What Financial Advisor Qualities Can Enhance Overall Asset Management?

What Financial Advisor Qualities Can Enhance Overall Asset Management?

Topics: Impact of investor mistakes, Fiduciary duty, Fee structure, Service offerings

Hello Friends!

It’s been awhile since my last blog post, though I have been working to improve my social media presence, so you may have seen more activity on my relatively new Facebook page! My purpose here today is to answer the question posed above, to illustrate how I think about personal finance, and thus how I have structured my business. Everyone has their own choice to make regarding an Advisor, but in terms of your investments, the end goal is to find someone you can work with that helps you sleep well at night and feel good about the future!

Last year I created 8 blog posts that were all topics I wanted to research and share because I felt each topic had a true relevance for anyone concerned with their finances. The blogs were also designed to be a connection from my spot in this world (Aledo, TX) to all those with an internet connection. Undoubtedly, I’ll write more “research reports”, but today I’m going for more concise and easier to read (5 minutes!), offering a simple discussion of an important topic for your financial decision-making.

Before we continue:

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Back to the topic. I wanted to review my very first blog post (Why Should I use a Financial Advisor for Asset Management?) that discusses confusion around investing and why you should enlist help from a Financial Advisor. A mistake related to timing, poor asset selection, misguided advice or a myriad of other challenges can cost you $100,000 or more over your lifetime. I want to reiterate the ENTIRE REASON I became an Advisor is to help clients to recognize unnecessary spending and help maximize savings for investment toward achieving their financial goals!

So taking the next step, once you have identified you need help with your finances, what should you be looking for in a Financial Advisor to enhance your Asset Management strategy? I outline three things you should know about your Advisor:

Fiduciary Duty
Fee Structure
Service Offerings

Fiduciary Duty

I have a fiduciary duty to my clients, meaning I have your best interests in mind when I make recommendations. Even if that recommendation is to send your assets elsewhere, to benefit another Advisor and not me. Not all Advisors have a fiduciary responsibility. Furthermore, some Advisors benefit from commissions related to products they sell you, products backed by the company they work for or where there is a referral business. A good example is a mutual fund with an underlying annual cost of 1% or more (that’s not including the broker’s fee!), or worse yet an up-front sales charge.

I am independent. I don’t sell products. I don’t get paid on commission. On the topic of commissions, the industry has largely done away with commissions on your trades. No more $4.95 per trade or $7.95 per trade. One of my custodians, TD Ameritrade, was among the first to move in this direction. I believe my fiduciary duty is to educate clients and provide them with favorable investment options while keeping costs low (underlying assets, trading costs, etc.).

Fee Structure

In his book Think and Grow Rich, Napoleon Hill stated, “One of the strange things about human beings is that they value only that which has a price.” While its true you often get what you pay for, I believe that within financial services paying more doesn’t necessarily equate to getting better advice. In my opinion, a good Advisor is one that has come the conclusion that he can’t beat the market. So then why do you need an Advisor?

Developing and adjusting a long-term financial plan according to your needs
Risk mitigation through asset allocation/diversification
Investment selection and rebalancing
Tax management
Accountability

That’s just to name a few. I operate under a fee-only business structure, and as previously mentioned I do not work on commission. I get paid under pre-determined rates depending on level of service and based on:

Monthly subscription fees
A flat rate for one-time financial planning
The % of assets I manage for you

I have designed my practice so that my fees as your Advisor PLUS underlying cost of assets I recommend would generally be less than 1% of Assets Under Management (AUM). That’s relevant because 1% is a very common cost Advisors charge for their services, and that excludes any underlying asset fees (remember the mutual fund that also charges you 1%? – now you’re up to 2% of AUM in fees). My goal is to make sure I’m providing the best value for my clients.

Service Offerings

As an independent Advisor I can offer a range of services: Financial Planning, Asset Management and Small Business Consulting. Some Advisors may be limited in their services, only managing assets, which means they can only make money on based on the amount of assets in your portfolio. Or by selling you products. They can’t get paid for development of a wholistic financial plan and are thus less incentivized to do so. I believe a complete financial plan is of greater importance to clients than simply managing your assets. Under my business structure, I’m incentivized to seek out services the client truly wants and needs. Although the tremendous bull market rally of the last decade-plus has many of us thinking we are well on our way to retirement, financial planning is often not part of life and day-to-day spending is frequently inefficient.

In closing, there are many other qualities you should seek out in trusting someone with your financial future, including a personal connection, experience or professional designations. Those are all good, but as you consider working with a Financial Advisor, I would also encourage you to ask questions about Fiduciary duty, Fee structure and Service offerings.

If you or someone you know has any financial-related questions, I would love to have a conversation, so please feel free to reach out: matt@mhb-advisory.com.

And please don’t forget to view our prior blogs:

Why Should I use a Financial Advisor for Asset Management?

How Do I Get Out of Credit Card Debt and Start a Budget?

Are Maximum 401k Contributions Best for My Asset Management Strategy?

Should I Pay Off My Mortgage Early?

How Can Effective Asset Management Help Me Reach Financial Independence?

How Much Money Do I Need to Save for Retirement?

How Much Should I Save for College?

Why Should a Small Business Owner Have a 401K Plan and What Are the Best Savings Options?

And stay tuned for additional blog posts on retirement savings and other topics.

Best wishes on your financial path!

Matt

This post was created by Matt Beeby, the Founder of MHB Advisory Services. Matt has been working in Financial Services and investing in real estate since 2005, though his investment experience spans nearly two decades. He is a Christ follower, active in both his church and his neighborhood association. Matt enjoys sports and family time. Read more about Matt on his website bio.

Disclosures:
Information contained in this document is for informational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any product or security.
This information is believed to be accurate and should not be considered tax or legal advice.
Please consult tax or legal professionals for such advice and be sure to consult with a qualified financial advisor and/or tax professional before implementing any strategy discussed.
Investments involve risk and are not guaranteed to appreciate, and past performance is not indicative of future results.
Additional information including our privacy policy and Form ADV are available on request or can be found on our website: mhb-advisory.com.

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