No regrets either way, but I know how to hire better now
Let’s look at some potential solutions to the investing conundrum. Tom sets the stage well when he describes the circumstances he faced in the matter of the misaligned fees:
Tom explains that while he was certain that Tom Von Reckers did not have the proper fiduciary interests in the accounts, there was little chance that Von had done anything wrong. So Tom wanted Von to have access to the accounts that were not under Tom’s fee as a fiduciary advisor. “But,” Tom added, “they still belong to me.”
Tom and Von also decide on their own that Tom will hire a fee-only financial advisor and allow that advisor to manage the accounts. Von agrees.
But Tom believes that a fee-only is financial advisor works in the best interests of the investor. So Tom trusts that the financial advisor has the best interests of Tom in mind when doing anything with the funds.
Tom and Von will trust their financial advisor with their fee-only accounts.
For that matter, Tom’s trust for the financial advisor should carry over into any possible future arrangements, like paying a retainer for referrals, or agreeing to a three-year retainer agreement for services. The financial advisor should provide the clients with fee-only accounts to manage, and not invest the funds.
To sum up:
Tom and Von are both required to have fee-only accounts with the financial advisor. Tom and Von know they are required to have fee-only accounts because of their agreement with their financial advisor. They are, in effect, both signing away the right to earn fees for investing with the funds in a fee-only account.
Notably, Tom Von Reckers is not required to have a fee-only financial advisor. In fact, he can get professional help, or help from a professional fiduciary who earns fees for doing the work.
Not all financial advisors are the worst people in the world. Many financial advisors are wonderful. In fact, Tom and Von have never met a fee-only financial advisor who is not wonderful. But Tom and Von shouldn’t trust them.
One might argue that Tom could be wrong, but he should have at least tried, right? No, that wouldn’t be a good approach. I’ll suggest that Tom still has the right to be wrong. And the right to ask questions about his situation and follow up. Tom can explain to the advisor how he believes his situation is a bona fide situation of professional wrongdoing. He can explain that the financial advisor has a vested interest in doing anything with the accounts,
As for Von, I can tell you that his financial advisor has not lost his financial license and that the advisor has not lost any clients. Von has expressed a great deal of anger and frustration, but I suspect that anger and frustration will fade over time.
On the other hand, if Von decides to switch advisors, he is paying a retainer, and he will have to pay fees for the new financial advisor’s services, too. So he won’t lose any of his assets, either, and he will keep his fees.he won’t lose any assets.
Von can choose to move to a fee-only advisor and he won’t lose any assets.
But if he stays with the financial , he will have lost the account fees. And the financial advisor’s firm will lose any fees it earned from having Von’s assets.
Von’s choice is the same as Tom’s choice. Both Tom and Von understand that they are not required to have fee-only accounts with the financial advisor.
But Tom and Von know that they are paying for a service they aren’t getting. And that’s a huge deal.
I can tell you that Tom and Von are not motivated by profit. I can tell you that Tom and Von will pay every penny they are legally obligated to pay, in the way Tom and Von are legally obligated to pay it, regardless of how their financial advisor behaves. Tom and Von are motivated by honesty and respect. They know that honesty and respect are the only requirements under FINRA rules for financial advisors.
