Brand Name Companies?
Too many investors think that selecting an advisor from a brand name company gives them additional protection from bad advice. They must believe that these advisors are more competent and ethical than professionals who are independent or work for lesser known companies. They couldn't be more wrong.
Brand Awareness
Some organizations can afford to spend a lot of money on advertising. That makes them brand name companies. However, that doesn't guarantee that they employ competent, trustworthy advisors. In fact, it could be just the opposite. The companies have a lot of overhead so they have to generate substantial revenues from the assets of their clients. This introduces the potential for major conflicts of interest.
There is no correlation between companies' advertising budgets and the quality of their advisors.
Public Companies
Brand name companies are publicly held. That means their number one priority is shareholders and not their clients. They have to meet the expectations of analysts for revenue growth and profitability to maximize the prices of their stocks. No brand name company measures the percentages of their clients who are achieving their financial goals. But, they know how to measure profitability from the assets of their clients. This creates enormous pressure on these organizations' advisors to do what's best for the companies versus what's best for investors.
Headlines
You may recall hundreds of headlines, earlier in this decade, that documented hundreds of financial abuses. You may also recall that many of the companies paid billions of dollars of fines for their abusive client practices and many of their executives were sent to jail or left the industry. A disproportionate percentage of these companies had brand names and a similar percentage of jailed executives worked for brand name companies.
There is no safety when you put more importance on the name on the door than you do on credentials, ethics, and business practices of the advisor.
Proprietary Products
Brand name companies produce their own (proprietary) products that they sell to investors. A high percentage of these products have long histories of producing mediocre results. But, the companies sell them anyway because they generate two to four times more revenue when compared to third party products that may produce superior results. You should be very cautious when a brand name company representative tries to sell you the company's own products.
Advisor or Company
When you select a professional to help you achieve your financial goals, are you hiring a company or an advisor? There is only one answer - you are hiring a professional and not a company. That's because no one at the company knows you or your needs - only the advisor does. So it's up to the advisor to use his or her expertise to help you achieve your goals.
Companies have little or no impact on the probability you'll achieve your goals
Breakaway Brokers
The financial services industry calls them breakaway brokers. These professionals spent years with brand name companies, but left to work in more independent environments. Their number one reason for leaving was a desire to do what was best for their clients versus what was best for their companies. They could no longer tolerate continuous company pressure to sell particular products that maximized profits at the expense of their clients.
Some of the best advisors in the country are breakaway brokers.
