Financial Advisor Tim Hayes

Fee Only Financial Advisor • Fee-Based Advice In Massachusetts

Financial Advisor

Tim Hayes

Securities Licensed in MA, RI, NH, ME, CT, NY, & FL

I am an Investment Adviser Representative at Cambridge Investment Research Advisors, Inc., a $44B RIA based in Fairfield, IA. I am also registered with Cambridge Investment Research, Inc., an independent broker-dealer with over 3,000 registered representatives nationwide.

Most clients pay fee-only or an hourly rate. The size and complexity of the client’s wealth management and financial and retirement planning determine that fee.

Some clients pay a commission, mainly those with smaller accounts, i.e., Roth IRAs, some public-school teachers with 403b retirement accounts, or parents or grandparents who set up a 529 college savings plan.

The first introductory and fact-finding appointment can be in-person or by phone. The next meeting where I provide my recommendations should be in-person. (For the time being, telephone, Zoom, and email are replacing some meetings.)

Subsequent meetings during which we monitor your progress and investments can be done in-person or by phone, email, Zoom, or Skype – or, more likely, a combination of these meeting types.

Table of Contents

After the introduction of a new rule from the Securities and Exchange Commission (SEC), with a new interpretation from the Department of Labor (DOL) of an old law, the Employee Retirement Income Security Act (ERISA), there is not much difference in the duties and responsibilities that financial advisors, financial professionals, ERISA fiduciaries, and  planners owe to their clients.

Financial Advisor

Having been a financial advisor and financial planner for over thirty years, I have witnessed many financial advisors’ changing compensation structure. For example, according to a review of their financial situations, most personal financial advisors were paid commissions from selling a financial product or investment when I started.

Fee-Based Advice

About midway through my career, the compensation in the marketplace began changing. More and more advisors began moving to a fee-based or fee-only financial planning compensation arrangement. So, instead of charging commissions from the sale of an investment, life insurance, or some other financial product, the financial advisor usually charges an ongoing fee, a percentage of the client’s investment for financial planning services.

The hope is that by disconnecting the compensation from the product or services, the client would receive better advice. However, another concern was that the planners were less inclined to provide ongoing advice and services when compensated from an initial product sale.

Regulation of Financial Advisors

Three federal acts regulate financial advisors: The first is the Securities Exchange Act of 1934, the second is the Investment Advisers Act of 1940, and the third is the 1974 retirement protection law called ERISA. The 1934 act regulates broker-dealers, the 1940 act regulates investment advisers, and ERISA governs retirement plans. (State laws also regulate them, and most insurance products are regulated at the state level.)

A broker-dealer (B/D) is a firm that buys and sells securities, operating as both a broker and a dealer, depending on the transaction. Fidelity, Charles Schwab, and TD Ameritrade are the three largest B/Ds. In addition, many regional and independent B/Ds exist, such as LPL Financial, Ameriprise, Cambridge Investment Research (my broker-dealer), and Raymond James. 

Their advisors are called registered representatives, who are usually paid a commission for selling financial products. They are not fiduciaries, but they are required to sell their clients a suitable product. 

Investment advisers are an alternative to broker-dealers. Moreover, investment advisers are fiduciaries. They have a different business model regulated under the 40 Act than that of B/Ds. They are usually paid fees as compensation, as opposed to commissions.  

Fee-Only Financial Planner

Around the time advisors were switching to fee-based, the financial industry began embracing personal computers. As a result, some firms started charging clients fees to develop a comprehensive financial plan. First, the client filled out a lengthy questionnaire. Second, the financial planner inputted the data into a software program and then printed the client’s financial plan, usually presented in a fancy binder. 

Most plans presumably ended up in the filing cabinets of clients, recalling President Eisenhower’s line about plans: ‘I have always found that plans are useless in preparing for battle, but planning is indispensable.’

Also, after paying a fee for the plan, some firms would then implement the plan’s recommendations using commission proprietary products, acting as a fiduciary under the Advisers Act but as a registered representative under the Securities Act or, more importantly, acting as a fiduciary while developing, but not while implementing, the plan.

Fee-Only Financial Advisors

In 2015, the U.S. Department of Labor proposed the so-called Fiduciary Rule, which aimed to reduce or eliminate conflicts of interest in retirement plans, rollovers of retirement plans, and IRAs. As a result, most financial advisors who work with these plans must be a fiduciary and receive only level fees for their services. 

A fiduciary has a legal requirement to act in good faith, requiring advisors to reduce and disclose all conflicts of interest when providing council. Level fees meant the advisor received the same compensation no matter the product.

Supporters claimed that rules about IRAs needed updating. In 1974, when Congress wrote the current rules, nobody contemplated the amount of money moving into IRAs. Cerulli Associates, a Boston-based research firm, estimates that individuals will roll over \$2.1 trillion from 401(k)s into IRAs.

The Department of Labor was the point agency because they oversaw the Employee Retirement Income Security Act (ERISA). Most IRAs, however, are not regulated by ERISA; instead, they fall under the jurisdiction of the Internal Revenue Service (IRS). But the IRS uses the DOL’s definition of ‘investment advice,’ so IRAs most likely will get covered if the government prevails. 

The 2015 rule as proposed was never fully implemented. Instead, it got bogged down in legal challenges. The 5th Circuit Court of Appeals ruled in 2018 that the DOL had overstepped its bounds in creating the so-called Fiduciary Rule, parts of which had gone into effect the year before.

There was talk that the SEC and/or FINRA, both of whom regulate advisors and brokers, would pick up the ball from the DOL to implement a retirement advice rule. Because they regulate brokers and advisors, some think these organizations are better suited than the DOL, which governs retirement plans to apply a new standard.

What’s the Difference Between a Financial Advisor and a Financial Planner?

There is no financial planner in the regulations. Instead, there are investment advisor representatives and registered representatives. ‘Financial planner’ is more of an industry term for someone who looks at your entire financial picture. Some financial planners are fiduciaries, and others are not. Some charge a fee, some are compensated through a commission, and some receive both.

A private organization offers a designation certified financial planner (CFP). Since 2018, all holders of that designation are required by the organization to be fiduciary. But the 40 Act determines if someone is acting as a fiduciary, so the organization requires that anyone who wants to hold that designation be willing to fall under the 40 Act.

There is also an organization called the National Association of Personal Financial Advisors (NAPFA), a directory where you can find a fee-only advisor in your area. Financial advisors pay annual dues of $249 to belong to NAPFA, plus a one-time, non-refundable processing fee.

My Professional Designations

Financial advisors who hold the AIF® designation have:

  • Completed the AIF® Designation Training;
  • Passed the AIF® designation exam;
  • Met the designation’s prerequisites and qualification and conduct standards;
  • Accrued a minimum of six hours of continuing professional education, with at least four hours coming from fi360-produced sources;
  • Attested to a code of ethics.

Financial professionals who hold the CRPS® designation have:

  • Completed a course of study encompassing design, installation, maintenance and administration of retirement plans;
  • Passed an end-of-course examination that tests their ability to synthesize complex concepts and to apply theoretical principles to life situations;
  • Pledged adherence to the CRPS® Standards of Professional Conduct, and are subject to a disciplinary process in that regard.

CRPS® designees renew their designation every two years by completing 16 hours of continuing education, reaffirming adherence to the Standards of Professional Conduct, and complying with self-disclosure requirements.

Financial Advisor who hold the AWMA® designation have:

  • Completed a course of study encompassing wealth strategies, equity-based compensation plans, tax-reduction alternatives, and asset-protection alternatives;
  • Passed an end-of-course examination that tests their ability to synthesize complex concepts and apply theoretical concepts to real-life situations;
  • Agreed to adhere to the AWMA® Standards of Professional Conduct, and are subject to a disciplinary process in that regard.

AWMA® designees renew their designation every two years by completing 16 hours of continuing education, reaffirming adherence to the Standards of Professional Conduct, and complying with self-disclosure requirements.

CFS designation is awarded upon passing an examination on mutual funds, ETS, REIT’s, closed-end funds, and similar investments. Advanced studies on topics include:

·       Fund analysis and selection;

·       Asset allocation;

·       Portfolio construction;

·       Sophisticated investment strategies for risk management, taxes, and estate planning.

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San Diego, CA, November 13, 2020 – The Institute of Business & Finance (IBF) recently awarded Tim Hayes with the only nationally recognized tax designation, CTS (Certified Tax Specialist). This graduate-level designation is conferred upon candidates who complete an 135+ hour educational program focusing on personal income taxes and methods to reduce tax liability. The combined top state and federal bracket can easily exceed 40%.

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San Diego, CA, September 1, 2020 – The Institute of Business & Finance (IBF) recently awarded Tim Hayes with the estate planning designation, CES™ (Certified Estate and Trust Specialist™).

This graduate-level designation is conferred upon candidates who complete a 135+ hour educational program focusing on trusts, wills, probate, retirement benefits, caring for children, and what should be done after the death of a loved one. Over $50 trillion is expected to pass from one generation to another during the next half-century.

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The Accredited Portfolio Management AdvisorSM, or APMA® program, is a designation program for financial professionals. The program educates advisors on the finer points of portfolio creation, augmentation, and maintenance. Students will gain hands-on practice in analyzing investment policy statements, building portfolios, and making asset allocation decisions.

San Diego, CA, May 12, 2020 – The Institute of Business & Finance (IBF) recently awarded Timothy Hayes with the only nationally recognized annuity designation, CAS® (Certified Annuity Specialist®).

This graduate-level designation is conferred upon candidates who complete a 135+ hour educational program focusing on fixed-rate and variable annuities. Several trillion dollars are invested in annuities; it is estimated that at least one-third of all annuity contracts are not titled correctly.

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Regulation Best Interest

The Dodd-Frank law emerged from the 2008 financial crisis. Its main objective was to shore up the banking system so we wouldn’t have another situation like in 2008 when the failing banking system put the world economy at risk.

Dodd-Frank, however, also tasked the SEC with studying whether changes needed to be made to the rules regulating financial advisors. The goal was to ensure the public was benefiting from having two silos’ commissions and fees and if it behooved brokers to become more like investment advisors (fiduciaries).

After much discussion, the SEC promulgated a new rule, Regulation Best Interest, primarily impacting B/Ds. The rule requires them to reduce and disclose conflicts of interest while working in the best interests of their clients. It, however, does not require that they become fiduciaries but moves them very close to that responsibility.

Remember, financial advisors are either registered representatives affiliated with B/Ds or investment advisor representatives working for investment advisors. I am dual-registered—that is, I am a registered representative of a B/D and an investment advisor representative of an investment advisor.

The New Rule from the SEC

Beginning June 30, 2020, B/Ds began operating under that new Regulation Best Interest standard. This requires them to better align their product recommendations and services with their clients’ best interests by eliminating conflicts of interest, such as proprietary product requirements, sales quotas, or sales contests.

Registered representatives will now be called financial professionals. Any advisors who are fiduciaries can continue calling themselves financial advisors. Some critics complain that the new standard does not meet the uniform standard’s original intent.

New Fiduciary Rule

Finally, however, to many people’s surprise, President Trump’s Department of Labor, run by Eugene Scalia, Supreme Court Justice Antonin Scalia’s son, implemented the Fiduciary Rule.

They removed some of the more demanding requirements and possible legal challenges provided to clients. Still, they kept the core tenant that financial advisors advising retirement plans and participants are fiduciaries. Most advisors, when recommending a client roll over their retirement account to an IRA, are also fiduciaries.

Remember, the Rule applies only to private-sector retirement plans, such as 401(k)s, SEPs, SIMPLEs, and 403(b) plans under ERISA. The 403(b) plans of public employees, such as teachers, are not covered by ERISA, so they are not subject to the new law. It only applies to them if they decide to roll over their 403(b) to an IRA. Roth’s, traditional, and rollover IRAs fall under the new rules.

The Obama administration believed the Rule was needed because conflicts of interest caused 401(k) participants and IRA owners to pay higher financial advisor fees, resulting in smaller account balances.

What do I mean by ‘conflicts of interest’? For example, some firms paid their advisors bonuses and benefits if the financial advisors sold that firm’s proprietary products. This is no surprise, but it is surprising that these conflicts go on with retirement plans—given that ERISA forbids conflicts of interest.

But ERISA stipulated that the prohibition against conflicts applied only on five conditions:

  1. The financial advisor must render advice as to the value of securities or other property;
  2. The advisor must do so regularly;
  3. The advisor must do so under an agreement with the client;
  4. That advice will serve as a primary basis for the client’s investment decisions; and
  5. The advice is to be based on the particular needs of the investment or retirement plan.

The advice must be given regularly and must be the primary basis for the client’s investment decisions. The DOL believes it allowed financial advisors with conflicts of interest to provide advice without violating ERISA’s prohibition.

Plus, the DOL felt that the 1974 exemptions were put in place when there was no such thing as an IRA or a 401(k), and companies invested the retirement money for their employees. However, now that individuals are responsible for their own investment decisions, new rules are needed.

For example, the DOL believes people are rolling over their 401(k)s into IRAs when it would cost them less if they remained in the 401(k). Moreover, under the old rules, rollover advice never fell under ERISA guidelines because the rollover happened once.

So, the new fiduciary rule reinterprets the five-part test so that now more financial professionals fall under the ERISA standard of who is a fiduciary. It also removed a previous ruling that rollover advice was not fiduciary advice. Instead, it requires that any advisor falling under these standards work in your best interest, including when they recommend a rollover.

Financial Advisor Tim Hayes Believes the DOL Got It Right

By striking a balance between new protections for consumers with additional burdens on the financial services industry, Financial Advisor Tim Hayes believes the Department of Labor (DOL) hit a home run with its new retirement advice rule.

Fixing the Law

By eliminating a 1975 rule, made when pension plans were much different than they are today, the Department of Labor rectifies the contradiction that financial advisors with conflicts of interest are providing financial advice to retirement accounts even though ERISA, the law governing these accounts, prohibits this from happening.

Lowering Fees

What does the new rule mean for consumers? “If you have a 401(k) or 403b, the advisor fees might come down. If you roll over the 401(k) or 403b to an IRA, the fees in the IRA should be competitive to what they were in the 401(k).

Retirement Planning – Employees who leave their employer can keep their 401k or 403b there or rollover to an IRA. If they decide to roll over, I help build their IRA portfolio. I also build portfolios for clients saving for retirement.

  • IRAs
  • Annuities
  • 403b Financial Advisor
  • Pension Max for Public Employees
  • IRA Rollover From Employer Plan

Please be sure to speak to your advisor to consider the differences between your company retirement account and investment in an IRA. These factors include, but are not limited to, changes to the availability of funds, withdrawals, fund expenses, fees, and IRA-required minimum distributions.

Financial Services Industry is Adapting

More and more financial products, such as variable annuities and life insurance programs, can be fee-based. For example, an annuity can be part of a fee-based advisor’s assets to calculate your fee. As a result, the product is stripped of some of the costs associated with a commission-based product.

Firms are also removing conflicts of interest to align with the new Best Interest Standard. The DOL also now uses that standard in their interpretation of who is a fiduciary advisor under ERISA. When the investing public works with a fee-only financial planner, they benefit from having a similar standard for conduct as Best Interest aligns closely with the fiduciary responsibilities in the 40 Act.

Why I Remain Duel Registered

I remain registered as an investment adviser representative and as a registered representative. Most of my business is as a fee-only financial advisor, where I charge a client a fee or an hourly rate for my advice. I like this arrangement because it is not product-based, and I can get paid to provide ongoing advice to my clients.

However, I keep my registered representative license because when I compare a commission product, it makes more sense for the client. For example, a new client who is 25 years old wants to purchase a Roth IRA with $6,000—I cannot imagine charging them a fee for the next forty years.

Also, I like to use American Funds for some clients with big 401k or 403b accounts, if I recommend that they roll over their money. If their 401k account balance is over a million, they pay no sales charge. And American Funds has some of the lowest management fees for actively managed funds. They also offer excellent funds for customers interested in generating retirement income. But I need to have a registered representative licensed to provide this option.

Fee-Based Portfolio Management

The client needs a minimum of $100,000 in assets. It can include just about any account: IRAs, 403bs, joint accounts, personal brokerage accounts, etc.

  • Your account size and the complexity of your wealth management will determine fees, but it is never greater than 1%.
  • The accounts are primarily invested in mutual funds and exchange-traded funds (ETFs). All funds have passed my rigorous due diligence process.
  • I design the portfolio to meet your goals and ensure it is consistent with how much risk you are comfortable with taking.
  • After the account is set up, you receive monthly statements, and you can follow your account online with CirStatements.
  • We periodically meet to check the portfolio, discuss performance and rebalancing, and confirm you are on track to achieve your goals.
  • The custodian for the accounts will be Pershing, a Bank of New York Mellon.

Portfolio Management: If you don’t have $100,000 to invest

My fee-based accounts require a minimum of $100,000; if you have less than this amount to invest, I usually charge a commission or an hourly rate.

  • However, I use the same due diligence process for building your portfolio. I use mutual funds and exchange-traded funds (ETFs) that have passed my due diligence process screening for low fees, historically competitive performance, low fund turnover, and long manager tenure.
  • I work with all types of account registrations: IRAs, Roth IRAs, 403(b)s, SEPs, SIMPLES, 529 Plans, etc. After the portfolio is set up, you will receive monthly or quarterly statements. You can follow your account online at CirStatements.
  • The custodian for the accounts will be Pershing, a Bank of New York Mellon company, or the fund family directly.
  • Periodically, we will meet to check if the portfolio is on track, monitor performance, and discuss rebalancing.

Fee-Only Financial Advisor Near Me

From my Boston or S Dartmouth office, I will provide expert, highly personalized financial planning, retirement planning, and investment solutions when you need an independent fee-only advisor in Massachusetts, Boston or Greater Boston, Salem or the North Shore, Hingham, or any other town on the South Shore, Andover, the Merrimack Valley, and the MetroWest, including Framingham or the Southcoast, Martha’s Vineyard, Nantucket, and Newport, RI.

What to Do Now

If you have an IRA and work with a financial advisor, now is an excellent time to review the financial planning arrangement, fee or commission, best interest, or fiduciary. Also, if you are thinking of rolling over a 401(k) or 403(b), ensure your decision is consistent with the new rule.

Suppose you happen to administer a retirement plan for an employer: Ensure that any advisor compensation is aligned with the new interpretation from the DOL and the new rule from the SEC.

Additional Resources and Information

  • Investor Profile Questionnaire (PDF) – Before creating your portfolio, it is essential to spend time learning about you and your unique financial situation.
  • Are You Ready to Retire (PDF) – You are not alone if you are overwhelmed with how to provide income for your retirement. Millions of Americans struggle to ensure that they have enough income to last them through their retirement years.

These are the opinions of Tim Hayes and not necessarily those of Cambridge Investment Research. They are for informational purposes only and should not be construed or acted on as individualized investment advice.

Securities Licenses

Passing the exam qualifies candidates as both securities agent and investment advisor representative.

Individuals who pass the Series 7 examination are eligible to trade all securities products: corporate securities, municipal fund securities, options, direct participation programs, investment company products, variable annuities contracts, etc.

The exam measures the degree to which each candidate possesses the knowledge needed to offer the products of investment and insurance companies, including the sales of mutual funds and variable annuities.

The exam qualifies candidates as securities agent within a state. Nearly all states require people to pass the Series 63 for state registration.

I am also licensed to offer life, health, accident, disability and long-term care insurance products, as well as fixed annuities.

Fee-Only, Hourly Rate, or Commission

Most clients pay fee-only or an hourly rate. The size and complexity of the client’s wealth management and financial and retirement planning determine that fee.

Hourly Fee

$ 150 /Hour
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