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If you are looking for an independent investment advisor, be prepared to do some homework

July 29, 2009

In today’s Wall Street Journal article “Wary Investors Are Seeking Out Objective Voices” Anne Tergesen and Jane J. Kim report that in the wake of the recent financial crisis many investors are leaving their Wall Street brokerage firms and choosing independent investment advisors instead.  But those seeking to repair their damaged portfolios by looking for more objective advice than they received from brokers who steered them to their firms’ products have discovered that hiring an independent isn’t as simple as it sounds.  In order to hire one who suits your needs, you have to consider the type of advisor you need, how much you want to spend, and – importantly – any conflicts of interest the advisor may face as a result of how he or she is paid.  “Every single form of compensation has built-in conflicts of interest,” says fee-only advisor Richard Salmen of GTrust in Overland Park, Kansas and president of the Financial Planning Association.  “The only thing you can do is to make sure any potential conflicts are fully disclosed and fairly managed.”