Get Your Financial Advice. . . Cold-Pressed
Extract the best financial guidance from your adviser with the fiduciary model.
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As recently discussed in the Los Angeles Times, the juicing trend continues to be strong in 2015, particularly in Southern California. Nowadays, many consumers are seeking out cold-pressed options in lieu of the traditional centrifugal juicers.
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Apparently, cold-pressed juicers safely extract juice by slowly grinding and pressing fruits and vegetables, instead of shredding them with fast-spinning blades. The fast-spinning blades in a traditional juicer generate heat, which can destroy many of the nutrients and enzymes in your fruits and vegetables. Cold-pressed juicers reduce the heat and create a more nutrient-filled snack.
Similar to the cold-pressing juice aficionados, I’m a firm believer that the way financial advice has been delivered for decades can be greatly improved upon. I believe there is a safer way to extract financial advice from the experts—a way that puts your interests ahead of theirs, at all times.
The traditional model that many financial advisers have adopted and still operate under today is called the suitability standard. Put simply, if these advisers, often known as “brokers,” can determine that a financial product is suitable for your investment profile, he or she can sell it to you. They are not obligated to consider costs, expenses, or even best interests of the client.
If that’s not enough to cause some concern, these fast-spinning brokers are typically selling a product in return for a commission. Not only does this compensation model present a potential conflict of interest, but the client often pays more for advice than necessary. Needless to say, the characteristics of the suitability standard model can destroy the value often found in working with a financial professional.
The fiduciary model, on the other hand, is a more appropriate way to render financial advice, in my opinion. A financial professional adhering to the fiduciary standard is required by law to put your interests ahead of theirs at all times.
Fiduciaries, often referred to as Registered Investment Advisors (RIAs), typically charge a flat, transparent fee in return for the advice they provide. This fee usually comes in the form of a percentage of assets, an annual or monthly fee, or even an hourly fee. Regardless of how the fee is billed, the consumer is always informed of the amount and their interests are always put first. Costs, expenses, quality of product and more are taken into consideration before making any recommendations.
Due to the stricter obligations of a fiduciary, the advice process is often longer than a commissioned broker. A fiduciary will take time to extract the unique characteristics of the client and prepare a plan that puts them in the best possible situation for success. In addition, RIAs will typically render advice on more than just investments. This might include tax planning, estate planning, charitable giving, college planning, and more.
Financial professionals have been rendering advice under the suitability standard for decades. Like traditional centrifugal juicers, it is a solution, but not the best one. If you want objective, conflict-free financial advice, get it cold-pressed by working with an adviser who has adopted the fiduciary standard.
Taylor Schulte, CFP, is founder and CEO of Define Financial, a San Diego-based fee-only firm. He is passionate about helping clients accumulate wealth and plan for retirement.
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