10 Ways Independent Financial Advisors Beat the Big Firms

10 Ways Independent Financial Advisors Beat the Big Firms

In this video, learn 10 ways that independent financial advisors at smaller firms may be able to save you big bucks.


Is bigger always better? I've got 10 reasons why working with a smaller, independent financial advisor might be a better option for you. Coming up.

Hey folks. I'm Patrick King with Transformative Financial. Here on this channel, we help people make money, keep money, and feel more financially secure along the way. If that's something that interests you, please contact me. My e-mail is patrick@transformative-financial.com. Contact information is in the shown notes below.

On today's episode, is bigger always better? Here are the 10 reasons why working with a smaller, independent financial advisor might be a better option for you. All right, just a quick caveat: obviously, these are generalizations. If you're working with a financial advisor or you're evaluating a prospective advisor, you're going to want to judge them on each of these criteria. There are some people at the big firms that do a great job, and then are some people who are at independent, smaller shops that don't do a good job at all. So obviously it comes down to the individual advisor. What I found is, over my career, these are some generalizations that by and large hold true. Again, there are outliers but you'll have to evaluate on a person by person basis.

Number one, you're more likely to pay less in fees working with an independent smaller advisor than you are someone at the big brokerage firms. If you think about it for a second, those million dollar Super Bowl commercials don't pay for themselves. Again, this is a generalization, but what I found is the independent smaller firms tend to save clients more on advisor fees, on internal investment expenses, and trading costs as well, over the course of a relationship.

Number two, you're more likely to get more personal attention. One thing that I've certainly found over the course of my years doing this is that the big firms, each advisor tends to have a number of clients or households that they deal with that number into the thousands, versus the independent firms where most of them cap their advisors' practices to 75 to 100 families. Me, personally, I don't want to work with more than 75 households simply because I want to be able to keep track of everybody, remember everybody's name, right?

Number three, they're more likely to be knowledgeable. Again, this is a generalization. What I found is that the smaller independent firms-- seems to be a higher percentage of the advisors that have a CFP® designation. They tend to be part of NAPFA and other professional organizations that have very strict entry requirements and a strict continuing education requirements.

Number four, they are more likely to be a fiduciary financial advisor. The independent shops, more likely than not, are going to be something called a Registered Investment Advisor. A Registered Investment Advisor is legally required to put the clients' interests ahead of the advisors’ in the firms. That's not necessarily the case with a big brokerage firm. To give you an idea, of all of the United States financial advisors, only 7%, roughly, are fiduciaries, those people who are legally required to put your interest ahead of their own.

Number five, independent advisors are less prone to "group think". If you think about a big organization, they're trying to standardize their processes, but wisdom doesn't scale. They're more likely to have their own ideas, very strong ones, about how things should work. They’re doing it most likely -- obviously, they're going to want to do it in the best interests of their clients, too.

If you're not answering to a boss and a bosses' boss, you're more likely to be bold in your recommendations and do exactly what the client needs, be able to talk with them, to be real with them on that level.

Number six, technology has leveled the playing field. My technology resources that I have as a small shop make me competitive with the best in the country. It's a really exciting time right now. When you think bigger is better when it comes to resources, that may not actually be the case right now. Technology has really driven down the cost of some of these resources to make an independent shop very, very competitive when it comes to client experience these days.

Number seven, independence means more choice. If you're working with a big brokerage firm, you might be working with advisor who's more likely to put you in a fund that pays them a bigger commission, that pays the firm a bigger commission. They might have an incentive to put you in that firm's funds versus the very, very best of the best. When you're working with an independent advisor, they've got the universe of investments that are available to them.

I think about my practice. I don't have a boss or a corporate structure that I'm accountable to. I make the best decisions for my clients. I make these investments in what I put my money in, and I think they're the best of the best. Of course, I'm going to choose those investments over something that I might have an incentive at another firm to put a client in.

That kind of led into my next one, number eight: third-party custodians, that most independent firms use, lower the risk. Third-party custodian-- I’ve made another video about this. I’ll link to it in the shown notes below. What that does is, that means, if you work with an independent advisor, they don't have your assets. They host it at a third-party custodian. For me, I use TD Ameritrade. You get the full resources of that big name that supports both you and me as advisor making the whole investment process easier. You get an extra layer of security using that third-party custodian. More on that link to that video down below.

Number nine, if an independent advisor can run a business, then they know what it takes to be able to get you where you want to be. I think that's a huge, huge advantage of working with somebody at an independent firm, is if they're doing this on a day to day basis, then they've got the discipline with their own money and be able to manage a business. They've got the discipline, and the knowledge, and the wisdom to be able to help you make the changes that you need to make.

Then finally, the 10th one that I think is just huge is that your life savings is not their quarterly sales goal. You've worked hard your entire career, your entire life to save the money that you have. I think it's an advantage to work with someone that honors that.

That's all I got for this time folks. Thank you for watching. I appreciate you being here. If you like this video, click "like". Click "subscribe" for more of these type of videos and until next time, I'm Patrick King with Transformative Financial. Thanks again, cheers.

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