By René Bruer
“Y’all ain’t from around here” is a colloquialism you hear in the South when you first move here. After leaving the Marine Corps in 2001, my wife Beth and I moved to Tallahassee from California. The California license plates, lack of southern accents, and a still-developing taste for barbeque combined with an extraordinary appetite for avocados made it obvious that we weren’t locals. Fast forward to the present and we have Florida plates, still no Southern accent, and we love barbeque. We’re finally official Tallahassee-ans.
The cultural transition was easy and entertaining thanks to plenty of help from our southern friends and neighbors. However, when it comes to business, becoming a fee-only financial advisory firm has really highlighted that Smith Bruer Advisors “ain’t from around here.” Even though George, Steve, and I have been financial advisors in Tallahassee for a combined 27 years, when we decided to go fee-only it proved to be a cultural disruptor, to say the least.
Like in many other places around the country, fee-only, fiduciary financial firms are a minority in Tallahassee. Wirehouses and regional broker-dealers have saturated the city for decades and are well represented by commission sales brokers. They’re culturally entrenched by way of affinity (golf club memberships, school buddies since kindergarten, non-profit boards, etc.) or by “just being born here.”
Now, I believe that being tied into your community is a wonderful thing. It shows that you care and are committed to making the place better than when you got here. When it comes to business, it’s another story. Affinity should not give anyone “carte blanche” to take advantage of clients and the community-at-large by churning, misrepresenting the facts, or hiding behind pages and pages of disclosures.
Broker-dealers are incentivized by a large swath of product sponsors to make their services and offerings complex, all in an effort to frustrate their clients. Adding to that frustration and complexity is when you’re sitting across from a commissioned broker that is regarded as trustworthy but is complicit in the industry’s shenanigans.
So, what can consumers do to protect themselves? Savvy consumers and investors will ask questions such as: “are you a fiduciary?” or “what’s the bottom-line fee?” (check out our link on being a fee-only fiduciary). Simple questions that should elicit direct and simple answers, and if they don’t like what they hear they will walk away. Conversely, those that don’t ask and simply trust their “buddy” or their neighbor’s “guy or gal” without asking about costs and conflicts of interest are invariably opening the door to being taken advantage of.
Bottom line, empower yourself! Find out how the person you’re sitting across from is getting paid. That’s directly proportionate to the “advice” you’re given. What should you do if you’re responsible for other people’s money, like a CEO or CFO of a company that sponsors a 401k? In that case, it ain’t just your money! It’s your employees and their families’ and you better know what it’s costing them to do business.
When you decide to make a change to a fee-only firm, there are a number of resources that will help you narrow down your options. A great starting point is the National Association of Personal Financial Advisors which is “the leading professional association of Fee-Only financial advisors.” Other resources are FeeOnlyNetwork.com.
Empower yourself to make a change and work with someone that may be in your town working as a fee-only fiduciary. It’s a step in the right direction to find someone that ain’t from around here like the rest of the financial services industry.