Who owns, controls and influences your financial adviser?
In an excerpt from his forthcoming book, provisionally entitled “Unmasking Your Adviser: 8 Essential Questions to Reveal If Your Adviser Actually Cares”, Ian King writes about the importance of who owns, controls and influences a financial advice/planning firm.
While most advisers and planners are competent, well-meaning people who genuinely want to help their clients, there are often forces behind them—direct or indirect—that pull them off track.
Let me explain.
Like any product or service, there’s a built-in conflict: buyers want real value, sellers want profits now and later. These goals often clash, but usually both sides figure it out.
Take restaurants: they range from cheap fast food to fancy Michelin-starred spots, offering all sorts of cuisines and experiences at different prices, all co-existing fine. If one disappoints, you know quickly—within a day, you’re either raving to friends and planning a return, or swearing off it with bad reviews. A food poisoning scare could kill the business. So they work hard not to short-change you with bad food or service. They balance it: charge enough for profits while giving an experience that keeps customers coming back. It’s a win-win value for you, success for them.
But it doesn’t always go well. Think of tourist hotspot restaurants: mostly one-time visitors, locals avoid them. No repeat business lets them cheat—serving overpriced, poor food to suckers with few options.
Good financial planning firms handle this conflict well, building a base of loyal, long-term clients who get real benefits, while the firm and staff are rewarded fairly. But like tourist traps, it can break down subtly in finance, due to two big differences:
- Short-term feel-good vibes vs. long-term real results.
- The years it takes for those benefits to show.
Let’s dig into these and how they can hurt clients.
Advisers and planners bring short-term feel-goods: you come in worried about money and the future; they sell a product or craft a plan, easing fears with a roadmap and safeguards. You feel better quickly—over a few meetings. Not bad for big worries.
But the real, measurable wins come later: better returns from smart investments, tax savings like pension relief, or helping kids cut mortgage interest with gifts. Likewise, the confidence that grows knowing that you have someone in your corner whom you can rely upon. These build slowly, compounding over the years.
Back to the conflict: clients pick advisers mainly on those short-term emotions, not the long-term benefits. Sure, everyone says they care about the return on their money, but choices hinge on emotions. This gap lets predatory institutions sneak in and feed off the system.
Good advice isn’t cheap, nor should it be. But most client money feeds investment managers, platforms, custodians, and funds. These are necessities, but commodities—you need them done, period, with little extra value. Overpaying wastes your cash. Big institutions bundle them with slick packaging and marketing, hiding true costs.
These institutions struggle to reach everyday clients directly—savvy DIY investors avoid them. So they use advisers as middlemen. An independent adviser would never push their stuff. But if the institution buys the firm? Advisers must sell only their products, ignoring better options.
Then the sales chain starts: institutions pitch advisers on “superior” products via short-term perks, advisers pass the emotional sell to clients. End result: clients get worse long-term returns from high fees.
Clients buy on emotions short-term, so they keep doing it, never seeing long-term issues. They stick with the “trustworthy” adviser and their flashy, high-fee platform. Firms won’t spotlight real gains vs. fees paid. Meanwhile, the industry fattens on those charges.
Luckily, costs for funds and platforms have dropped a lot lately—for independents who can pick freely.
Source: Broadbridge (2024)
We see these as necessary evils: pick the best, minimise costs without cutting quality. No kickbacks from providers. We deliver the same short-term feels, minus the fancy stationery or portals, but you get the top deal long-term.
How to spot it? They’re usually required to disclose—check website footers, like “ABC is an appointed representative of XYZ.” But influences can be subtler, so ask: “Who owns, controls, and influences your company?”
Maybe an ex-partner holds a stake, waiting for a payout—acting as a drag, leading to short-term cuts like skipping client education on investments (see question XX), which hurts long-term.
If it’s not 100% by the current team, beware. If a big institution owns it, providing only tied advice? You know what to do.