Many wealth advisors approach investors positioning themselves as “trusted advisors.” Yet, is it really possible to have this type of relationship with someone who is compensated for selling proprietary products—or should you seek out a wealth advisor who strives to reduce conflicts of interest between the firm and the client?

One of the biggest issues investors have is one of feeling “steered” toward specific investments by their advisor. Frequently, these products are manufactured and/or managed by the firm that employs the advisor. Such products can take the form of mutual funds, managed accounts, structured products or partnerships. This is true for brokerage firms, investment banks and trust banks. In some instances, the compensation of the “trusted advisor” is largely based on how much proprietary product he or she can sell. With that type of motivation in place, it is fair for investors to ask whether their best interests are being placed first.

Fee-only wealth advisors do not and will not manufacture or sell investment products; their only source of income comes directly from their clients. They refuse compensation from investment managers, insurance companies, banks and other types of investment or advisory firms. Such an advisor’s role is to work with you to structure a multi manager portfolio that fits your specific investment needs. The advisor/fiduciary also will likely spend time with you to understand your goals, objectives and risk tolerance long before the investing process begins, including writing an investment policy statement. Many fee-only advisor firms have Certified Financial Planners on staff who work with you to ensure you have the right structure around your assets (wills, trusts, etc.) to meet your long-term financial goals in the most tax-efficient way possible.

It is becoming more difficult for investors to pinpoint outstanding investment talent. Fee-only wealth advisors offer true “open architecture” and are not limited by an investment platform. This enables them to seek out the best and brightest managers in all asset classes. You should expect that your wealth advisor has conducted a thorough amount of due diligence on each of the managers in the recommended portfolio.

To review, here is what individual investors should expect from an independent, fee-only wealth advisor:

• A thorough independent appraisal of your current investment portfolio

• A discussion about what you want to accomplish with your investment capital, coupled with an investment policy statement

• An examination of the structures around your assets such as wills, trusts and retirement plans

• A well-designed asset allocation model that fits your investment goals

• A multi-manager portfolio that fits with your goals and objectives

• Thorough and ongoing due diligence on the part of each of the managers in your portfolio

• Face-to-face meetings to update you on performance and to review your objectives

• A strong effort to reduce investment costs (e.g., manager fees, brokerage commissions, etc.)

• Quarterly performance reports

Fee-only wealth advisors offer an attractive alternative to traditional sales based financial relationships. You have the comfort of knowing that the advisor is working in your best interests and that all recommendations come from a desire to achieve your long-term goals and objectives.

This report is for information purposes only. No information provided herein shall constitute, or be construed as an offer to sell or a solicitation of an offer to acquire any security, investment product or service; nor shall any such security, product or service be offered or sold in any jurisdiction where such an offer or solicitation is prohibited by law or registration. Past performance is not indicative of future results.