outside tools because the firm pays for (or develops their own) software that needs to be visible across the company, work well with other parts of their operation, and be applicable to the wide range of client types that large firms have. Unfortunately, these tools are often built on far outdated technology, or not well-suited for the specific types of clients that an advisor may want to work with.
Similarly, large firms have clearly defined processes for completing various tasks. If a client wants to open an account, buy or sell investments through their advisor, or create a comprehensive financial plan, for example, then the advisor has a specific way of doing things dictated by the employer. This is necessary, because there are many moving pieces within large organizations and standardization allows them to operate more efficiently. The problem is that the processes may not be set up to serve a particular client’s unique situation, and these processes are rarely flexible enough to allow needed changes. Exceptions or problems may result in dozens of internal phone calls and emails and approvals, resulting in frustrating delays for the client as well as the financial advisor having less time to actually spend with clients.
Small, independent financial planning firms have the ability to be much more flexible in how they serve clients. They can tailor their tools and processes to match the needs of the specific types of clients that they work with, and quickly handle any individual problems that may occur without having to get approval from six supervisors in four different corporate departments spread across the country. We do care about setting up processes to operate our businesses efficiently and provide consistent service, but can much more easily adapt to the situation when real-world variations happen between individual clients.