Why Select a Hometown Financial Advisor?

hometown financial advisorInvestors continue to turn their assets over to financial advisors who work for major Wall Street firms because the financial advisors told them the firms’ extensive research departments would improve the performance of their assets. In other words, big research will uncover investment opportunities that are missed by smaller research groups.

This sales pitch has not been true for 20 years. The Internet is an information superhighway that has spawned thousands of independent research groups that are every bit as good as their Wall Street counterparts. In fact, former Wall Street researchers own most of these firms.

Research is no longer a reason to select an advisor from a big Wall Street firm. Your selection decision should be based on criteria that have a direct impact on the achievement of your financial goals.

Big Wall Street firms have skyscrapers, shareholders, boards of directors, layers and layers of executives, branch and regional managers, support staff, and financial advisors. This is a lot of mouths to feed from the revenues that are generated by your assets. None of this massive overhead produces any direct benefits for you.

Contrast that to your hometown Registered Investment Advisor. There are no shareholders, boards, executives, or managers. Most often the principals at the firm work with clients directly. There are no layers that separate you from the owners of the firm. In fact, your advisor may be an owner or he works for the owner.

There are no executives controlling the advice or services of your financial advisor. There are no managers pressuring your financial advisor to sell the products that make the most money for their firms. Your advisor is focused on the achievement of your financial goals or he knows he will be terminated and the revenue stops.

Why doesn’t everyone have a hometown RIA? The big Wall Street firms spend billions of dollars creating brand names. They know at least 40% of investors feel safer when they have heard of the firm that will be investing their assets. But, keep in mind all of the money spent building the brand does not benefit you. The firms are using revenue from investor assets to build brand name awareness that allows them to expand their businesses.

There is a second reason. Hometown advisors spend very little money or time on marketing. In fact, they may not even employ any marketing professionals. There are investment advisors and investment professionals such as analysts and portfolio managers. Consequently, these advisory firms are harder to find because they are not household names.

The next time you select an advisor consider a hometown financial advisor who is a Registered Investment Advisor or an Investment Advisor Representative. Make sure the advisor acknowledges he is a financial fiduciary and is compensated with fees for his knowledge, advice, and services.

Other posts from Jack Waymire