In short, a stock broker is never held to the fiduciary standard, they're transaction based, incentivized with commissions and product sales, and have a non-transparent compensation structure. In other words, they can make financial decisions solely based on their own personal gain. Sometimes this can be great for the investor, but only if the broker's objectives align with the client's.
Whereas, a fee-only fiduciary advisor is held to the fiduciary standard 100% of the time, with complete transparency. They are strictly compensated by the established fee structure, meaning they're not influenced by commissions or sales. This allows the financial decisions between advisor and client to be entirely based on the goals of the client.
Depending on your financial situation, these are some leading questions that every investor should ask their advisor:
If you can't confidently answer "yes" to all of these questions, you would benefit from hiring a financial advisor:
Asset allocation is arguably one of the most important decisions that an investor can make. Your investment results are primarily tied to the way that your assets are allocated either in stocks, bonds, cash, or equivalents. Your asset allocation should be tied to your financial goals to help determine whether to invest more conservatively or take a gamble and elevate your risk level. To learn how we invest, click here.
How you invest should be tied to your financial goals. Mutual funds are actively managed baskets of stocks. They allow for more flexibility in a volatile market because you're ultimately investing in multiple companies that are grouped into one fund. They do require a minimum amount to invest.
However, if you chose an individual stock, you'd take on more risk. You'd also profit considerably well if the individual stock outperformed the market. Individual stocks do not require a minimum to invest.
If your advisor or a friend’s “advisor” implies that they’re working for free…RUN. Almost half of investors believe their service is free or are unaware of how their advisor is compensated. Unfortunately, “free advice” can cost you more than just pocket change. Explore our cost of service.
Think of stocks as ownership stakes (equity) and bonds as debt. When a company issues stock, they are ultimately selling part of the company in exchange for cash. When issuing a bond, a company is really just borrowing money and agreeing to pay interest.
These are the two primary classes for types of stock.
Common stock is what we all think of when we hear the term "stock." Investors are able to make a profit through rising share prices and dividend payments. They are also capable of voting in corporate decisions since they are owners themselves. However, if the company were to go bankrupt, they'd also be one of the last to get their money back.
Preferred stock pays a predetermined dividend regardless of performance. Although preferred stockholders do not get to make corporate decisions, they are allowed to redeem their shares before common stockholders if ever the company were to be unsuccessful.
A hedge fund is more or less an investment partnership. It's where a group of investors pool their money together and a fund manager works to manage the funds based on their strategy. The purpose is to maximize investor returns and eliminate unnecessary risk. However, they are generally considered to be more aggressive, risky, and exclusive than mutual funds.
An index fund is a type of mutual fund that tracks the market index, like the S&P 500 Index or Dow Jones Industrial Average. It provides exposure to a large number of companies within a specific market segment. This is generally a safe way to introduce diversity to your portfolio and make returns similar to that of the market. The term “index investing” is often used interchangeably with “passive investing.”
A trust fund can contain many types of financial assets like cash, stocks, bonds, or property. The recipient of a trust fund typically waits until a certain age or until a specified event occurs before they have access to the fund. This is a great way to secure savings for the next generation and leave behind your legacy.
Yes! We are never compensated by sales commissions or product placement. Consequently, our professional team is motivated to let you tell your story in your own words before offering our thoughts on a customized financial planning strategy. Without conflicts of interest to unduly influence our recommendations, you can be confident the advice we deliver is always reliable.
Loyalty. Prudence. Objectivity. These are the requirements that legally define the fiduciary standard of care, at Exchange Capital Management, it’s only a start.
Our advisors are compensated by the designated cost of service that you have agreed upon when signing up. There's no need to write a new check every quarter. We withdraw the percentage from within your total assets under our management.
We’re prepared. We can act as a barrier between your anxieties and your investments. Unlike most investors, we do not respond to market volatility based on temporary emotions. We believe in sticking it out for the long haul and taking actions based on data.
Our strategies work best when we have access to both the financial planning and investment management of your portfolio.
If you have accounts that are not managed by us, you are more than welcome to invest on your own. In fact, our blog is a great resource for staying up to date on investment practices.
All portfolios are subject to trading fees. Our cost of service covers everything else. We have developed tax-efficient, low cost investment strategies to build better returns and secure your long-term success.
We provide services for private clients and families. However, clients typically include Executives, Entrepreneurs, Educators, and Emerging Affluent with assets working in retirement plans, taxable savings accounts, trusts, and charitable foundations.
We believe that a comprehensive financial plan is a process rather than a one-time project. As your life evolves and changes, so do your goals, objectives, and financial circumstances. That's why our services are tailored to grow and update with you rather than expire days later.
Our cost of service chart shows the annual rate for services: you will be charged quarterly.