I often meet people with investment accounts at Edward Jones, Merrill Lynch, Morgan Stanley, etc. When they learn that I am an Independent Financial Advisor the next question is usually this: “how are you different from my guy at insert brand name broker here“? I think the following story about purchasing a diamond ring helps to illustrate the difference between the two types of advisors.
You have two choices when purchasing a diamond ring. One option is to purchase it at a “brand name” jewelry store such as Tiffany or possibly Zales/Jared. The other option is to buy the ring from an independent/local jeweler that does not have a brand. This may be your local jewelry store, or in New York City there is a “diamond district” with dozens of independent diamond dealers. Remember that diamonds are a commodity – a 1 carat VS2 diamond is considered the “same” no matter where you purchase the diamond.
At Tiffany you will enter a beautiful store and you will be greeted by a smiling salesperson. “How long have you been with Tiffany”, you may ask. “About a year”, they may say. The salesperson will walk you through the available options and also subtly find out if your budget “fits” their inventory – if not, you may be shown the door. They will find the product that best fits your price point, lets say a 1 carat VS2 diamond ring, and the sale will be made.
Now let’s look at the experience you might receive if you purchase at an independent diamond dealer. This person, who is the store owner, has no advertisements in Vogue or Forbes. The only way this person keeps his business going is by doing the best possible job for his existing clients. So good a job, in fact, that his clients refer his store to their friends and family. Because he has no “brand” to back him up, he has only his reputation and knowledge to fall back on. But that is not an issue because this guy knows his stuff – this person has been in the diamond business his whole life.
The store owner also has a 1 carat VS2 diamond ring that fits your needs, but guess what? This ring, which is exactly the same ring as the one at Tiffany, is 20% cheaper than the Tiffany ring. Why? Without the fancy store and without a huge advertising budget the store owner can pass on some of the savings to his clients. When you reach your ten year anniversary and you are looking for a nice gift for your spouse, you can go back to the same store and find the friendly store owner.
I think you get my point by now. You may get financial planning advice and portfolio management from the “brand name” brokers, but you are most likely going to pay for it. On the independent side there is a good probability we can offer the exact same thing but at a lower cost. But let’s go one step further. If your independent advisor has a wealth of knowledge and is great at what he/she does – they may be able to provide BETTER financial planning, BETTER investment returns and BETTER client service verses the “brand name” brokers.
So, where would you buy your diamond?
Charles Brown is a Portfolio Manager and Financial Advisor at M. Brown and Associates in Naperville, Illinois
**The above article is informational in nature only and is not a recommendation to buy or sell securities. All information is gathered from sources believed to be reliable, but neither Charles Brown nor Ausdal Financial Partners, Inc guarantees the accuracy of the information. All investments carry a degree of risk. Individuals should consult with their tax and investment professionals before making changes to their investment portfolios.
***Securities and Investment Advisory services offered through Ausdal Financial Partners, Inc, 5187 Utica Ridge Road, Davenport, IA 52807 (563)326-2064. Member: FINRA/SIPC. M.Brown and Associates and Ausdal Financial Partners are independently owned and operated