Fee-Only Advisors - NAPFA - National Association of Personal Financial Advisors?

[hedgehog]

My Internet searches brought this topic to my attention:

1. Gary Schatsky
http://www.objectiveadvice.com/garyschatsky.html

"Advice from Experts Who Only Sell Advice"

He is Chair Emeritus of NAPFA (National Association of Personal Financial Advisors)- which represents fee-only financial advisors.

2. http://www.napfa.org/
http://www.napfa.org/UserFiles/File/Pur ... idev14.pdf

I don't know much about these but should I care?

A search on the forum brought up this:

In my opinion, a fee-only compensation structure is the best way to ensure that the client is not being milked out of their hard-earned money.

And a couple of hits for the word NAPFA.

Pls. educate me on the subject!

[Libertarian666]

Why do you feel you need an adviser at all? What would you want them to do for you?

[moda0306]

After meeting some fee-only advisors that I thought were quite pompous, and some commission-based advisors that I thought were damn good at their job, I tend to think that this isn't as clear as we'd all like it to be.

[craigr]

Some people would like the help of an advisor because their situation can be quite complicated. There are tax issues, relationship assets, leftover accounts between jobs, etc. So it's completely understandable why it may be good idea to get advice.

So with that said, the only kind of advisor I'd ever use would be one that charged an hourly fee only and not assets under management. It is the only way to be sure you are getting a fair shake.

Look at it this way, if you had a plumber come to your house to do work would you expect to pay him 1% of the value of your home (each year) for their work? How about an attorney? Do you pay him with 1% of your assets annually? Why should a financial advisor be treated any differently?

I understand there are significant compliance costs involved with managing money for other people, but the pricing structure for the services is often ridiculous. There are a few small examples where some advisors charge much more reasonable fees. If I were looking for an advisor that charged annual fees, they should be using cheap passive funds and have no more than around a 0.50% management fee attached. Most advisors charge well over 1% which is a complete rip-off.

[hedgehog]

@Libertarian666
Of course I don't need an adviser. I just had to ask it, OK?

@moda0306
Thanks, very interesting. I kinda share your experience.

[Kshartle]

I understand there are significant compliance costs involved with managing money for other people, but the pricing structure for the services is often ridiculous. There are a few small examples where some advisors charge much more reasonable fees. If I were looking for an advisor that charged annual fees, they should be using cheap passive funds and have no more than around a 0.50% management fee attached. Most advisors charge well over 1% which is a complete rip-off.

The amount of government interference in this industry makes marketing and servicing clients extremely expensive. Every client present a significant risk. Just getting in front of quallified clients can be expensive and dangerous. The "regulators" are gunning for the small time advisor. So it require might several hundred marketing dollars per good prospect and the conversion rate might only be 20% meaning they need to charge a significant amount per client. Then the compliance and insurance costs pile up.

It's getting very hard for small shops to keep up with the regulations. The regs of course are not written to "help" the public....that is laughable. They are written by the large firms who then donate to candidates and place them on the financial services commitees so they can introduce the bills written by the large firms. They can afford to comply. The smaller and superior competition is driven out of business or their costs are driven up so much that it isn't worth the headache.

This is the most regulated part of the economy, probably more so than ingestibles even. Maybe the only thing worse is healthcare.

This is the main reason the quality of the product generally sucks and and the cost is so high.

[craigr]

In the interest of full disclosure, I actually thought about setting up an advisory firm in the past. After studying for the Series 65, etc. I snapped myself out of it. There are federal regs, state regs, tax issues, audits, threats of client lawsuits, etc. It was simply not worth the aggravation. I agree that for a small firm you will have to charge high fees to make it even remotely profitable.

Ultimately I feel for the advising industry, but also the industry has done a *ton* of things to clients over the years to bring on the heavy oversight and regulation. Studying for the Series 65 was really telling. There are regulations to prohibit activities that seem quite obvious are unethical. For instance, selling a 95 year old widow a high surrender clause investment product that locks her in for a decade or more. Does someone really need to be told that's unethical?

[Kshartle]

There are regulations to prohibit activities that seem quite obvious are unethical. For instance, selling a 95 year old widow a high surrender clause investment product that locks her in for a decade or more. Does someone really need to be told that's unethical?

No.

If you have to tell someone that then what are the chances they would even care to begin with?

The stupid government test are a complete scam and waste of time. They are just another tax and way for the government to limit competition.

The free market would come up with much better credentials if the stupid government exams were done away with.

I was series 7 and series 66 licensed. Those tests are a complete crock and the laws surrounding them are just to keep out competition from the big firms who can afford to add new advisors and pay them while they study all that BS.

[hedgehog]

In the interest of full disclosure, I actually thought about setting up an advisory firm in the past.

In the interest of full disclosure, I opened the topic/asked the question because similar thoughts have arisen in me as well.

I am from Europe. I am thinking of advice for international clients. Every country in the world, maybe with the exception for Americans. Sorry Americans, you know you are the most difficult country for the international financial industry?

So what are some good/interesting/ethical avenues worth looking for? Thinking of the UK, Switzerland, maybe Malta (but not Cyprus) or some other other major European countries as a base, offering valuable advice, "value of advice" (that is a term, by the way -  http://www.unbiased.co.uk/value-of-advice ) for the client.

The above Unbiased.co.uk is a nice site, by the way, do you like something there?
http://www.unbiased.co.uk/get-advised/h ... an-adviser
http://www.unbiased.co.uk/news/5-questi ... viser/1942

I am thinking of a specific adviser you have found you like on that site?