What It Means to Have an Advisor On Your Side
Anxiety to Confidence Series | Part 4
The financial services industry uses a lot of language about trust. Relationships. Putting clients first. Most firms saying these things mean them, at least at some level.
But meaning something and being structured to act on it are different things. The way a financial services practice is set up- how it generates revenue, what incentives exist, who it ultimately answers to- shapes behavior in ways that even well-intentioned people don’t always recognize in themselves.
It’s worth understanding the difference. When you’re handing someone responsibility for decisions that will affect the rest of your financial life, the structure of that relationship matters.
Choosing the Right Guidance Relationship
Not all financial guidance is created equal, and not all relationships are structured the same way.
Some financial professionals are compensated primarily through commissions on the products or transactions they facilitate, while others charge ongoing advisory fees based on assets under management or other fee arrangements. Neither model is inherently better than the other, and each may be appropriate depending on a client's needs, preferences, and circumstances.
In a commission-based relationship, recommendations may involve investment or insurance products that generate compensation for the agent. Many of these products can play an important role in a well-designed financial plan. The key consideration is understanding how the agent is compensated and whether potential conflicts of interest are appropriately managed and disclosed.
This is where the fiduciary standard becomes important. A fiduciary is generally required to act in the client's best interest and to provide guidance with a duty of care and loyalty to the client. It's a meaningful distinction, and it's worth asking any advisor you're considering how they are compensated, what standard of conduct applies to their recommendations, and whether they operate under a fiduciary obligation across all of the services they provide.
What Doing the Right Thing Looks Like in Practice
The fiduciary standard is an obligation. But the mindset behind it - genuinely orienting every decision around what's best for the client - has to be something more than a compliance requirement. It has to be a habit, reinforced through years of small, consistent decisions.
Here's a recent, concrete example to illustrate the point. A client came in with a capital gains situation. A piece of property was selling, and his accountant suggested a particular alternative investment product might allow him to defer the gain. It was worth looking into.
Research on the product took the better part of a day - its structure, its risks, its real-world track record, and the pluses and minuses of this type of product as part of a broader portfolio. We also looked at liquidity terms, fee structures, and how similar products had performed for investors during periods of market stress.
After reviewing everything, the conversation with the client was thorough. We walked through how products like this operate, what they're generally designed to accomplish, and what an investor should weigh before committing capital to something with these characteristics - including both the potential benefits and the real tradeoffs. The goal was to provide the client with a complete and balanced picture before he made his own decision.
In the end, the client chose not to proceed.
That's what doing the right thing looks like. Not a directive, not a sales pitch in either direction - just the kind of thorough, honest conversation a client deserves before making a decision with real consequences.
The Pension Story Worth Knowing
Here's another example, simpler but equally instructive.
A client years ago was weighing whether to take a lump-sum payout from her pension or a monthly payment for the rest of her life. It's a decision a lot of people face once, with no practical way to practice getting it right ahead of time.
The math behind the recommendation is straightforward once you work through it: calculate how much money, invested conservatively, it would take to generate the same monthly payment for life. If the pension payment exceeds what you'd realistically generate from investing the lump sum, the monthly payment is generally the stronger choice.
The calculation itself isn't complicated. What it requires is someone willing to run it honestly, even when one option happens to generate an ongoing management fee and the other doesn't.
She took the monthly payment.
That's what we believe the relationship is supposed to look like: a recommendation based on the math and what's best for the client.
All client examples are for illustrative purposes only and should not be construed as a recommendation. They may not be representative of your experience.
What to Look For
If you’re evaluating financial advisors - whether for the first time or because your current situation has changed - a few things are worth paying attention to.
Ask directly whether they operate as a fiduciary, as an agent, or both. Ask how they’re compensated.
Ask what happens when the right answer for you isn’t the profitable answer for them. A good advisor should be able to point to specific examples, not just general principles. The examples tell you whether the commitment is real or theoretical.
And if you already have an advisor who operates this way - who knows your full picture, has your interests genuinely at heart, and has shown it in the decisions they’ve made - the guidance is simple: stay with them. A good financial advisor, like a good doctor, is worth keeping.
Rawe Financial is a family-owned financial services practice in Northern Kentucky, helping individuals and families navigate their way to retirement. If you haven’t yet found someone to walk that path with you, we’d welcome a conversation.