When you would NOT want a fee-only financial advisor

Sean discusses the situations when you want a financial advisor who's paid on commission, and why fee-only shouldn't be a hard, fast limit for you.

Transcript

Sean 0:03

Okay, in this video, I'm gonna talk about why sometimes going for the fee-only financial advisor, despite everything you read online, may not be the best approach if you're looking at specific people and trying to compare who's the best fit. So I'm gonna show you examples of real advisors, one of which will be sort of hypothetical a little bit because of privacy issues, and it will make the point. And there's plenty of people that fit this profile that I'll describe. The other one is very real because it's yours truly. A lot easier to share my information and not worry about privacy issues. So the benefit of a fee-only financial advisor is they are a fiduciary all the time and they are legally bound to push your interest first. And I don't think anybody in the profession or anybody in the country or the world should disagree with that as being the ideal. What happens though is like most things in life, there are nuances and history and context about specific people. So this might be slightly self-serving to hold myself out as the example of an experienced advisor with a certified financial planner designation and a lot of experience that is not technically fee only. Um, where I'm I'm gonna compare my profile if you were to come across me, and this assumes you've talked to both advisors, you have a feel for what they're all about, and you're trying to figure out okay, who's the best fit? Who would I want to work with in making some uh the most important decisions about my financial future? Um, who would I want, who would I want on that wall for me, if you will. So I'm gonna use broker, uh Finro broker check. So that's a great tool if you're trying to research someone's background, do a very cursory uh research into what they've done, the licenses, if they have any regulatory uh record, et cetera. There's another system that uh covers advisors that have never had a certain set of licenses, but um a lot of advisors with experience will have had these uh set of licenses that are covered by broker check. And if not, you can uh go to this other site. But I'm gonna give you a high-level uh example here. So I'm gonna share my screen and we will see. All right, so here is my uh broker check. So if you want to go check this website out yourself, just search broker check, FINRA broker check, or it's brokercheck.finra.org. So this is me. I used LPL because that's who holds some of my licenses. Um, that's for another video, but um, some of my licenses are held by LPL Financial, which is a massive institution uh with over a trillion dollars of assets under custody. And then some of my licenses are held by advisor resource council, which is fairly small. I'm a part owner in that organization, so it's it's tiny compared to an LPL. No one's ever heard of Advisor Resource Council unless you are an advisor that that uses our firm or a client of the firm or a family member. So um first couple of things. This broker check shows the history of your experience, and that's really what I want to touch on. So if you go to my record, you can see, okay, I took this, uh, this the earliest test I took on here in exam was 2002. Well, even if you don't know what this is, the point is I've been licensed, have had an investment license of one form or another for at this point almost 22 years. Uh, this advisory license, IA stands for investment advisory. I've had that for uh about 18 years now. So but I've had the supervisory licenses since 2006, uh supervisory compliance type licenses for almost 18 years as well. So, bottom line is I've been doing I've been doing this a while. So by itself, that's not the only criteria, but I think if you're if you've talked to people and you're comparing experience and what to expect, I think that's a big factor is how long have you been doing this? What's your experience? Um, again, there's probably a point in in our lives where we get where if we've been doing this 50 or 60 years, uh, if I were the consumer of that professional services, I might wonder uh about that end of the spectrum. But you know, 18 to 20 years, 22 years is sort of experienced, but uh, you know, not ready to retire just yet. So I've got a bunch of state licenses, which again may or may not matter for a lot of what I do, it's irrelevant. Um current registrations, I've been with the same uh LPLs, held these licenses for uh 14 years and change. And then advisory resource counsel that I'm a part owner is coming up on. It's been 11 and a half years, I guess. So I spent a few years at Edward Jones, a few years at Morgan Stanley, and then I've been independent for 14 years. So that's the gist of my profile. Okay, now, so am I fee only? No. And the reason that is is because I have these B, which are brokerage licenses. Ironically, even though you see what, six of them compared to one advisory license, I don't really actively use the brokerage licenses. But again, you wouldn't know that unless you asked me why do you have all these, what your situation, and it's way longer and more boring of a story that I can fit into this video. Um, the point is, almost all my uh business is done through the advisory model uh at this point. Um, so let's compare that with a newer advisor who um I'm gonna use the the hypothetical jump that this person was in the business and then decide, you know what, this isn't working, or I read, hey, fee only, you need to have everyone's supposed to have a fee-only advisor. I want to be a fee-only advisor, so let me go do that. Well, this advisor uh looks like they graduated college, and I'll show you how I know that in about 2020. So three and a half years ago at this point. Um, they have a lot of state licenses based on their their role, which I'm not going to show too much because I don't want to respect the privacy of this random person. Um investment advisory license they've had since 2023, so less than a year as I record this video. Um, their earliest license was um you know three plus years ago, so a little bit of a little bit ago, um, but not very long. And then an interesting thing about the broker check website is you can go back and you we have to submit 10 years of work experience. So if you go to this person's report, and this is linked from the the uh broker check, um it's 10 years worth of experience. So if someone graduated college four years ago, it goes back into their college and high school years, which to this person's credit, it looks like they worked um during high school based on the dates here, which is awesome. This is you know, last three years of high school, that's impressive. Worked during college, looks like um uh at a bank in the summer, maybe, and in the sub two at least two summers, uh, you know, internships maybe. So it was definitely working, which is very uh that's a good sign. If I'm comparing this to someone else of a similar experience level, I'm gonna say this person is probably working pretty hard. They had a job, it looks like during college also uh at an Audi dealership. Um, again, could probably great experience, um, help dealing with the public and something that's very important to them, their vehicle, their nice Audi vehicle. And then they worked at Vanguard for a while. So in this example, um in this example, I think if everything else was equal, you had an equal equal comfort level, strong recommendations or referrals to these people. Um, I think, you know, objectively, most people say, well, give me the person with more experience. I I didn't know if if the other person has the CFP designation yet, but um, you know, I'm a certified financial planner uh professional. If someone is fee only but doesn't have that yet, uh, he might not, because he's you have to have three years of experience to use the designation. So even if you've done all the educational requirements, you have to have three years of experience to have the designation. So again, sort of an extreme example, but I wanted to give you sort of a real easy, straightforward comparison of fee only, you have to have fee only, you have to have fee only. If you go out and you make that like a hard and fast criteria, you can sh you can cut off a lot of potential uh professional expertise quickly and be left with people who have very little experience, which again, they might have more bandwidth and time and energy to help you, which is helpful. But you I think you also want someone who's learned on other people's or other companies' dime and not with your financial future. Um, so a lot of the reasons I'll get into this in another video as well, but a big reason there are lots of people kind of like me that have been around 20 plus years that still have these old licenses, is it was not as easy to run a business and help people without with just the advisory license, just being fee-only. Um, the technology, the the offerings from the big custodians, LPL, Fidelity, Schwab, et cetera, has gotten way better in since I've been doing this. And like anything, you have some experience and you have some success helping people. And some of the tools and vehicles that I've used do not have uh, there's really no way to turn it into an advisory relationship. So that legacy, old school business still exists. Uh, much like if your parents or your grandparents or you, depending on your age and personality, it might be things you still do that, you know, people I grandpa, dad, why do you still read the paper? Or why do you still look in the yellow pages, or whatever it is that we we did as a habit, that's how we did things. And now you just do it because it still works for you. If you were starting over, it might not be the most efficient way. And that's how I feel about not being fee only. Um, I completely understand the push, but I think there are a lot of great advisors who are not fee only. And if you were to objectively stack them up against someone who might be fee only, but they have very little experience and uh may have knowledge, but they may have the practical uh application of it. So again, this is not a knock on younger people because there are plenty of career changers, et cetera, that don't understand necessarily the context of how we got here. Um and I feel like uh sort of the old man yelling at the cloud to say, hey, you know, you don't have to be fee only to be good. But uh I think millions of consumers' experience would bear that out. So that's when fee only may not be the only or the number one criteria you want to search for uh if you're looking for good, trustworthy help. So if you have any questions or I can uh answer a specific topic, just let me know. Thanks.