October 19, 2013


baby's hand in mom'sDad, can I borrow the car?

Like teens, advisors want to look independent but may not be.


Advisors who aren’t independent are called “captive” (Investopedia). They are dependent and forced to sell products from a specific catalogue or specific companies. They can't scan the market. Management influences what they sell through quotas and bonuses. Somehow, the captives convince themselves they have freedom of choice. They convince themselves that what they have is the best (or at least good enough). They then try to convince you.

You don't go to the Apple Store for unbiased advice about Apple or Android. At least you know that. With financial advice, the limitations aren't as obvious.

Captive advisors are like commissioned employees. They're stuck selling what they're told to sell, regardless of quality or value.
Spotting Captives
Dependent advisors don't have their own brands. Their business cards show the name of the company they represent. Dependent advisors rarely have their own websites. Instead, they may have a page on a corporate website that lists competitors (other advisors from the very same firm).

What about social networking? Since captive advisors are representatives of a brand, they may not be allowed to use social media. It’s as if the brand doesn’t trust the judgement of their own employees.

Captive advisors might be on LinkedIn but have an especially bland profile due to corporate standards. Following the rules is called “compliance”. They may belong to Groups, but do they participate? If you connect to a captive, don't be surprised if they block their connections from your view. Actually, that could easily be true for independent advisors too.
Write Wrong
An article from a captive advisor may have been ghostwritten by the corporate head office or approved there. You can often tell by the blandness and wishywashy-ness of the content. The writing rarely sounds like the advisor. There's rarely any personality or a controversial stance.
Pretend you wrote Speaking of Success with Blanchard, Canfield and Covey
Do a web search for an article title and see what shows up. You might find the same article but with different author names. That even happens with books like Speaking Of Success written by Ken Blanchard, Jack Canfield, Stephen Covey and    (fill in the blank)   . Actually, independent advisors can play this game too.


Independent advisors can scan the marketplace. That choice might be an illusion. In practice, they often have preferred suppliers which get the bulk of their business.

An independent advisor is more likely to
  • show up in a web search
  • have a real website
  • be on Twitter (check their Klout score)
The products they sell might cost less or guarantee more.

Which Is Better?

A captive advisor can't offer you much choice. That may seem like an advantage because choice can paralyze. An independent advisor can scan the marketplace and filter the choices for you.

Mommy, where do independent advisors come from?

They often started as captives to get training. The top ones often leave after they’re trained and established. Why? Independents tend to get paid more. Also, independents tend to get better service because vendors are competing for their business.

If you're young, your needs tend to be simpler. The difference between captive and independent matters less. By the time you need choice, you've established a relationship with your advisor and your advisor has developed more sales skills. You're less likely to leave or realize what you are (not) getting. You risk becoming the captive, caged by a Goliath.


Podcast 242

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PS Just because an advisor is paid on commission doesn't make them independent.

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