Quick Note: Two Things

“Advisers at Leading Discount Brokers Win Bonuses to Push Higher-Priced Products: At Fidelity, Schwab and TD Ameritrade, employees win extra pay and other incentives to put clients in products that are more lucrative for them, and the firm.” 

The headline above appeared in yesterday’s Wall Street Journal. Fidelity, Schwab, TD Ameritrade, Merrill Lynch, Edward Jones, and many of the household names you have heard of and perhaps invested with are brokers, more properly they are called broker-dealers. Broker-dealer activities are generally commission driven. Legally broker-dealers are held to what is referred to as a suitability standard with regard to the advice they give to their clients. Suitability is a lower standard of duty and care than that which is required of a registered investment adviser. A registered investment adviser is held to a fiduciary standard, the highest legal standard.

First thing: I bring this up because over the years I have observed that most of my clients have not been aware of these different standards, and have often assumed that brokerage representatives (representing a broker-dealer) would be lawfully compelled to put their clients’ interests first when providing advice. This is not the case. Please note that I am not suggesting that representatives of broker-dealers are lousy crooks. There are plenty of broker-dealer representatives who are interested in helping their clients do the best they can with their financial choices. However, there is no legal requirement that they put their clients’ interests first, and as the headline points out their personal compensation may improve if they push higher-priced products.

Second thing: As I mentioned, registered investment advisers are required to put their clients’ interests first. Financial Planning Associates, Inc. is a registered investment adviser. We must put our clients’ interests first. Further, our compensation comes directly, and only from our clients. Our compensation does not change depending on what financial products we recommend. We do have a Schwab connection and it is this: In most cases, we choose Charles Schwab to provide custodial services for our clients’ accounts. We are not compensated by Schwab. We are not employees of Schwab. In some cases, there are reasons why we believe that a different custodian would serve our clients better than Schwab, and in those cases, we recommend the preferred custodian.


Bonus thing: I came across an interesting piece called, Everything You Should Know About Happy Relationships In One Infographic. It is based on research by a company called Happify. If you are interested in knowing everything that you should know about happy relationships look here.


PS. We jump for joy when you recommend us to a friend. 🙂

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