THE POWER
Independence
of
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uly 4, 2021, is the 245th anniversary of the publication of the Declaration of Independence. For most of us, this holiday is a source of great pride, and it has historically been a day when we set aside any differences we may have with each other as we celebrate our country. The sacrifices of prior generations that have allowed this amazing experiment in democracy and freedom are acknowledged with community parades and gatherings of family and friends in backyards and parks from coast to coast. Although political opinions may vary from person to person, we are fiercely united in our belief that each of us maintains the right to not only have our own, independent beliefs but that we also have the right to express them. This disposition can also be found among independent financial advisors. Who are these professionals, and why should you care?
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What is an independent financial advisor? For purposes of this article, licensed independent investment professionals are defined as those who are not employees of a large securities or insurance firm that has them tied to minimum production requirements of a specific investment or insurance product. Instead, they are typically either self-employed or are employed by a firm that is privately owned and operated by industry professionals. The theory is that because these professionals are independent, they should have fewer distractions to prevent them from focusing on your best interest. We believe this to be true. Why do many financial advisors seek independence? A popular career path used to be for a financial advisor to get into a large firm with an easily recognizable name and a solid training program.
Let’s call this Big Firm Z. Those that survived the first few years, which usually is a very small percentage of hires, would then build a client base that they could focus on for their entire career. It would be typical for Big Firm Z to seek additional revenue streams for the business by creating proprietary mutual funds and/or life insurance products and expecting their employees to sell them to their clients. Although this is still a prominent representation of the industry, the tide has been turning. Financial advisors began to think differently about being pressured by their employer to utilize investment products with their clients that had the same logo as the one on their business card. Firms like Big Firm Z took steps to try and address this practice, including changing the name of their proprietary product from “Big Firm Z Growth Fund” or “Big Firm Z Whole Life” to a product name that gives
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