NEW YORK (MainStreet) — With your financial future on the line, it really does help to know what motivates the financial professionals managing your money.
Sure, in most employer-sponsored retirement plans, portfolio managers at the investment firms working with your employer are the direct stewards of your retirement planning money. But millions of Americans also work with financial advisors and stockbrokers on retirement savings, and there is a big difference between the two that retirement savers should know about.
"There is a perpetual problem in the industry that doesn't seem to be getting a lot of attention," say Peter Mallouk, a certified financial planner and founder of Creative Planning, a Kansas City, Mo., investment management firm. "Many clients hire an 'independent advisor' only to find out the independent advisor is also a broker."Read More: Here's Who Can Legally Handle Your Income Tax Returns In 2015
The reason is largely an industry-based one, Mallouk says, but leads to potential trust problems between investment advisors and clients.
"Many advisors are leaving big firms like Merrill Lynch, Wells Fargo, etc. and going 'independent,' but they are also staying brokers," he says. "This is an extremely dangerous advisor — because this advisor can say they are an investment advisor and is held to the fiduciary standard and would be telling the truth. But the same person can switch from being an investment advisor with a fiduciary duty to act in your best interests to a broker who can sell you something and not act in your best interests in the same conversation."