Is Your Financial Adviser Truly Independent?
Even if the firm you’re working with uses the word “independent” in its name, you need to dig deeper to make sure your adviser is putting your best interests first.


If you were buying a home, you probably wouldn’t want a Realtor who showed you only the houses listed by his company. Pretty soon you’d find yourself asking, “What about this place with the pool? Or this one with the walk-in closet? That’s what I really want.” And if he couldn’t accommodate you, you’d quickly find someone who could.
It wouldn’t matter if he was nice. Or if he worked for a well-known real estate firm. You’d want him to find homes that fit your needs and price range, and to give you as many options as possible.
I often wonder why people aren’t as demanding about their investment choices.

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Are You Working with a ‘Captive’ Adviser?
I understand that folks feel secure when they go with brand-name broker-dealers — the ones that have quality TV commercials, tall buildings downtown, perhaps even their name on a stadium. And I’m sure some investors just feel more at home at their local bank, or they like the convenience of using the financial services offered there.
It’s possible most aren’t even aware the person they’re working with at the bank or the big brokerage company is what’s known as a “captive” adviser — a financial professional who is a registered representative of the firm for which he works, and who typically can recommend only the products offered by that firm or those that they allow on their platform. Which means the things he suggests will be suitable for his clients’ needs, but not necessarily the best possible options, because he simply might not have access to the best solution.
He might tell you what he’s selling is superior — but, of course, he’s a bit biased. The licensing a captive adviser works under doesn’t require the more stringent fiduciary standard, which says the adviser must act solely in the client’s best interests. A captive adviser may have good intentions — but he also has limitations. If he can’t give you what you want, he’ll give you what he has. After all, he still has to make a living.
A Better Way to Go
Which is why a major shift is going on in the industry toward truly independent advisory practices.
Independent advisers offer investment products from a number of companies. They don’t get a bonus or a corner office based on revenue-sharing quotas. And they don’t limit their recommendations or suggest strategies based on a list of products built by their bosses; they look at everything available to determine the best fit for the client. That’s where their loyalty lies.
I know it can be difficult to tell the difference between these types of firms and their advisers. It always has been — and the jumble of letters we put behind our names (CFP, CFA, CFS, etc.) doesn’t mean much to anyone outside the industry. It also doesn’t tell you whether you’re working with an independent adviser, who has your best interests in mind.
The push for better disclosure statements and to make the fiduciary obligation to clients an industry standard has, unfortunately, muddied the waters even more. Firms that use the word “independent” in their name or on their marketing materials are not always completely self-contained. In many instances, they are “independent” practices of another firm. Think of it like owning a McDonald’s franchise: You still have to sell burgers even if your customers want sushi; however, you are an “independent” franchise.
Of course, the most important thing is to find an adviser you trust. Some important factors to keep in mind:
- Do you feel confident that he is looking out for your best interests?
- Does he have a passion for the work?
- Is he persistent?
- Do you get along?
- Does he answer the phone and your emails?
The Question You Always Want to Ask: Why
But your adviser also should be capable of explaining why he picked a particular fund or strategy and whether there was a commission involved or some other motivation for the choice.
Open your statements and look past the bottom line. Read the fine print on disclosures. Ask what licenses your adviser holds and whether he and/or the firm is an independent Registered Investment Adviser, registered with the either the Securities or Exchange Commission (SEC) or state securities authorities.
Finding the right products and strategies to build your nest egg is obviously crucial to your financial success. But hiring the right person to help you make those decisions — with the most choices and the fewest conflicts — is every bit as important.
Kim Franke-Folstad contributed to this article.
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

Casey B. Weade is president of Howard Bailey Financial Inc. in Indiana and author of the book "The Purpose-Based Retirement." Weade, a financial professional, hosts The Purpose-Based Retirement radio and TV shows in the Fort Wayne area. He earned the prestigious Certified Financial Planner™ (CFP®) certification in addition to being a Retirement Income Certified Professional® (RICP®). He is also an Investment Adviser Representative (IAR), as well as life, accident and health insurance licensed and Long-Term Care Certified.
-
Four Surprising Signs You’ll Never Retire (and How to Fix Them)
Gearing up to retire? If any of these four signs ring true, you may want to make some changes before you do.
-
Stocks Rise After Trump-Powell Fed Tour: Stock Market Today
Nvidia hit a new all-time high intraday, but another renowned semiconductor name and some less iconic stocks were bigger movers Friday.
-
How Divorced Retirees Can Maximize Their Social Security Benefits: A Case Study
Susan discovered several years after she filed for Social Security that she is eligible to receive benefits based on her ex-spouse's earnings record. This case study explains how her new benefits are calculated and what her steps are to claim some of the money she missed.
-
From Piggy Banks to Portfolios: A Financial Planner's Guide to Talking to Your Kids About Money at Every Age
From toddlers to young adults, all kids can benefit from open conversations with their parents about spending and saving. Here's what to talk about — and when.
-
I'm an Investment Pro: Here's How Alternatives Could Inject Stability and Growth Into Your Portfolio
Alternative investments can often avoid the impact of volatility, counterbalancing the ups and downs of stocks and bonds during times of market stress.
-
A Financial Planner's Guide to Unlocking the Power of a 529 Plan
529 plans are still the gold standard for saving for college, especially for affluent families, though they are most effective when combined with other financial tools for a comprehensive strategy.
-
An Investment Strategist Takes a Practical Look at Alternative Investments
Alternatives can play an important role in a portfolio by offering different exposures and goals, but investors should carefully consider their complexity, costs, taxes and liquidity. Here's an alts primer.
-
Ready to Retire? Your Five-Year Business Exit Strategy
If you're a business owner looking to sell and retire, it can take years to complete the process. Use this five-year timeline to prepare and stay on track.
-
A Financial Planner's Prescription for the Headache of Multiple Retirement Accounts
Having a bunch of retirement accounts can cause unnecessary complications. Consolidation can make it easier to manage your savings and potentially improve investment outcomes.
-
Overpaying for Financial Advice? A Financial Planner's Guide to Fees
Take five minutes to review how much you're paying for financial advice. If you're overpaying, you could be better off with an adviser who charges a flat fee.