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What does “financial advisor” mean anyway?

Surprisingly, actually not much — at least legally. There are virtually no constraints in the U.S. to calling oneself a “financial advisor.” As a result, you’ll find many types of professionals (and some not-so-professionals) who use this term. Representatives of Registered Investment Advisors — otherwise known as fiduciary advisors — as well as brokers, insurance agents, representatives of mutual fund companies, and many others may call themselves “financial advisors.” It is up to you, the consumer, to learn what the difference is and how to distinguish among the types of individuals that you may want to trust to advise you.

What does it mean for a financial advisor to be a fiduciary?

Ethically, acting as a fiduciary simply means placing a client’s interests first.

Legally, the exact definition of the term has changed somewhat over time. The most important thing for most consumers to understand is that there is a difference between the “suitability standard” brokers are under and true “fiduciary duty” that Registered Investment Advisors are held to.

Recently, the Committee for the Fiduciary Standard developed a five point statement of principles delineating what it means to deal fairly with a client. Here they are:

  • Put the client’s best interest first
  • Act with prudence – that is, with the skill, care, diligence and good judgment of a professional
  • Do not mislead clients; provide conspicuous, full and fair disclosure of all important facts
  • Avoid conflicts of interest
  • Fully disclose and fairly manage unavoidable conflicts of interest in the client’s favor

Is it difficult to find a financial advisor who is willing to be held to a fiduciary standard?

Unfortunately, it is more difficult than you might think. Fiduciary advisors make up less than 10% of the financial services industry. This means that 90% of the individuals who call themselves “financial advisors” do not have a legal duty to put your interests first, even above their own interests. Most investors are shocked to learn this.
Cerulli Associates, a Boston firm that studies the financial industry, recently calculated that approximately 250,000 people throughout the U.S. call themselves “financial advisors.” Of those, 232,000 are sales people who work for their firm, not for their clients. Sales reps selling insurance, mutual funds or other financial products are most likely not fiduciaries. Only 23,000 advisors are representatives of Registered Investment Advisor firms, who are true fiduciary advisors.

What does it mean to have a CFP® certification?

The CFP® certification is today’s gold standard when it comes to the education, training, and commitment it takes to be a financial advisor. Also known as a CFP® certificant, the CERTIFIED FINANCIAL PLANNER™ professional must meet the following qualifications in order to be certified to use the CFP® marks, as specified by the Certified Financial Planner Board of Standards, Inc.

  • Examination – An individual must successfully complete the CFP Board’s comprehensive certification examination, which tests the individual’s knowledge on a multitude of key financial planning topics.
  • Experience – Depending on the level of degree work completed in a collegiate setting, an individual must acquire three to five years of financial planning-related experience prior to receiving the right to use the CFP® marks.
  • Ethics – An individual must voluntarily ascribe to the CFP Board’s Code of Ethics and additional requirements as mandated. This voluntary decision empowers the CFP Board to take action if a CFP® certificant should violate the code of ethics. Such violations could lead to disciplinary action, including the permanent revocation of the right to use the CFP® marks.
  • Education – A CFP® certificant must obtain 30 hours of continuing education every two years in the body of knowledge pertaining to financial planning areas such as estate planning, retirement planning, investment management, tax planning, employee benefits and insurance.

Do all CFP® professionals adhere to a fiduciary standard at all times?

Unfortunately, no. Technically, they are supposed to, but as a practical matter many CFP® professionals work for sales-driven organizations and are under pressure to sell products and services. Many such organizations are large and powerful, and other industry players may ‘look the other way’ when they expect their CFP® professionals to produce sales results rather than adhere to a fiduciary standard.

The best way to ensure that your advisor will adopt a fiduciary standard of conduct is to work with a CFP® professional who is affiliated with a Registered Investment Advisor.

Can I afford your wealth management services?

We believe that, for most people, the answer to this question is a resounding “yes.” We have priced our entry-level services to fit the needs (and budget) of younger individuals and families. In most cases, “affordability” really depends on your priorities. As a young professional starting out, for example, if you can afford a gym membership or good cell phone data package, you can probably afford Griffin Black’s services.

Our fees do increase with the age and financial complexity of our clients. But our asset-based pricing helps ensure that the fees we charge are commensurate with a client’s ability to pay.

Finally, whatever your financial circumstances, you should keep in mind that we can usually help clients either lower their overall investment fees or save money in other ways (e.g., by good tax planning). As a result, our fee is frequently ‘paid for’ to some extent by savings we help our clients achieve. The real cost to most clients is not as great as it might seem.

How do you get paid?

At Griffin Black we earn all of our money directly from client fees. We do not sell products; and we never engage in referral schemes.

Our clients work with us on a retainer basis. This approach enables us to work pro-actively on clients’ behalf. It also means that, even when we work on a large and time-intensive project, the client doesn’t pay more. S/he simply continues to pay the agreed upon retainer fee.

We collect our fees directly from clients’ investment accounts. This process is cost efficient for us, as well as simple and tax efficient for clients. It also allows clients to plan their cash flow independently of their advisory fees.

Are you affiliated with another institution?

No. We are a completely independent company.

Do you offer financial planning without investment management?

Yes, we do offer standalone financial planning services. We do so, however, on a retainer basis in the same way we offer full wealth management services. Prices for standalone financial planning services are comparable to those for full wealth management services.

You’re a small company. Do you hold my money? Is that safe?

Griffin Black does not hold your money. We only provide advisory services. Our clients’ investment assets are held by – “custodied by” in industry parlance – Pershing, LLC. Pershing is a subsidiary of the Bank of New York Mellon and is the largest custodian of investment assets in the world and is very secure.

What is Shareholders Service Group? Why do you recommend them? Why haven’t I heard of them?

Shareholders Service Group (SSG) is a Broker-Dealer, which means that they provide us with transactional services back-office support. They also supplement Pershing’s custodial services. We have chosen to work with SSG because we believe they quite literally offer us – and therefore our clients – the best service in the business.

You probably haven’t heard of SSG because they do not work with ‘retail’ accounts. They work exclusively with fee-only advisors like Griffin Black and their clients. Nevertheless, they are a large, conservatively run, and highly professional organization.

What if I have still have questions?

No web site is going to answer all of your questions. That’s why we offer perspective clients a 1-hour complimentary “Get Acquainted” session, either in our offices or online. (See the “Contact Us” section of our site.) There is absolutely no obligation, pressure, or cost to you for this service. While we will not be able to give you actual advice in our session, we will try to address any outstanding questions or concerns you may have about what we do and how we may be able to address your needs. Then you are free to make a choice.

Why do we take the time to do this? Our business success depends on happy clients. Finding the right “fit” is just as important to us as it is to you.

How can I get started?

Once you’ve decided to get started we’ll walk you, step-by-step, through our process. (See: About/Our Process.) We’ll make sure that you’re comfortable with each step before we proceed to the next. At each state you’ll have the opportunity to ask questions and address any potential concerns you may have. In addition to the “what to do” element, we will also work with you to actually take appropriate steps toward realizing your financial plan.

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