I’ve noticed a lot of financial advisers using the word independent to describe their business and services, yet when you look deeper, many are clearly not.
Any reasonable consumer of financial advice would expect the word independent to mean the adviser would be free of kick backs and commissions. Because anything other than that, is not independent.
As an adviser, you could argue that you receive commission from most companies so that makes you independent. It does not. You don’t get commissions from EVERY investment product out there. And some of the commissions paid by companies are more than that of others, meaning you are more biased towards certain companies under your commission umbrella.
I receive emails all the time from many of the largest investment providers wanting me to ‘work with them’. But I refuse every time. In fact, I don’t even respond to most. I am fiercely determined to keep my financial advice business free of as many conflicts of interest as possible. I am proud to be independent. It gives me the peace of mind to offer advice that isn’t influenced by anyone but me and my clients.
That is what keeps me going. Knowing I have given the client the best possible advice I could. Not swayed by other factors such as who else is paying me money. I am in no doubt of my priorities. That is why I am proud to use the word independent. But it is also what disappoints with many other advisers who also use the word independent when they are not. It dilutes the meaning of the word.
No matter what someone says you can’t be not independent AND put the client first.
As with anything, take care out there. The easiest way to find out is to:
Ask questions
Check out the adviser disclosure statement. Disclosures have to state how an adviser is paid, among other things. Here is a link to what needs to be disclosed. I have mine placed on my website. As per the requirements, all websites should either have one or at least a link to one. If an adviser you are researching does not have a disclosure on their webpage then tread carefully. What are they hiding?
The advisers that use the word independent when they are not, are trying to have the best of both worlds. Impression of independence and low upfront customer fees. They can’t have their cake and eat it too. It’s not fair for independent advisers, of which there are very few in NZ, who work so much harder to build a client base, due to having to charge customers higher upfront costs than non independent advisers.
Some people are fine with an adviser having conflicts of interest, even when fully armed with the information. That is fine. Most advisers who are paid commissions can charge less to you, the client, as they are being paid in other forms where you are the product. That suits some people just fine.
As with anything, being fully informed before making a decision is key. The same is true when choosing a financial adviser. Small upfront costs can be more significant costs over the long term if you have been recommended inferior recommendations.
The information contained on this site is the opinion of the individual author(s) based on their personal opinions, observation, research, and years of experience. The information offered by this website is general education only and is not meant to be taken as individualised financial advice, legal advice, tax advice, or any other kind of advice. You can read more of my disclaimer here