Determining Which Investment Products will be Best for Your Clients | Naples Florida

As a financial advisor, you advise your clients on a daily basis to help them with their financial planning for their retirement accounts. How do you determine which investment products will compensate you well and be the best options for your clients?

This is an important question because when you boil it down to its essence, it comes to integrity. Are you offering the best options for your clients? Often times, financial advisors have chosen investment products primarily for the compensation they are offered and what they are incentivized to sell. While some of these products can be beneficial to the client, a lot of them are not. In fact, some advisors even force an investment on clients even though it does not fit their risk profile but offers them a higher payout as their advisors.

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Your clients rely on you for sound financial advice. There is a lot of trust involved. Depending upon the investment products you are looking at with your client and their financial planning goals, there can be a lot of details to keep in mind and prepare for. Clients are often unfamiliar with these steps and details, and will turn to you for your advice and guidance.

It is really important that you provide genuine and comprehensive information to your clients. Instead of focusing solely on your own compensation, your goal as a financial advisor must first be towards your client. You will want to choose investment products that suit their individual risk profiles.

Shift Towards SMA Accounts: Greater Transparency, No Hidden Fees

An increasing trend today after the changes in the fiduciary rule by the Department of Labor, is to support SMA wrap accounts. SMA wrap accounts are set up with a financial advisor and have fee-based management without any commissions. Unlike the standard platform used by many financial advisors with multiple fees and a commission management fee of 3%, a managed account platform has just 1 fee. By utilizing the SMA account structure with our Enhanced Dividend Income Portfolio, the total fee can be negotiated depending on the relationship and amount of assets being delivered into the strategy.

The financial industry is moving towards increasing transparency. The Department of Labor ruling required that all financial advisors must reveal the fees that the client is paying for the management of their funds. Previously, financial advisors could offer 401(k) plans that they were incentivized to put their clients in, that was suitable for them as advisors, but not for the clients. After the DOL ruling and increasing changes now happening in the financial industry in this direction, there is a growing shift towards using SMA accounts.

More and more financial advisors are now managing their books of business directly with manages accounts. As more investors move into managed accounts that have no hidden fees or commissions with clear costs outlined, the entire industry is changing.

Projecting Savings Over 30 Years+

An easy way to see the direct financial benefits of this lowered fee over time is to compare 401(k) plans with the traditional mutual funds that are still being used in employee plans. Fund fees can range anywhere from 1 - 3%. With the transition to transparency and lower fees, many of the mutual funds that are charging high fees can be replaced with a low-cost ETF that is highly correlated and offers very similar returns to that of the mutual fund.  When you put your client’s portfolio through an audit, you can clearly see and explain to them how much they are paying in fees over time and how much money they can save over a 30-year period.

When you work with us at Capital Wealth Planning, we can  explain and present this compelling argument with direct facts pulled right from your client’s existing portfolio. We use a 401(k) optimizer tool that can take your current plan, analyze it and look at the different funds being offered by that plan. You can quickly see how much money you can save and which ETFs can offer relatively the same returns which much lower fees. mutual funds are in the best interest of your client.

By helping your clients be successful, you will be successful too.