Media Coverage

Investors Want Guidance in Their Financial Decisions

Printed June, 2001 by Business Opportunities Journal
By – J. Graydon Coghlan – Coghlan Financial Group, Inc.

Traditionally, investments have been chosen and paid for on a per-transaction basis. That is, whether you invest by yourself or through a broker, you might pay a commission to buy shares of stock, for example, or a load to buy shares in a mutual fund.

In recent years, however, investors have shown a desire to manage their investments in a more unified way. A study released last year by Cerulli Associates, and independent research company specializing in financial services, shows that fee-based brokerage programs – those that charge an annual fee, usually based on the amount of dedicated assets – are the fastest growing sector of all fee-based programs, growing at an annual rate of 143.2 percent for the past four years.

It’s notable in this day of increased trading avenues, many of which allow investors to initiate and complete transactions on their own, that the Cerulli study also concluded that an essential component of any fee-based program is the access it gives an investor to the advice of a financial advisor.

Why guidance is important:

It’s no wonder that investors are seeking guidance with their financial decisions. Last year’s market performance – a record-setting decline of 39 percent by the technology-heavy *NASDAQ composite index and a 9 percent drop in the broader **S&P 500 index – and this year’s continuing market volatility have left many investors not knowing what to do next.
At the same time, despite the downturn, years of favorable market conditions have left many people with substantial assets to his or her financial life becomes more complex, the desire for the advice and guidance of a financial advisor frequently becomes greater.

The need for solutions that simplify an investor’s life also becomes more urgent as financial decisions become more complicated. That’s part of the appeal of fee-based services.

Fee-based services are not all alike. Discretionary services offer professional portfolio management and investment services for individual or institutional investors. A money manager personally oversees the account, usually for an annual fee that represents a percentage of invested assets.

A discretionary service appeals to investors of sufficient means who have little time or interest in managing their own financial affairs and want to leave this responsibility to an experienced money manager.

With non-discretionary services, decision-making is in the hands of the investor who has the guidance of an experienced financial advisor. The financial advisor serves as a source of personalized market information, offers investment and asset allocation guidance and suggests planning strategies, but the investor may also come up with investment ideas of his or her own and perhaps even personally execute them at times.
Non-discretionary services appeal to people who value a hands-on approach to fee-based pricing makes these services even more attractive to investors.

Many investors believe that a fee-based approach more naturally aligns a financial advisor’s goals with their own – the growth of your assets. Managing your own finances in an integrated fashion also allows you, with the guidance of your financial advisor, to make decisions that take your entire financial picture into account, rather than take unrelated scattershot actions that could work against each other.

Choosing a service:

When you look for a non-discretionary fee-based service, be sure that it has the investment avenues that suit your needs, and that you can be as involved as much as you want. Make sure you can invest in the manner you wish – weather by phone, through a financial advisor or over the Internet. And, because your day rarely ends at 5pm, make sure you have around-the-clock access to your account.

A bonus for you would be a service that is offered in conjunction with a central asset account, providing a base for cash management along with features like direct-deposit, checking privileges, ATM transactions, online bill payment, a delayed debit card and funds transfer capabilities. It’s a great way to simplify personal financial management.

Because the key component of a fee-based service is the financial guidance and advice you receive in conjunction with transaction capabilities, make sure you are matched with an experienced financial advisor who knows your needs and goals and can help you put the pieces of your financial life together. A financial advisor can help you develop a comprehensive plan to guide your strategies and connect you with specialists who can assist you, whether your goals are retirement or college savings, managing taxes, handling stock options. or planning your estate.

An integrated approach:

Services with fee-based pricing appeal to a wide range of investors. Some investors are attracted by the simplicity of handling many aspects of their financial life within one program, while others want to sever the link between transactions and fees. It may be time for you to consider a more integrated approach to building wealth and achieving your financial goals – and today you have more choice and flexibility in how you work toward that end.

*The NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System.

**The S&P 500 is an unmanaged group of securities considered to be representative of the stock market in general.
An investment may not be made directly in an index. Past performance is not a guarantee of future results.