A CONTRARIAN VIEW OF THE CONFLICT OF INTEREST IN THE FINANCIAL SERVICES DISTRIBUTION PARADIGM

Here are 2 key questions to ask your investment advisor:

1 - What is the optimal amount of capital I can expect to have available for retirement at age 60?

2 - What 'sustainable' income can I expect the above capital to generate between the ages 60 - 90?

'Sustainable' means with no shortfalls in income in any given year.

The financial services industry employes advisors to promote and sell proprietary products.

The compensation received by advisors varies with each of the companies with whom the advisor is licensed.

This fact creates a potential conflict of interest when advisors are deciding on which product to recommend to a client.

An example.

Assume 2 companies offer products which have identical value. Assume further that one company has a higher compensation scale than the other.

Which company will the advisor recommend?

Captive advisors (those who can only sell their own company's products) are limited in the full choice of alternatives that they can offer their clients.

How do they make their product choice decisions?

These issues can have a profound effect on the answer to the first question above.

There are excellent client centric advisors throughout the retail financial services sector. The very best reach a conclusion that the only way they can act in an unbiased fiduciary relationship on behalf of their clients is by operating their own financial planning or independent investment management firm. In this role they are paid a fee for their service with no conflicting obligation to sell or recommend any corporate products or services.