Big Firm Versus Financial Advisor

What is Meant by a “Big Firm”

There are two types of big firms. We know the names of most of them because we often hear about them in the news and also because they invest a great deal of money in advertising so that we can’t help but have heard of them. One is the low cost firm, often with low fees, where you’ll call an 800 number, be asked a series of standard questions, and then put into a standard set of investments based on the answers to those questions. They don’t want to know you in depth and they won’t seek an on-going personal relationship. Each time you call that 800 number you’ll get a new person.

The other type of large firm is the retail full-service firm, meaning you’ll likely have a representative assigned to your account. Internally, their model requires that they move certain investment products, styles or types that may or may not be in the best interests of their clients, but are certainly in the best interests of the firm.

Issues that Arise with Big Firms

With either type of big firm, the amount of personal care and attention is lacking. Regular contact and reviews with the clients are scarce which can mean the financial plan becomes neglected and the client’s investments are not in a position to proactively react to the needs of the client that arise in life.

With the full service firms, unless you have a large number of assets, you might end up relegated to the call center and stripped of a direct relationship with a single representative. You go into the pool, so to speak. Or, it is not uncommon for representatives to move from one firm to the next, calling their clients with a list of reasons why the new firm is better and why the client should follow them there with all of their assets.

Another problem with large firms is that they often have or create certain products that they instruct their representatives to sell into their client base. It’s difficult to imagine today that decisions made by any investment manager with a large firm are entirely independent of the corporate goals of the big firm. Instead of being about the client, it is about what they need to sell.

Advantages of a Financial Advisor

A financial advisor should be independent in their choices. They are registered directly with the state’s securities board and/or the SEC. They make their investment choices not on what a firm is touting that particular month, but rather on their knowledge of you and your goals and the investments best suited to support those goals over time.

A good financial advisor makes themselves available at all times to their clients. All of our clients, for example, are given the cell phone number of Todd Frank and are encouraged to use it. We want to be involved and available in a time of need. Our clients are not “account numbers” to us, they are real people with real lives. Access to a decision maker in time of need is very important to us.

In the end, most advisors learn that being independent is ultimately the best course for both the clients of the independent advisor, as well as for the advisor, who enjoys the freedom of managing investments based purely on what’s best for the client. That’s not to say that most advisor’s eventually become independent. Only a few have the desire, the wherewithal, the means, etc. to become independent. It’s not an easy process.

Because many clients are also business owners, it can be of benefit to them to have an advisor who is also a business owner,— someone who understands the challenges that a business owner faces in getting a business off the ground, having employees, balancing family life with business life, and so on.

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About the Author

Todd E. Frank, CPA/PFS, MBA is the President and CEO of Frank Financial Advisors, a Registered Investment Advisory Firm (RIA) serving clients nationwide from our headquarters in Carlsbad, San Diego, California. As an RIA, Frank Financial Advisors is able to offer truly independent, fee-only financial advisory services.