Busting myths of financial service firm independence

Most financial services firms tout their independence and how they are always looking to do what is in the best interests of their clients. But the truth, of course, isn't so simple.
Let's start by busting a few myths about adviser independence. First may be the myth that because someone practices as a fee-only adviser that they are completely independent. In theory, of course that would be true. But in practice, I've seen independent fee-only advisers whose independence may be compromised because of limited product knowledge or using the same cast of characters for commission business or other services without offering a choice of others who may be equally or more competent.

Next is the myth that an adviser who earns commissions is not independent. This may or may not be true. The best way for an adviser compensated by commissions to be independent is to represent and evaluate every possible product or company for client solutions and to fully disclose any compensation from the use of that product.

There are a few different levels of independence. Beyond the whole issue of the commission itself, the next issue is what products or services are offered by an adviser's firm. For example, if an independent company only represents a few companies in any given area, is the adviser or that firm truly independent? I would argue not.

If the solutions presented to you always have the same brand name, there is a good possibility that your adviser is not acting independently. It is very difficult, if not impossible, for any one company to manufacture the best in class for the entire range of financial products. Ask to see some alternatives if you want to test this.

Many financial firms tout themselves as financial planners when in reality they are product salesman using a consultative selling process that mimics comprehensive financial planning.

This does not mean that all commission-based financial firms mask their true intentions behind the cloak of financial planning, but specifically ask if a written financial plan will be prepared for you. I don't mean pages of numbers and forecasts. I mean a document written in plain English that spells out your situation, goals and objectives, alternatives and specific recommendations. Be very direct and ask specifically if an adviser will put their advice in writing.

John P. Napolitano is CEO of U.S. Wealth Management in Braintree, Mass., and 2012 president of the Financial Planning Association of Massachusetts. He may be reached at jnap@uswealthcompanies.com or on Facebook as JohnPNapolitano and US Wealth

Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through U.S. Financial Advisors, a registered investment advisor and separate entity from LPL Financial. The LPL Financial Registered Representatives associated with this site may only discuss and/or transact securities business with resident of the following states: AL, AR, AZ, CA, CO, CT, DC, FL, GA, HI, IA, ID, IL, IN, KS, KY, LA, MA, MD, ME, MN, NC, ND, NH, NJ, NM, NV, NY, OH, OK, OR, PA, RI, SC, TN, TX, UT, VA, VT, WA, WV. USFA, and U.S. Insurance Brokers, LLC are wholly-owned subsidiaries of U.S. Wealth Management. U.S. Wealth Management companies are not affiliated with LPL Financial.

The information being provided is strictly as a courtesy. When you link to any of the web sites provided here, you are leaving this web site. We make no representation as to the completeness or accuracy of information provided at these web sites. Nor is the company liable for any direct or indirect technical or system issues or any consequences arising out of your access to or your use of third-party technologies, web sites, information and programs made available through this web site. When you access one of these web sites, you are leaving our web site and assume total responsibility and risk for your use of the web sites you are linking to.

Headlines can influence your money decisions

This past week was the 68th anniversary of D-Day. On June 6, 1944, more than 150,000 Allied troops invaded the beaches of Normandy. Not only do I ask for your appreciation of those men who risked and lost their lives fighting for our freedom, but for your perspective on how large world events like this relate to world economics.

Today, the headlines about Europe are just as prolific. But they are dominated by the possible collapse of the European financial and banking system, the possible financial failure of a few governments and issues of currency devaluation.
Rarely in history has our world been without some shocking news or catastrophic event. We’ve had high inflation, we’ve had low inflation. We’ve lived in peacetime and in times of horrific wars. Our reality dictates that we are likely to always have interference or headwinds that give us the feeling that the financial system will suffer.

Doing nothing, however, is still about the worst thing that you can do.

Today, record amounts of cash sit invested at rates below the current rate of inflation. Many understand that this loss of purchasing power can only get worse over time, and the wisdom is often grounded in the fact that the certainty of a small loss feels better than the uncertainty of a possible large loss. For some, though, the loss of power can lead to problems down the road.
If you find yourself stuck in this quandary, get a fresh set of eyes.
Perhaps a fresh set of eyes can show you what your future would look like were your cost of living to grow at 3 to 4 percent while your assets on an after-tax basis grow at less than 1 percent. Small numbers indeed, but these small numbers may have a profound impact on your ability to maintain your lifestyle over your entire lifetime.

I’m not suggesting that you get out of your comfort zone in terms of how you have your nest egg positioned and invest in risky or volatile holdings. But I am suggesting that you understand that throughout history there have been major world events that affect our lives and finances.
I do not know what the headlines will be over the next seven days, but there are likely to be headlines that can affect your investment decisions. Before you head for a bunker, understand your alternatives and attempt to do something positive.

John P. Napolitano is CEO of U.S. Wealth Management in Braintree, Mass., and 2012 president of the Financial Planning Association of Massachusetts. He may be reached at jnap@uswealthcompanies.com or on Facebook as JohnPNapolitano and US Wealth

Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through U.S. Financial Advisors, a registered investment advisor and separate entity from LPL Financial. The LPL Financial Registered Representatives associated with this site may only discuss and/or transact securities business with resident of the following states: AL, AR, AZ, CA, CO, CT, DC, FL, GA, HI, IA, ID, IL, IN, KS, KY, LA, MA, MD, ME, MN, NC, ND, NH, NJ, NM, NV, NY, OH, OK, OR, PA, RI, SC, TN, TX, UT, VA, VT, WA, WV. USFA, and U.S. Insurance Brokers, LLC are wholly-owned subsidiaries of U.S. Wealth Management. U.S. Wealth Management companies are not affiliated with LPL Financial.

The information being provided is strictly as a courtesy. When you link to any of the web sites provided here, you are leaving this web site. We make no representation as to the completeness or accuracy of information provided at these web sites. Nor is the company liable for any direct or indirect technical or system issues or any consequences arising out of your access to or your use of third-party technologies, web sites, information and programs made available through this web site. When you access one of these web sites, you are leaving our web site and assume total responsibility and risk for your use of the web sites you are linking to.

Don't continue to let financial matters slide

Getting your financial house in complete order and keeping it that way is as daunting a task as going on a diet or quitting smoking.
As we approach the midpoint of the year, I'd like to reach out to those who had great intentions in January but have not made significant progress. Each day, millions of people put off significant issues that need addressing. People who can afford to hire the right people to get it all together are often just as delinquent as those with little or no wealth.

The task can be intimidating for a number of reasons. You have perceptions of what you need, and your view of what you need is driven by what you want. Serving your wants should be the goal of any team of financial advisers, but it is also the job of those advisers to show you what you need. For example, shouldn't any adviser continuously nudge you if he or she is aware that you are underinsured or without a current set of wills and trusts?

Another reason for the intimidation is that many advisers use jargon or technical terms that the average person doesn't understand. How many times have you listened to a lawyer, accountant or insurance professional present a concept and not understood a word?

And now, given the time of year, the biggest reason people deny themselves the right to get their financial act together is weather. Are you one of those who plan to get it together after the summer? I've known people who each year use the summer and the holiday seasons as reasons they can't tend to financial issues just yet.

Perhaps you can use the summer as your time frame for getting it all together. This all starts with reviewing your team of advisers and deciding whether this team is functioning.

To make this judgment, you can't only ask your current team members. How many of them would be willing to expose what they haven't done for you over the years? This process is work. It will require your time and that of a dedicated team. If you start now, you can know that you've done everything that you can to get your financial house in order and focus on keeping it that way permanently.

John P. Napolitano is CEO of U.S. Wealth Management in Braintree, Mass., and 2012 president of the Financial Planning Association of Massachusetts. He may be reached at jnap@uswealthcompanies.com or on Facebook as JohnPNapolitano and US Wealth

Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through U.S. Financial Advisors, a registered investment advisor and separate entity from LPL Financial. The LPL Financial Registered Representatives associated with this site may only discuss and/or transact securities business with resident of the following states: AL, AR, AZ, CA, CO, CT, DC, FL, GA, HI, IA, ID, IL, IN, KS, KY, LA, MA, MD, ME, MN, NC, ND, NH, NJ, NM, NV, NY, OH, OK, OR, PA, RI, SC, TN, TX, UT, VA, VT, WA, WV. USFA, and U.S. Insurance Brokers, LLC are wholly-owned subsidiaries of U.S. Wealth Management. U.S. Wealth Management companies are not affiliated with LPL Financial.

The information being provided is strictly as a courtesy. When you link to any of the web sites provided here, you are leaving this web site. We make no representation as to the completeness or accuracy of information provided at these web sites. Nor is the company liable for any direct or indirect technical or system issues or any consequences arising out of your access to or your use of third-party technologies, web sites, information and programs made available through this web site. When you access one of these web sites, you are leaving our web site and assume total responsibility and risk for your use of the web sites you are linking to.