I am an Investment Adviser Representative at Cambridge Investment Research Advisors, Inc., a Registered Investment Adviser (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.
Many financial advisors are registered as both representatives of a broker-dealer and as investment-advisor representatives of an investment advisor.
Investment advisors are fiduciaries who owe the client a higher oath of loyalty. They must act in their clients’ best interest and disclose any conflicts of interest.
Registered representatives are not fiduciaries. The advice they offer the client must suit the client’s particular situation. However, they do not have to disclose any conflicts of interest.
If that is not confusing enough, there is a third standard, a fiduciary advisor who falls under ERISA, the law governing retirement and pension plans. Unlike investment advisors who can have conflicts of interest as long as these are disclosed, an ERISA fiduciary advisor must eliminate all conflicts.
Which Registration is Right for You?
I do most of my wealth management business (90%) as an investment advisor representative (fiduciary). I charge the client a level or a fee only, usually based on their portfolio’s size and complexity.
If the client has a smaller account, such as a Roth IRA or a 529 Plan, or is a teacher saving in a 403(b) plan, I opt to receive commissions as a registered representative. Most of these clients end up paying less with a commission-based product. Moreover, maybe they do not need as much time as those who pay an annual fee.
A Uniform Standard of Care
Under the 2010 Dodd-Frank Act, Congress directed the Securities and Exchange Commission (SEC) to study the need for establishing a new, uniform federal fiduciary standard of care for brokers and investment advisors.
Having a uniform standard would make it easier for investors, as many are unaware that there are two standards and that the same financial advisor could wear both hats.
New Rule From the SEC
Beginning June 30, 2020, broker-dealers will start operating under a new standard called Regulation Best Interest. This requires brokers to better align their interests with those of their clients 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.
Financial Planning for Retirees
You have retirement accounts in a few different places, and so does your spouse. Now that you are retired or thinking of retiring, you are closer to using the money. But you haven’t changed the allocation or risk level of any of those accounts. Moreover, you haven’t met with a financial advisor to discuss your retirement goals or accounts.
Switching from Growth to Income
Along with great careers, you’ve built up substantial 401k balances. It took a while, but you got the hang of investing in equities — never comfortable with the ups and downs but always focusing on long-term growth.
But now you need income, not growth. Over the years, you owned some bonds with mixed success. But unlike your foray into equity investing, you cannot afford on-the-job training this time. You need the income now. Plus, you have less time to recover from any mistakes.
- Understanding interest rates, bonds, annuities, and dividend stock investing, along with other transition products, can be challenging and confusing.
- As with most things in life, the first step is often difficult, but securing sound financial advice should not be left until it’s too late.
- Finding a licensed and knowledgeable resource will help you get the best financial advice.
Tim is a financial advisor…
- with a keen understanding of interest rates and the bond market.
- with the knowledge that is imperative when one talks about retirement income.
- with access to the products necessary to help you transition from growth to income.
- who will research your retirement accounts and let you know if leaving it with your 401k or 403b is a good option, or if you should roll it over.
- who will work to keep your costs low – because in a low-yield world, the less you pay to someone else, the more you keep for yourself.
How Tim will help you transition into retirement?
- Measure how well your investments match up with your risk tolerance and goals and income needs.
- Design a strategy for minimizing your tax burden.
- Recommend investments based on an explicit balance of growth vs. security.
- Figure out whether you should keep your 401k or 403b with your previous employer or roll it into an IRA, where Tim will build you a new portfolio.
- Build that portfolio using your risk tolerance to create enough retirement income, but so that you will not outlive your money.
- Look over any pension options you may be eligible for and review any Social Security and Medicare questions you may have.
- Examine any group life policies you may want to convert to an individual policy.
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.