You may be thinking that working with an advisor who is part of larger company makes more sense. Ben disagrees and he gives his reasons below.
I have spent some time touching upon Bona Fide’s independent status in both the “Introduction” and “What is a fee-only planning?” videos, but this point deserves further elaboration, so I will delve into it here.
Perhaps it’s best to begin by looking at some definitions for “independent.” In doing a simple Google search, you’ll see that “independent” means “free from outside control, not depending on another for subsistence or livelihood.” Wow! How powerful of a description for independence, especially when it comes into the context of financial planning, wherein advice on how best to use your money is being offered and delivered.
Simply put, when you are looking to get advice from somebody on how best to use your money, do you want that advice to be “dependent,” meaning that the advice is governed by another outside body or that the advisor is in need of another for his subsistence? I personally wouldn’t. The potential conflicts of interest seem way to high. But even if you were alright with the potential conflicts, you should at least recognize that, if the advisor is dependent, it is not enough simply to learn about the advisor, you need to learn just as much about the entity upon which he or she is dependent. If the advisor is leaning on this other organization for support, you better learn what kind of support is being provided and how that may be affecting the advice you are receiving.
To be fair, we are all dependent upon somebody else to some degree at all stages of our lives. (Read Dependent Rational Animals by Alasdair MacIntyre for great insight on this.) Even though Bona Fide Finance is “independent,” that does not mean that I am not turning towards others for direction or assistance. In fact, I regularly turn to XYPN and NAPFA for help, some of my advertised affiliations. Bona Fide is very much still dependent in that fashion.
How we are independent though is that I can terminate any of those relationships at any moment or I can go outside of these organization for further advice, which I regularly do. XYPN and NAPFA do not have a controlling interest in my business. If I begin to believe that these entities are no longer the right fit for my practice, I can move in a different direction at any time. This “freedom of movement and choice” gives Bona Fide the space to be autonomous, allowing me the opportunity to draw my own conclusions and opinions, even if those are conflicting or critical to conventional manners of practice or advice.
What this gives to the client (through Bona Fide) is an unfiltered outlet or perspective to financial matters and issues. I can be quite candid and forthright with you on any subject, because I do not have to be principally concerned with whether you go along with “business as usual.” We have the freedom to pursue a different route, a different course of action. You are paying me to tell you what I think and know in a candid manner so that you can process that information and put it to use in your own situation as it makes the most sense for you.
Hopefully, the value for this is fairly self-evident at this point. I do not have to monitor or defend the interests of others (such as the financial industry at large or my immediate mother company at small) at the expense of your interests. Your interests take top precedent and the ramifications of what you decide to do from what I share will have whatever effect they have, even if they are detrimental to how you view the finance industry, other firms and advisors, or the whole capitalist enterprise. My obligation is to you and nobody else. All you need to do for this service is pay the fee for my advice, the means by which I support myself.
All that said, I have both positive and negative opinions on the financial industry, a reality that is likely true for most of us regardless of which industry we operate. Nothing and nobody is perfect, so it should hardly come as a surprise that “skeletons lie hidden in the closet.” The problem is we tend to shy away from criticizing our own industries (even though that criticism could lead to change and improvement) because we fear the impact it may have on our job or ability to make a living. It’s the whole “Whistleblower Dilemma” and “not biting the hand that feeds you.”
In the finance industry specifically then, consumers don’t get the whole picture because so many of the advisors have a symbiotic relationship to the parent company which supports them. That’s very unfortunate when you are looking for advice on how best to use your money, presumably wanting the whole picture. You often, instead, only get the “shiny side” of things.
I have taken great effort to keep Bona Fide as independent as possible A sign of this, among other things, is that all fees received by Bona Fide come directly from clients. We don’t even do the commonly accepted practice of Asset Under Management fees, mostly because it presumes that investing in the capital markets is the single best place to deploy your capital. (There are many good reasons for choosing to invest this way, but I don’t think the fee structure should dictate it.)
Ultimately, I take great pride in our independent status and hope you see the value that this provides. Here at Bona Fide Finance, you get independent advice that is directed towards your best interests above all others. None of that means necessarily that the advice is perfect (I am only human after all) but it does mean that it is in my best interest do what is in your best interest, not something you find wherever you go.