Washingtonian magazine’s popular “Salary Survey” issue is now on display at newsstands and grocery checkouts across the Washington, D.C., area. In spite of our curiosity about White House speechwriter Jon Favreau’s take home each year, what really caught our eye was a tease on the cover stating: “Plus 152 financial planners who can help you manage your money.” A quick peek inside, however, reveals the advisors recommended by the magazine may be more suitable for the D.C. law firm partner pulling in $1.2 million a year than for the Fairfax County police officer making $62,000.
The magazine shows a strong preference for fee-only registered investment advisors over broker-dealers earning commissions. While not going into the current SEC study and efforts to place broker-dealers under a fiduciary standard, the magazine comes down firmly on the side of advisors with fiduciary rather than suitability standards of care.
The author acknowledges that a fee-only advisor typically charges $2,000 to $5,000 to develop a financial plan for a client, but doesn’t mention that it may cost more to actually put the plan in place. It gets interesting when we look at the list of fiduciary-bound investment advisors the Washingtonian recommends. Of the 63 advisors (the “152” from the cover tease includes lists of tax accountants, estate lawyers and insurance advisors), all but six require a minimum investment before they will take on a client. The average minimum portfolio: $2.8 million. We’re not exactly talking about serving middle-market investors here.
In fact, a strong argument against requiring a universal fiduciary standard for broker-dealers is that increased liability and other costs could force them to quit the industry or seek only up-scale clients, leaving the middle market without affordable financial services they need and deserve. It is important that the SEC protect the interests of everyday people — like the third-grade teacher from the Washingtonian article earning $73,000 — by allowing broker-dealers to maintain a cost-effective business model.
All investors, including those who might have less than $2.8 million to invest, can search for qualified advisors in their area on the NAIFA website.