At the risk of seeming self-serving, this is a question we hear a lot. At the heart of the matter, what people are often really wondering goes something like this:
“We are fond of our bank and our personal banker there. They’re a familiar name that’s been around forever. I trust them with my chequing account; why shouldn’t I invest there too?”
It’s a fair question. We Canadians tend to perceive our banks as the financial equivalent of comfort food – and the multi-millions of dollars they spend on promotional activities certainly do nothing to dispel the notion. We can see why it may be tempting to want to place all things “money” onto the same, familiar plate.
While banks may be the best place to stash your cash, when it comes to your wealth-building investing, there are several good reasons to turn to an independent financial advisor to help you minimize your costs, safeguard your best interests and advance your financial goals. Here are two important questions to consider when heeding anyone’s investment advice:
1. Do they emphasize the objective evidence over common convention?
As an independent financial advisor committed to the Science of Personal Finance, Lowrie Financial focuses solely on helping families plan, build and manage their long-term investments according to their individual interests and objectives. In doing so, we are guided by the academic evidence on how to best build wealth in complex and sometimes confusing global financial markets. The science of investing truly informs us on which factors are expected to be within your control (minimizing costs, and managing for risks and expected returns according to personalized goals) and which are more likely to tempt you to veer off-course (trying to pick winning stocks, or chase or flee hot/cold markets).
The advice found in conventional settings such as big banks and similar transaction-based businesses typically emphasizes stock picking, market timing and similar ill-conceived recommendations that just happen to generate increased transactional fees. Because such practices are so familiar, you may find them comforting. But, bottom line, they’re not in your best interest. As described in this related post, this sort of hyperactive investing is more like chasing daily weather patterns than planning for the climate.
2. How much is that comfort and convenience costing you?
At Lowrie Financial, we operate in a 100% fee-based compensation model, which means our only source of revenue comes from our clients’ fully-disclosed fees. Our practice is dedicated to our clients’ portfolio management, with no need to answer to corporate headquarters, promote the in-house products, meet sales quotas, or compete in “sales contests” that may run counter to that cause.
We also work hard to ensure that any investments we recommend offer the most cost-effective exposure to the market factors we’re seeking to target. A bank’s focus is often on promoting its own proprietary products, not necessarily because they are in your best financial interest, but because the bank stands to reap the most profit by encouraging you to invest in them.
Seeking an Objective Second Opinion
In short, in seeking an advisor to help you manage your family’s nest egg, focus on building an independent relationship with someone who is dedicated to minimizing your investment costs in both strategy and security selection, and in fully disclosing any costs that remain. Any lesser form of advice may well cost you more than it’s worth.