1. Five Seasons is Fee-Only
One of the necessary conditions for you to find a financial advisor who will work in your best interests is to find one who is Fee-Only, whose compensation is not tied to the sale of products. The benefits to consumers of the Fee-Only business model have been touted by the press and by financial experts for years.
The results of a study by the National Bureau of Economic Research (NBER) highlight the dangers of working with advisors paid by commissions and fees derived from the sales of mutual funds. NBER auditors pretended to be clients and visited 284 financial advisors, ostensibly to seek investment advice. The authors of the study found that:
Advisors with a monetary interest in the sale of mutual funds encourage returns-chasing behavior, and recommend actively-managed funds that have higher fees and expenses.
Even when these advisors were presented with a diversified portfolio of low-fee index funds, they tended to move investors away from the existing strategy to a portfolio of high-fee, actively-managed funds that would make the client worse off than with the allocation he/she started with.
Research in the past decade has produced a large body of evidence suggesting households on their own are bad at constructing and managing portfolios. For example, companies like Morningstar and Dalbar periodically generate reports showing that returns experienced by fund investors over the long run tend to lag behind the returns generated by those funds. Basically, the average fund investor shoots him/herself in the foot by chasing returns and by trying to time the markets.
The NBER study suggests that financial advisors compensated from the sale of mutual funds share much of the blame for the poor investment performance experienced by mutual fund investors and brokerage account-holders. The authors find that, in "catering" to their clients to promote their own financial self-interest, these advisors reinforce and even exaggerate the poor investing habits of the public.
This study concludes that financial advisors often work against the interests of their clients if it means the advisor can earn more in fees. The key takeaway for consumers of financial advisory services is to start by finding an advisor who is not in any way compensated through the sale of financial products. Only in this way can you ensure that your advisor's financial interests are aligned with yours. Only in this way do you stand the best possible chance of receiving objective advice.
Consider fee-only advisers: Fee-only financial planners often dig deeper than other brokers and advisers for independent research and "tend to be more academically oriented," says Sean Cunniff, a director in the brokerage and wealth division of research firm TowerGroup.
- from a Wall St. Journal article listing "tips for deciding your next investing moves."
2. Five Seasons is Independent
When it comes to personal finance, choosing the right adviser is one of the most important steps you can take. After all, this is your life savings we're talking about, so it's worth doing a little legwork before you take someone's advice. Start by considering individuals who work independently. That often means hiring an adviser who gets paid for his or her advice, or for boosting your nest egg, rather than for making trades in your investments.
-Wall St. Journal, May 2007
3. Five Seasons Takes a Personalized Approach
At Five Seasons, there are no canned investment portfolios, no boilerplate financial plans. Because your financial circumstances are unique, the services you receive will be customized to you. The portfolio management services and financial advice you'll receive will be tailored specifically to you, your needs, and your goals. While we utilize some of the best technology available to streamline the planning process and to ensure accuracy, professional guidance and interpretation of the numbers is a large part of the "Five Seasons Difference".
You will never feel like "just another account" at Five Seasons. Advisory services are tailored to the individual needs of clients. Investment Policy Statements, which govern how Wealth Management client accounts are invested, are in turn based on the investment objectives, time horizon, investment preferences and constraints, need for income, tax situation, and tolerance for risk unique to each client.
Objective. Professional. Advice. Experience the Five Seasons Difference.
To get started on your way to a brighter financial future, contact us to schedule your complimentary Introductory Meeting.