The stock market bubble of the late 1990s was not kind to Al, a retired furniture designer living in central New Jersey. He had entrusted a lifetime of savings and investments to a big brokerage firm near his home, and when the bubble finally burst, he found he had lost close to $230,000, nearly two-thirds of his nest egg.
Many people lost a large portion of their savings during that period, but Al, who asked that his full name not be used, felt particularly aggrieved. His money was lost largely on investments far beyond the risk he says he had agreed to assume, and most of those investments were in mutual funds belonging to the brokerage firm.
On top of that, he later discovered, much of what ought to have been profit was swallowed up in commissions and fees to his stock broker.
After the dust cleared, Al asked around and found Eve Kaplan, a former fund manager who now runs a small independent financial advisory service in Berkeley Heights, New Jersey, called Kaplan Financial Advisers.
Kaplan is one of the growing breed of independent financial advisers — counselors unaffiliated with any bank or brokerage firm who help individuals with their financial planning for a fee.
Once, such advice was available only to the very wealthy, who had financial lives complex enough to need it and pockets deep enough to afford it.
In today's shareholder culture, though, more investors need sophisticated and personalized advice to know how best to diversify their portfolios and survive in an uncertain market.
And with personal computers and the Internet making sophisticated analytical tools cheaply and widely available, personal financial advice is now affordable even for people with moderate incomes.
Many of these individuals have relied on stockbrokers to manage their money — a reliance encouraged by many of the big investment houses, which often use the term "advisers" to refer to their brokers.
But as more investors like Al have felt burned — and as the links between advice and a firm's other businesses have come under scrutiny by regulators — independent financial advice that comes without strings attached has become increasingly popular.
"The independent adviser does not have to sell any product," said Thomas Muldowney, the president of Savant Capital Management, a small firm of independent advisers. "He can truly be impartial."
The first thing Kaplan did was pore over Al's brokerage statements and showed him what he had paid in fees. She also helped him consider alternatives like outsourcing his portfolio to a manager who would rebalance and monitor the portfolio for a nominal fee — 20 basis points, or two-tenths of one percent of the assets under management.
Kaplan's role was to oversee the portfolio manager — an "extra set of eyes" as many advisers call it. For this, she charged a flat fee that was set out in advance and not tied to the investments she advised Al to buy.
"It's all about transparency," Kaplan said.
Independent financial advisers can be found around the world, but the most developed markets appear to be the United States and Britain, the two countries with the most dynamic shareholder culture. In the United States, the National Association of Personal Financial Advisers is a group of about 1,100 practitioners who are subject to state securities regulations.
"The function we perform is one of counseling," says Richard Glickman, a partner in Family Office Advisers, a two-person advisory firm in New York. "We look at the total wealth posture of a family and help them create a long-range wealth picture of the family — the houses they own, insurance policies, stocks and bonds, annuities."
Glickman and his partner, Charles Comer, take a holistic approach, looking at "the total wealth posture of a family" to create a long-term financial plan. They help clients select insurance policies, mortgages, and even accountants and lawyers. But they draw the line at picking stocks or other individual investments because, Glickman said, receiving commissions from the institutions selling stocks or mutual funds could put him in conflict with his clients' interests.
"We are not selling anything," Glickman said. "We simply make sure all the parts are talking to one another."
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The stock market bubble of the late 1990s was not kind to Al, a retired furniture designer living in central New Jersey. He had entrusted a lifetime of savings and investments to a big brokerage firm near his home, and when the bubble finally burst, he found he had lost close to $230,000, nearly two-thirds of his nest egg.
Many people lost a large portion of their savings during that period, but Al, who asked that his full name not be used, felt particularly aggrieved. His money was lost largely on investments far beyond the risk he says he had agreed to assume, and most of those investments were in mutual funds belonging to the brokerage firm.
On top of that, he later discovered, much of what ought to have been profit was swallowed up in commissions and fees to his stock broker.
After the dust cleared, Al asked around and found Eve Kaplan, a former fund manager who now runs a small independent financial advisory service in Berkeley Heights, New Jersey, called Kaplan Financial Advisers.
Kaplan is one of the growing breed of independent financial advisers — counselors unaffiliated with any bank or brokerage firm who help individuals with their financial planning for a fee.
Once, such advice was available only to the very wealthy, who had financial lives complex enough to need it and pockets deep enough to afford it.
In today's shareholder culture, though, more investors need sophisticated and personalized advice to know how best to diversify their portfolios and survive in an uncertain market.
And with personal computers and the Internet making sophisticated analytical tools cheaply and widely available, personal financial advice is now affordable even for people with moderate incomes.
Many of these individuals have relied on stockbrokers to manage their money — a reliance encouraged by many of the big investment houses, which often use the term "advisers" to refer to their brokers.
But as more investors like Al have felt burned — and as the links between advice and a firm's other businesses have come under scrutiny by regulators — independent financial advice that comes without strings attached has become increasingly popular.
"The independent adviser does not have to sell any product," said Thomas Muldowney, the president of Savant Capital Management, a small firm of independent advisers. "He can truly be impartial."
The first thing Kaplan did was pore over Al's brokerage statements and showed him what he had paid in fees. She also helped him consider alternatives like outsourcing his portfolio to a manager who would rebalance and monitor the portfolio for a nominal fee — 20 basis points, or two-tenths of one percent of the assets under management.
Kaplan's role was to oversee the portfolio manager — an "extra set of eyes" as many advisers call it. For this, she charged a flat fee that was set out in advance and not tied to the investments she advised Al to buy.
"It's all about transparency," Kaplan said.
Independent financial advisers can be found around the world, but the most developed markets appear to be the United States and Britain, the two countries with the most dynamic shareholder culture. In the United States, the National Association of Personal Financial Advisers is a group of about 1,100 practitioners who are subject to state securities regulations.
"The function we perform is one of counseling," says Richard Glickman, a partner in Family Office Advisers, a two-person advisory firm in New York. "We look at the total wealth posture of a family and help them create a long-range wealth picture of the family — the houses they own, insurance policies, stocks and bonds, annuities."
Glickman and his partner, Charles Comer, take a holistic approach, looking at "the total wealth posture of a family" to create a long-term financial plan. They help clients select insurance policies, mortgages, and even accountants and lawyers. But they draw the line at picking stocks or other individual investments because, Glickman said, receiving commissions from the institutions selling stocks or mutual funds could put him in conflict with his clients' interests.
"We are not selling anything," Glickman said. "We simply make sure all the parts are talking to one another."
1