Wealth Management: Independent vs. Everyone Else

School of Financial Wellness

Meld Financial provides comprehensive wealth management solutions for our clients.

You’ve decided it’s time to get help growing your investments and planning for retirement, so you’re enlisting a professional. Of those proficient in this arena, you may choose a CERTIFIED FINANCIAL PLANNER to guide you in securing your future.

Good. That’s step #1 in securing your financial future. Step #2 is deciding who you want to trust with that process.

In the world of wealth management, you have two main choices: You can hire one of the “big guys” to manage your investments. Or you can hire an independent wealth management firm.

The choice is different for everyone and depends on each person’s financial personality and situation. And there are a few key elements to consider as you weigh your options.

What do the big banks and large investment firms offer compared to independent wealth management firms?

Typically, the main selling point of wealth management services at large institutions is consolidation. If you’re already using a specific bank for all your other financial needs, you may be inclined to add wealth management to the mix, in the interest of keeping everything under one roof.

Another way the large institutions acquire customers is through massive marketing programs. You likely see their names on the internet, television or social media on a regular basis.

We get it; the allure of simplification can be attractive, and familiarity can be comforting. However, with that simplification comes the likelihood for conflicts of interest. The conglomerate structure promotes an opportunity to cross-sell wealth management customers on other services or point them to internal funds over external ones. That becomes a problem when it boosts the bank’s bottom line but does not serve the best interests of the client. In some cases, it’s not even legal. This sales system is known as “closed architecture,” and, as one expert told the Financial Times a few years back, it’s one in which the clients lose out:

The problem is that, as banks build up big internal asset management businesses, pressure to encourage clients towards internal funds. [This] maximizes the institutions’ profits at clients’ expense.

Many banks claim to have open or guided architectures in place, which means some or most of the funds they recommend come from external asset managers. But many agree that it’s hard to verify those systems are actually functioning as promised.

Given all those potentials for conflicts of interest, as well as recent scandals, it can be hard for some clients to trust that the advice they receive from a large institution is truly in their best interests.

Where will I get the highest level of service?

There are very few guarantees with investment advice, no matter which wealth management option you choose. That’s why it’s important to get to know a prospective advisor before making a commitment.

That said, there are a few considerations that could impact the level of service you receive from a wealth manager.

At the big banks and large investment franchises, you will be one of many customers. This can have an impact on service level. Wealth managers at larger institutions also tend to focus on asset growth, rather than taking a more holistic view of a client’s financial situation. This is mostly because of the incentive structure at the institution. The bottom line is wealth managers at large banks and investment firms can have lots of clients and various quotas to hit. That’s not always good news for the investor.

Independent wealth management practices are generally small businesses built on relationships. That structure makes customer service paramount. The independent advisor can’t rely on market dominance, name recognition or huge marketing budgets to bring new business in; their best bet is keeping current customers happy. That is generally a good situation for an investor.

Independent practices also lack the complex and competitive incentive structures in place at larger institutions. Not to mention, their services are generally more focused around their client’s specific situation. Their main incentive is to create investment plans focused on helping customers protect and improve their financial future.

When it comes to reliability, which option is best?

Some clients believe the most reliable wealth management option comes with a larger institution — a firm that has a long history, a large market presence and many individual advisors who can step in to help if someone else steps out.

But size, history and market presence are not always accurate predictors of long-term viability. Just look at the recent financial crisis, which claimed longstanding institutions such as Lehman Brothers and Bear Stearns. Those organizations were fixtures on Wall St. with billions under management, and they were gone in the blink of an eye.

And while many institutions have a large number of advisors, each is simply focused on their own Individual clients. Whereas most Independent firms have numerous advisors and specialists focused on their clients.

So, how do I choose what’s best for me?

Talk to prospective advisors before you decide where to invest your hard-earned dollars. Ask the tough questions and get the answers you need to make the right choice. Make sure you understand your advisor and the strategy he or she has for your finances. The most important thing is that you are comfortable with your wealth manager and their organization as a whole. There’s a lot at stake — your retirement, your future — and you want to invest with confidence.

At Meld Financial, we are independent wealth managers and we’d love the opportunity to get to know you. Join us at one of our upcoming Meld University events or make an appointment to visit our office. We can’t wait to meet you and introduce you to our unique strategy we call Situational Investing, which is an integral feature of our comprehensive wealth management services.

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Why Meld Financial?

Meld Financial, Inc. is an independent wealth management firm located in Birmingham, AL.

We specialize in financial planning, investment management, employee benefits and executive benefits for individuals, families, trusts, foundations and institutions.

We provide independent and objective services melded with customer-driven financial goals.

Mark McGarvey - Founder - Meld Financial

“We will always recommend the same course of action we would choose for ourselves, given the same circumstances.”

-Mark McGarvey, Founder