........................................................................................................................
HOW WE
ARE DIFFERENT
The
ideal financial planning process consists of gathering information,
identifying objectives, developing a plan to meet those objectives,
implementing the plan, and monitoring and updating the plan. The
client's objectives, not the planner's method of compensation,
should drive the planner's recommendations. Unfortunately, this
is seldom the case. The vast majority of people who call themselves
"financial planners" or some similar term are actually financial
product salespeople who do not have a fiduciary relationship with
their customers. Instead, they have a principal-agent relationship
with a product provider and a sales person's customer relationship
with a consumer. Thus, they must do what is in the best interest
of the product provider, not what is in the best interest of their
customers.
Additionally,
their compensation is determined solely by the quantity of the
products they sell rather than the quality of their advice. These
"planners" mass-produce "financial plans" that are merely props
for their sales pitches. Most of their customers would be shocked
to learn that they pay a commission that is many times the value
of the advice they receive. This explains why commissions are
rarely disclosed. We do business differently. We believe that
commissions entice planners to recommend products that are often
not in their clients' best interest.
In a TD Waterhouse
survey (conducted by Penn, Schoen & Berland Associates), most
investors were found to be unaware of the regulatory distinctions
between investment advisers and stockbrokers. The survey found
that 88% of investors would not seek advice from stockbrokers
if they knew stockbrokers were not required to act in the investor’s
best interest in all aspects of the relationship. In addition,
87% indicated they would not seek financial advice from a stockbroker
if they knew stockbrokers were not required to disclose conflicts
of interest prior to providing financial advice. And finally,
85% of investors indicated they would not seek financial advice
from a stockbroker if they knew stockbrokers provided fewer protections
than investment advisors.
Therefore,
we believe that accepting commissions is inherently unprofessional
since it impairs a planner's objectivity. We believe our compensation
should come from the party to whom we owe our loyalty--the client.
We do not accept commissions from product providers. We work on
a fee-only basis and recommend only no-load products. Just because
an advisor works on a fee-only basis, however, that does not mean
that he or she is acting as a fiduciary or that he or she has
no potential conflicts of interest. In recent years, the financial
services industry has discovered how profitable asset management
fees are, and is now transitioning from transaction-generated
commissions to asset management fees, which are based on a percentage
of assets under management. These fees increase as the size of
your portfolio increases despite the fact that the additional
time and effort required by an advisor as your portfolio grows
is negligible.
Virtually
the entire financial services industry is now primarily concerned
with gathering assets under management. We are different from
most fee-only financial planners in this regard, as our fee for
ongoing financial planning services is a flat dollar amount that
does not automatically increase with the size of your portfolio,
rather our fees often decline as your portfolio appreciates.
This removes
virtually all remaining potential conflicts of interest; in the
fee-only community, it is known as being "pure." This ensures
that we do not have a financial incentive to take an inordinate
amount of risk with your portfolio in pursuit of unnecessarily
high returns, to recommend that you convert hard assets to financial
assets or not pay off debt, or to not want you to spend your money
or give it away as part of your estate planning.
Lastly, many
financial planners lack the enormous range of investment experience
provided by Montecito Capital Management. Our background is a
unique attribute given our extensive Wall Street experience, advance
investment tools and applications of the most recent portfolio
management techniques. Clients benefit immensely from our application
of Modern Portfolio Theories, which in turn, move their investment
frontier to the highest risk-adjusted return based on their objectives,
risk tolerance and constraint criteria.
Disclaimer:The information in this
website is based on data gathered from what we believe are reliable
sources. This Web site is intended to give you information, not
investment advice. We do not guarantee its accuracy, nor completeness,
and it is not intended to be the primary basis for investment
decisions. It should not be construed as advice meeting the particular
investment needs of any investor. We may express opinions in this
site and elsewhere about allocating investments between asset
classes. This is NOT a specific investment recommendation to any
person or entity. We do not make 'personal investment recommendations'
to people or entities except to those who have engaged us expressly
for the purpose of providing professional investment advisory
and/or other financial advisory services. The process of making
specific and personal investment recommendations involves a close
understanding of our client’s objectives and expectations. Unless
we have this information, we are UNABLE to make ANY personal investment
recommendations.
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