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What's in the Name (of Financial Advisors)?


The cavalcade of titles on Wall Street can be confusing - it's meant to be. The ever-changing titles on Wall Street have fooled the public for too long.

"What's in a name? That which we call a rose by any other name would smell as sweet." —William Shakespeare

I recently congratulated a friend and colleague who sent me an email containing a new title in his signature line. It pleased me to see what I thought was a step up on the ladder of success and I offered my congratulations.

“No,” he said, “I’m doing the same bullsh** I’ve been doing since we last spoke — but we are using new titles here.”

The cavalcade of titles on Wall Street can be confusing — it’s meant to be. Salesmen have gone from calling themselves salesmen, to vice presidents, and then financial advisors. Now they’re wealth managers or, at one large bank, Fundamental Choice Portfolio Managers. This naming progression has endured to fool the public for too long. And, no matter what they’re called, new titles do not protect investors from those motivated by commissions.

How do you know if you are receiving objective advice or if it’s a sales pitch? Since a vast majority of wealth management firms compensate their salespeople based upon the fees and commissions that are generated, it can be hard to tell which one is which.

Take note: no professional money manager would knowingly agree to have a salesperson acting as the steward of their wealth. They would reasonably require that any person managing their assets do so in good faith and legally act in their best interest — 100% of the time, as a fiduciary. And yet, the College for Financial Planning 2011 Survey of Trends in the Financial Planning Industry found 70% of folks who call themselves financial advisors generate their primary source of income from commissions, sales charges and fees.

So what’s the alternative? Fee-based wealth management comes in many forms. One in particular, despite its effectiveness and esteem among the world’s wealthiest families, remains relatively unknown to those outside this exclusive milieu — it’s the family office. Popularized by J.P. Morgan, it is structured to serve people who run their businesses and do what they excel at (or enjoy their retirement) while professionals act as stewards of their assets.

No products; no salespeople clamoring for your attention; no hidden fees. So how can the preferred wealth management system for trillions of dollars around the globe remain virtually unknown in the aftermath of the greatest recession of our lifetime? The answer is simple; Wall Street does not want you to.

According to the National Association of Personal Financial Advisors (NAPFA), while there are over one million financial representatives in the U.S., less than 2,500 are registered fiduciaries. That means that of the million-plus individuals going by many names, less than one-quarter of 1% are professionals legally bound to act in the investor’s best interest.

So, what can an investor do to safeguard his or her future? It’s essential to seek out and employ experienced professionals for advice to preserve and protect your hard-earned wealth. The family office model not only takes commissioned salespeople (or whatever they’re calling themselves today) out of the equation, but also offers clarity about other facets of wealth planning. Since earning commissions isn’t part of the family office’s business model, the advice is objective and unbiased.

Want to create instant transparency in your financial affairs? Here are the top questions to ask:

• How can I tell if I’m working with professional investors?

They have a decade-plus of experience and an audited track record — not just a lofty title. Seeing the record of an investor’s work over time allows one to assess the work objectively and make an informed decision.

• Do all of my advisors work together and communicate regularly?

This collaborative working format is called integration and is key in assuring that clearly defined written goals and objectives are met by all parties. When advisors don’t coordinate their work, it may mean a much higher price tag for the investor with duplicative investments, excessive fees and high taxes due to incorrect structures. Integration avoids these issues.

• Are the clients served similar to me?

Hire professionals with a client base similar to yourself. If the net worth, income, and goals of the other clients in a financial adviser’s network vary a great deal from your own, it is probably time to find someone who can serve you better.

Brian Luster, along with Steven Abernathy, co-founded The Abernathy Group II Family Office and the country's first Physician Family Office (PFO). The Abernathy Group Family Office sells no products, receives no commissions, and is independent, employee-owned, and governed by its Advisory Board comprised entirely of thought-leading professionals. They are regular contributors to several publications and blogs including The Huffington Post.

The information contained in this article is provided solely for convenience purposes only and all users thereof should be guided accordingly. The Abernathy Group II does not hold itself out as a legal or tax adviser. If you wish to receive a legal opinion or tax advice on the matter(s) in this report please contact our offices and we will refer you to an appropriate legal practitioner.

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