You made the choice to get some financial help. That’s great! Everyone can use help from time to time.
When picking a financial advisor, you need to think about the size of the firm they come from. There are the large well-known companies and the small independent shops. Is choosing an advisor at a boutique financial planning firm better than choosing one at a large company? How do you choose what type of firm to work with?
Before getting into the advantages and disadvantages we want you to create an open mind. Open to finding the right financial firm and advisor and not limited to preconceived notions. When you first think about working with an advisor and firm what comes to mind? What do you envision? Now challenge that vision. Why do you think you envisioned it this way? What feelings came up about other choices? What are some of the pros of the other options you thought of?
It takes careful consideration to find an advisor and a firm that is right for you. Have you considered what values you honored the last time you made a purchase? Can you apply these same values to selecting a firm and advisor? Such as, you prefer local small business or you like the convenience that a corporation can offer.
Let’s look at the options out there. There are the heavyweights of the industry that can easily have 15,000+ advisors working for them. Or there’s the opposite end where you have a sole financial advisor working for themselves. Then there is everything in between and firms that specialize in certain areas.
When it comes down to it, a smaller firm has the big benefit of creating a more personalized service. Corporations and their advisors have quotas to fill and are very streamlined, so advisors tend to work with a lot more clients. This can often make clients feel more like a number especially if they work with any advisor available verse having one or two go to people.
The benefit of a large firm is you can likely talk to someone any day of the week. If an advisor gets sick, is on vacation, or dies there will be someone to take over your account almost seamlessly. With a smaller firm you may not have that same advantage and will need to wait until the advisor is back in the office or a succession plan if fulfilled.
Large firms often can have other arms of the business that may simplify your life by being a one stop shop. For instance, you may be able to get a retirement plan and life insurance at the same place. A large firm can create a retirement plan in as quick as a half an hour and you’ll be on your way. This may be appealing to some but not to others.
Other people may want a more holistic approach to financial planning. Which is something you find at a smaller firm. Where the advisor can really take a look at a person’s whole situation and goals. You will often spend more time with the advisor discussing your finances. Smaller firms and their advisors will often have more flexibility to meet and adapt to your needs as well.
One, it is a common misconception that larger firms have more resources and therefore are better. Until the early 90’s there was more advantages to big firms but with the advent of the internet and power of technology things have changed. Little sized and middle-sized firms now have access to the same valuable resources as the big ones. Whether it be analysis on investments, planning software, marketing tools or economic data.
Two, larger firms can provide better outcomes over a sole advisor. This is not accurate. Think about it in this way. Not dogging on McDonald’s, but they have a ton of resources and are in practically every city. However, you won’t expect to find high quality food there even though they have a lot of resources. There may be a local burger restaurant that can give you an outstanding burger because they offer better ingredients and service. The same holds true for advisors and their firms.
Three, a corporation is a safer bet. You can trust them more with your money and information. While it is true that corporations tend to have been established for more years it doesn’t make them any safer. It is also the bigger firms where bigger problems happen. The bigger the company the easier they can clean things up after mishaps with well-funded lawyers, public relations, and marketing departments.
For instance, do you remember Wells Fargo advisors fraudulently opening up accounts under corporate pressure for profits. Or how news broke when Fidelity was putting clients of their target date funds in riskier investments than what was appropriate so that they could inflate the performance over peers (Fidelity puts 6 million savers on risky path to retirement). The point of this is not to deter you from using a big firm but to remind you that bad situations can arise at any size firm.
Special consideration should be taken when deciding on working with a financial advisor. Deciding on the firm size that your advisor will be at is only one part of the equation. There are a variety of other considerations when picking an advisor. One of those other considerations is whether or not the advisor is a fiduciary. Learn more about fiduciary advisors here.