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Independent Financial Advisor

Wealthy individuals face all manner of challenges when it comes to managing their finances, but this can be dealt with easily with the help of an independent financial advisor. The major services provided by independent advisory firms such as Pillar Wealth Management include estate planning, retirement planning, investment management, and tax planning. Find out how we invest by reading our special investor’s guide for individuals with $10 million or more in investable assets.

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STRATEGIES FOR FAMILIES WORTH $5 MILLION TO $500 MILLION

7 Secrets To High Net Worth Investment Management, Estate, Tax and Financial Planning

The insights you’ll discover from our published book will help you integrate a variety of wealth management tools with financial planning, providing guidance for your future security alongside complex financial strategies, so your human and financial capital will both flourish.

Clients frequently share with us how the knowledge gained from this book helped provide them tremendous clarity, shattering industry-pitched ideologies, while offering insight and direction in making such important financial decisions.

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The biggest Financial Planners' Mistake That Will Hurt Your Financial Security!
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Founder & Managing Member Pillar Wealth Management
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Founder & Managing Member Pillar Wealth Management
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Table of Contents

Definition of an Independent Financial Advisor (IFA)

An independent financial advisor is a specialist who offers clients unbiased financial advice. Unlike linked advisers, who are limited to promoting certain products, IFAs can choose from a diversity of products on the market. This independence enables them to tailor advice that is aligned with the specific needs and goals of their clients, encompassing areas such as investment strategies, retirement planning, tax optimization, and wealth management.

Seeking the guidance of an IFA can be particularly beneficial for individuals looking for sophisticated and holistic financial strategies, ensuring personalized solutions that reflect a comprehensive understanding of their financial situation.

Some of the services offered to high net worth clients include portfolio management, retirement planning, and estate planning.

An independent financial advisor does not have ties to a given institution or provider. Their advice reflects products or services from different sources and, therefore, is objective in nature.

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What defines an independent advisor, and when is this independence questionable?

An advisor or firm is considered independent when there are no ties to a larger organization, ensuring unbiased advice. However, independent and non-independent advisors often offer similar products and services. Independent advisors typically provide services like investment and retirement planning.

How do you know your advisor is independent?

Your advisor will be glad to tell you. Or if it’s a big investment platform, in all likelihood, the firm will not be independent, as it will have its own products to sell—products like mutual funds. Similarly, where the offering of a product is narrow, that might be indicative of not being independent.

Pros and Cons of Independent Financial Advisors

Pros and Cons of Independent Financial Advisors

Being independent enables financial advisors to serve their clients without external influences or commitments. Those who own their own investment firm typically have closer relationships with their clients.

Independent advisors are not subject to outside influences and can make investment recommendations across a broad range of products. They are not restricted in their investment models or strategies and can be fully transparent in their approaches to financial planning.

Independent advisors use third-party custodians to hold their clients’ money, while some clients may prefer to work directly with such a financial institution, for example, Charles Schwab or Fidelity.

Moreover, the big firms may offer more expertise simply due to their size, with specialists in areas such as tax and estate planning and alternative investments. Some big firms also provide banking services, such as savings accounts and borrowing options.

Independent vs Non-Independent Financial Advisors

Again, this underlines the relevance of independent financial advice, free of allegiance or influenced by a large organization or outside vendors. On the less positive side, a smaller independent firm could also not have access to sufficient research resources.

Fee structures vary between independent and non-independent financial advisors. Advisors with their own firm or an independent firm can avoid conflicts of interest by not taking commissions as part of their fees. They are called fee-only advisors. In contrast, non-independent advisors are usually paid sales commissions, hence are called fee-based advisors, and they are prey to the conflicts of interests.

Who you decide to work with is up to you, but it’s good to know how they’re paid.

Tips for finding a financial advisor

This should be determined from thorough research with a full understanding of your financial goals. Some independent advisors are very successful in their field and can provide great insight and advice suitable for your needs. Use your search engine to look for advisors in your area, specifically the ones that are independent if that is your goal.

For example, look for “retirement planning independent financial advisor” if this is the kind of service you need. You may prefer someone who is certified through a reputable institution such as the National Association of Personal Financial Advisors and holds a Certified Financial Planner qualification. This is insurance to show that indeed, the consultant is able to offer you quality advice.

Once you have a shortlist of potential advisors, take some time to look at their client reviews and testimonials. This is important in determining the reliability and service quality you will get with the advisor. Look out for comments regarding the availability of the advisor, transparency in their fees, and overall satisfaction of other clients having similar financial profiles to yours. Set up meetings with the top contenders and get a feel for how clearly they understand your financial goal and what they’re thinking in terms of getting there. The interaction could also provide good information in regard to whether the expertise and style of the advisor would be a fit for your financial planning needs.

What does the Independent Financial Advisor provide?

What does the Independent Financial Advisor provide?

The scope of service an IFA provides could be based on their background and personal interests. Some advisors have a focus in one area, while others provide a number of services that can help clients reach their financial goals, including:

  1. Asset management
  2. Portfolio analysis
  3.  Retirement planning
  4.  Estate Planning
  5. Tax Planning

Each of these services is valuable for individuals with substantial wealth, whether they’re high net worth or ultra high net worth individuals. Let’s dive deeper into each of these services.

1. Asset Management

Asset management includes balancing assets, analyzing portfolios, and choosing stocks. You could reach out to professionals who provide services on either an ad hoc basis or on a more comprehensive level.

Some financial advisors are hired by a client to manage their portfolio, make decisions that seem to meet the set objective, and continue informing the client about their assets’ performance. A thoughtful investment management approach may dramatically improve the performance of your portfolio by efficiently helping you reach your investment objectives. Look no further than our in-depth guide to strategies that could inject a human touch into your portfolio.

Portfolio Analysis

2. Portfolio Analysis

Wealthy investors aiming to optimize their portfolios can benefit from portfolio analysis services. An independent financial advisor can study your portfolio in-depth and identify risks to which you are vulnerable.

They can help you avert or minimize these risks by structuring your portfolio. Such services are beneficial when planning for future investments. We discuss many great portfolio expansion strategies in our special guide.

3. Planning for Retirement

A significant aspect of what many independent financial advisors do is providing retirement planning services. This involves a range of activities designed to help you secure a stable and enjoyable retirement.

For instance, advisors can guide you on effective budgeting methods to help boost your savings before you retire. They can also assist in selecting investment options that generate passive income, ensuring you maintain a comfortable lifestyle without exhausting your savings.

To learn more about protecting your wealth, you can check out our specialized book, The Art of Protecting Ultra-High Net Worth Portfolios and Estates: Strategies For Families Worth $25 Million To $500 Million.

4. Estate Planning

Estate planning is the process of planning wealth distribution following your passing. This typically includes the creation of a will that outlines precisely which beneficiaries and institutions will receive your wealth.

Estate planning is vital because it helps your beneficiaries receive exactly what you intend in a shorter time frame. This service can help you minimize estate taxes, which would otherwise eat into your children’s savings. Please contact us to learn how estate planning can help you.

5. Tax Planning

Tax planning is an essential yet often overlooked aspect of financial management, from which many affluent investors stand to gain. It involves a strategic review of your financial situation and asset allocation to optimize tax efficiency. As a result, you can significantly reduce your tax liabilities, making wealth accumulation smoother and more manageable. For investors with assets of $10 million or more, our specialized guide provides insights on how to select tax-efficient investments tailored to your needs.

How Do I Know an Independent Financial Advisor Is Unbiased?

To determine if an independent financial advisor provides unbiased advice, look at how they are paid. Fee-only financial advisors are objective: they earn money either from a certain percentage of the assets under management or a fixed fee for services and nothing else, not commissions from financial product sales. This fee structure comes with very few potential conflicts of interest since the advisor’s earnings do not depend on the financial products they recommend. You should also ask for full disclosure of any potential conflicts of interest that might exist. An advisor who provides complete objectivity must be clear about any business relations or association with a financial firm, which could motivate the advisor to make certain recommendations.

Another control mechanism for the honesty of an advisor would be checking their investment recommendations for different products. A truly independent, objective financial advisor could draw on any opportunity in the investment universe and would be predisposed to offer solutions that most closely align with your financial goals and risk tolerance. The same goes for verification of their credentials and professional affiliation to organizations like the National Association of Personal Financial Advisors (NAPFA), whose standard is fiduciary ethics. Most of these credentials further require that advisors maintain very strict standards of ethics and therefore guarantee an advisor’s commitment to unbiased advice.

Questions to Ask an Independent Financial Advisor Before You Decide to Work with One

Below are key questions that you should ask before you decide that an advisor is able to meet your financial needs and goals.

What are their credentials and experience?

Look for credentials after their name, like CFP (Certified Financial Planner) or CFA (Chartered Financial Analyst). Ask about their years of experience in the industry, especially with clients in your financial situation.

How do you pay them?

Knowing this will give you a heads-up on the mode of remuneration for the financial advisor and a glimpse of any foreseeable conflicts. Find out if they are fee-only, fee-based, or receive commissions from the sale of recommended products, and how their fee structure works (e.g., percentage of assets managed, hourly rates, or retainer).

To further ensure their suitability for your financial management needs, consider these questions:

  1. Can you provide references from clients with similar financial profiles to mine?

References can help you gauge the effectiveness and satisfaction level of their current and past clients.

  1. How do you normally facilitate our interaction?

Get to know how often they will meet with you, when they will be available for your queries, and how they prefer to communicate, in addition to the reports or updates they provide. This allows you to better understand whether the advisor can meet your expectations for ongoing financial management and advice.

How much does an independent financial advisor cost?

An independent financial advisor will normally charge on an hourly basis, which may range between $150 and $400. They may include an extra charge for various plans.

Experienced advisors often charge more than novice ones. The professional’s reputation may also influence how much they charge. An advisor with an excellent reputation is likely to be in demand and will therefore charge more for their services.

How to Determine if Your Independent Financial Adviser Really Is Independent

First, consider the form of compensation. An independent and unbiased advisor operates under the fee-only model, where the advisor generates income from fixed rates or percentages of assets managed and not through commissions attached to product sales. Such a fee structure helps minimize conflicts of interest because the advisor’s earnings are not influenced by the products they recommend. Equally important is asking for full disclosure of any existing conflicts of interest. Independent advisors should express clearly and unambiguously any business relations with financial institutions, which could create a conflict of interest and compromise the recommendations made by the advisor on behalf of the client.

Another clue to fairness would be to consider the range of products for which an adviser makes investment recommendations. A sound independent financial adviser should be free to select from an extensive range of investment opportunities and should recommend a solution that closely reflects your financial goals and risk tolerance. You may check their credentials and professional associations such as membership in organizations like National Association of Personal Financial Advisors (NAPFA), who promotes fiduciary standards and ethical practices. Chances are that this person will have qualifications with strict ethical guidelines on giving impartial advice.

It goes without saying that you need to have a considerable amount of information that pertains to these professionals, which will help you assess if indeed they could help you achieve your financial goals and needs.

How to Find an Independent Financial Advisor?

How to Find an Independent Financial Advisor

  1. Use a Search Engine
  2. Read Reviews
  3. Meet With the Advisor

To know how to find an independent financial advisor, follow these steps.

1. Use a Search Engine

These professionals can be found with a simple search on the Google or Bing website, listing independent financial advisors and those that practice in your area.

You may want to consider consultants who offer the exact type of services that you require. For example, you will want to consider the search phrase “independent financial advisor retirement planner” in case you need retirement planning services, and so on. The more you specify during your search, the more it becomes easy to land a professional who is able to meet your needs.

Choosing the right independent financial advisor is like maintaining social media. Before you choose an advisor, you need to do market research first by searching on the internet. As geo-location data does, you need to make sure that the advisor is accessible and you can meet them in person. Similar to social media where you need to pay attention to product development, content profile and content measurement, ad performance and ads profile, and content performance, you also need to consider the advisor’s credibility, such as what kind of advice they offer, their previous work, their marketing strategy, and much more. You can also use previous clients’ testimonials like audience insights on social media.

2. Read Reviews

Once you have found a handful of independent advisors who offer the services you are seeking, you should check reviews and ratings for each one. Many financial advisors tout themselves as “the best in the business”; however, their past clients may tell you otherwise.

Look for reviews from clients that have a similar financial background to your own. If you see complaints regarding the advisor’s lack of availability, hidden charges, or inadequate knowledge, these are huge red flags that should be taken into account, including the conflict of interest you may face in the future.

Besides considering their reviews, you can choose financial advisors by taking a look at their qualifications, such as being a member of the National Association of Personal Financial Advisors or NAPFA, Certified Financial Analysts or CFA, Certified Financial Planner or CFP, Certified Public Accountant or CPA, and financial planners or financial advisors who are Personal Finance Specialists or PFSs.

3. Meet with the Advisor

Aim to communicate clearly with them about your financial background and goals. The advisor will then outline their services and how they can assist you in achieving your objectives.

Use this meeting to gauge the advisor’s financial expertise and see if they truly possess the knowledge they claim to have. Our special guide provides useful questions to ask an independent financial advisor.

Is an Independent Financial Advisor Worth It?

Is an Independent Financial Advisor Worth It?

  1. Expert Advice
  2. Meeting Your Goals
  3. Someone You Can Trust

An independent financial advisor may be expensive, especially when you use their services often. But to those with a high net worth or an ultra-high net worth, these expenses would be small compared to the value of the services provided. Please set up a free appointment with us to learn how our wealth managers can help you.

1. Expert Advice

If you were to pick a financial advisor who specializes in a particular area, they could probably easily shape it to your needs. Most of the time, when the client seeks to make important financial decisions or make plans for their future, it is always best to consult one of these advisors.

2. Meeting Your Goals

Everyone has a financial goal they want to achieve. You may want to amass wealth for your retirement. Similarly, you might want to invest in a kind of asset that you may not know much about.

An independent financial advisor can guide you in these areas, clearly, objectively, and with transparency.

3. Someone You Can Trust

Independence—that’s one of the best reasons for choosing an independent financial adviser. Being independent means that they are not beholden to any institution or company. They can, therefore, offer impartial advice and services to help you achieve your goals.

Why do people prefer a wealth manager to an independent financial advisor

Why do people prefer a wealth manager to an independent financial advisor?

  1. The number of services
  2. Experience with wealthy clients
  3. Fee structure

Independent financial advisors do bring a lot of value to an affluent investor. What we would advise, though, is that for needs like yours, a wealth manager would be a better option. Make an appointment with us for a free consultation on how our wealth managers can be of assistance. Here, we’ll look at the differences between the two types of financial professionals and why someone with high or ultra-high net worth might be more drawn toward a wealth manager.

1. Number of services

As already mentioned, most independent financial advisors provide services that focus on one or two areas. Wealth Managers provide a wide range of services. At Pillar Wealth Management, we offer services like asset allocation, portfolio analysis, retirement, and estate planning, as well as tax planning, among others.

2. Experience with Wealthy Clients

Wealth managers are different in that their services are directed to high net worth and ultra-high net worth individuals only. The usual financial advisors serve a much bigger pool of customers.

At Pillar Wealth Management, we serve clients with $5–500 million in liquid assets. The essence of our experience is not just the amount; our wealth managers have enough experience to understand that you want to preserve your values and goals. If this is the case, a wealth manager can prove to be the best option to protect and grow your wealth.

3. Fee Structure

Another major demerit of hiring an independent financial advisor is the fee structure. Simply, this means that you shy away from using a service if every time you need the service, you have to pay the advisor. Wealth managers do not charge hourly rates for the services offered; they charge annual fixed fees based on the value of your assets. Meaning, one may use their services often, without extra costs that accrue to the user.

Five Key Benefits of Independent Financial Advisors

Five Key Benefits of Independent Financial Advisors

Customized guidance based on your entire financial picture

A relationship that’s responsive, attentive, and personal

A fee structure that is simple and transparent

A high level of expertise to support your complex financial needs

An independent custodian holds your money, not the advisor’s firm. An independent advisory firm or an independent registered investment advisor (RIA) is a firm that does not rely on any funds or other investment products. Generally, fiduciaries are registered with federal and state regulatory bodies. They provide personalized or customized advice to individuals and organizations.

1. Customized guidance based on your entire financial picture

Because they are not tied to particular products, independent financial advisors can recommend a wide range of investments to meet your needs. They can tailor your financial plan to your personal goals.       

2. A relationship that’s responsive, attentive, and personal    

An independent advisor will take the time to build a relationship with you to develop your financial plan and investment portfolio, making sure there is an understanding of the fine details of your financial situation.

3. A fee structure that is simple and transparent

Independent advisors should be fiduciaries and utilize a transparent fee structure. It may include a fee that is a percentage of your managed asset value by them, and this may be a flat annual fee.

4. A high level of expertise to support your complex financial needs  

Besides passing the Series 65 exam, most of the licensees have either the CFP or CFA designation, among others. This includes ongoing education to keep current on changing financial markets.

5. Your money is held by an independent custodian, not the advisor firm

Your money stays private. No one other than the RIA and you has the ability to get to your bank accounts. It does contain the investment of the third-party custodian, like Charles Schwab.

Benefits of Independent Financial Advisors

The firm provides a huge range of benefits with varied types of investment products. For example, being independent of a single company, they will provide you with the insurance that you need.

Secondly, the fact that RIAs are fiduciaries means they work for the client and for the best interest of the client, putting the interests of the client before their own. Their advice has to be objective, though in the event of conflicting interests, the nature of the conflict is to be fully disclosed.

Drawbacks of Independent Financial Advisors

The fees charged by RIAs are a little higher, and hence, out of proportion for some investors. The unbiased advice may be good, but it is quite possible that there are better options, which your advisor may not be aware of.

Do Independent Financial Advisors Add Value?

Do Independent Financial Advisors Add Value?

Independent financial advisors can be of immense value to those who need advice on many areas of finance without bias and given by an expert. These characteristics of independence from financial institutions allow for a full array of investment products, with no inbuilt conflict of interest, focusing only on the needs and objectives of the client. This can be of huge benefit to high-net-worth individuals who need strategies tailor-made for their intricate financial situations and long-term planning objectives.

Cost should be a consideration in deciding to engage an IFA. Such advisors typically have a fee structure based on the assets under management, which sometimes could look higher than the commissions of other advisors. Though costly, this creates a huge value for customers because an increase in asset performance can be realized through personalized financial strategies, offered to those who will accept nothing less than dedicated holistic financial advice.

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Because RIAs are independent, they have a larger burden of business administration, requiring time and energy. So, they may be more costly.

Well, the benefit of being independent means having the freedom to build relationships with clients, thus enabling the possibility to provide higher quality advice that is properly geared to the needs and goals of the client.

Independent financial advisers provide financial services such as retirement and investment planning. They are typically fee-based fiduciaries with close relationships with their clients.

According to Barron’s, the top independent advisors are Edelman Financial Engines (Santa Clara, CA), Hightower Advisors (Chicago), Creative Planning (Overland Park, Kan), and Captrust (Raleigh, NC).

Like most financial advisors, RIAs charge a percentage fee of the assets being managed on behalf of their client. As is typically the case with independent advisors, this percentage varies from advisor to advisor, so glean as much detail as you can.

Independent financial advisors don't actually work for free but instead charge fees, normally a percentage of your total portfolio that they will be managing for you. This can vary, so it is important to shop around before making a choice.

Independent financial advisors offer a variety of services regarding finance. Other than budgeting and debt management, services that an independent financial advisor offers include retirement planning, asset allocation, asset management, and tax and estate planning in addition to various kinds of insurance.

The revenue of independent financial advisors primarily comes from the fees charged to clients for their service, who usually pay a fee representing a percentage of the value of their managed assets.

Financial advisors should avoid seeming superior to their clients, not responding to calls and emails, and putting their own interests first. They should act with integrity at all times.

It could be worthwhile to work with an independent advisor, who may have more flexibility in their product offering and more time to develop a close relationship with you.

Authors

To be 100% transparent, we published this page to help filter through the mass influx of prospects, who come to us through our website and referrals, to gain only a handful of the right types of new clients who wish to engage us.

We enjoy working with high net worth and ultra-high net worth investors and families who want what we call financial serenity – the feeling that comes when you know your finances and the lifestyle you desire have been secured for life, and that you don’t have to do any of the work to manage and maintain it because you hired a trusted advisor to take care of everything.

You see, our goal is to only accept 17 new clients this year. Clients who have from $5 million to $500 million in liquid investable assets to entrust us with on a 100% fee basis. No commissions and no products for sale.

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