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A Growing Army of Financial Advisors Is Jockeying for Your Ear--and Wallet. How Do You Pick One?

June 29, 1997|TOM PETRUNO | TIMES STAFF WRITER

Need advice on your finances? Don't say so too loudly--or you may soon find a mob outside your door.

With aging baby boomers finally in their asset-accumulation years, and the nest eggs of many pre-retirees and retirees inflated by the long bull market in stocks, the potential audience for professional money help has never been larger.

So here come the would-be helpers. From major Wall Street brokerages to insurance companies to the horde of independent financial planners, a growing army of competitors is fiercely jockeying for position in the race to become the preeminent supplier of financial help to Americans who are willing to pay for it.

Nor are these advisors aiming only at the "rich." Increasingly, personalized financial advice is available as you like it: a little or a lot, a la carte, and even for people whose portfolios aren't yet very big.

And right behind the advisors are the watchdogs. State securities regulators are drawing up plans for a first-of-a-kind national competency exam for people who call themselves investment advisors.

At the same time, at least one consulting firm is readying a rating system for advisors, akin to Morningstar Inc.'s well-known star rating system for mutual funds.

In part, the financial service companies and the watchdogs both are responding to surveys showing that, despite the romantic image of Americans as hardy do-it-yourselfers, when the issue is money, most people go looking for help long before they build up large portfolios.

"It's true as with every other aspect of our world: Money has become too complicated," said Philip Feigin, securities administrator for Colorado and former chairman of the North American Securities Administrators Assn.

A national consumer survey by Boston-based financial consultant Dalbar Inc. last fall found that 89% of respondents said they were likely to seek advice or direct money management once their investable assets topped $100,000--a threshold many will reach sooner rather than later, thanks to employer-sponsored 401(k) investment programs and other pension-substitute plans.

But having plenty of choices for one-on-one financial help also means greater confusion. It isn't easy to know which type of advice giver is right for you, what is a fair price to pay and, perhaps most important, how to judge the quality of the advice and/or personal money-management services you get.

Generically speaking, what most Americans want in an advice giver is obvious enough: a trusted source of help who unfailingly puts his clients' interests ahead of his own.

And rightly or wrongly, most people view the traditional commission-based financial business--the image of the old-time stockbroker, for example--as neither trustworthy nor one that puts clients' interests first.

Indeed, the Dalbar survey found that 70% of respondents wanted to pay a flat fee or an asset-based charge for advice and help, as opposed to a commission or sales "load" of any kind.

Not surprisingly, the financial services industry is rushing to get on the right side of that sentiment swing:

* Most major brokerages, such as Merrill Lynch and Smith Barney, in recent years have moved away from calling their representatives "brokers" and instead now refer to them as "consultants" who offer comprehensive financial planning.

More recently, many brokerages have stopped paying their reps more to sell in-house products (such as proprietary mutual funds) than independent products, and now allow reps to place clients' assets in no-load mutual funds if the client so chooses.

Meanwhile, discount brokerage giant Charles Schwab Corp. is pushing hard into the advice business, indirectly: It now will refer clients who want their money professionally managed to specific investment advisors in their geographic area.

* Insurance giant Aetna Inc. in May agreed to pay $50 million for Torrance-based Financial Network Investment Corp., a network of 2,400 independent financial planners nationwide. Aetna will meld FNIC into its retirement services business--a way to dramatically increase the number of professionals Aetna can muster to serve the burgeoning business of advising 401(k) plan participants at the local level.

* Mutual fund companies, which hold nearly $4 trillion in investor assets today, increasingly are seeking to provide more than just a passive menu of funds for investors. Many of the biggest fund companies, including Fidelity Investments and Vanguard Group, offer do-it-yourself kits for basic asset allocation (i.e., deciding how much to have in stocks, bonds and money market accounts).

Other firms, such as Wells Fargo's Stagecoach fund group, have designed "lifestyle" funds aimed at specific age groups, with the composition of each fund amounting to a generic asset-allocation plan for that group.

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