Independence now, and independence forever!


By Jeremy Office Special to The Pineapple As many of you know, I have long admired Abraham Lincoln. This amazing leader was selfaware, had extraordinary communication skills and was willing to compromise but not with his core principles. He was quoted, “I have never had a feeling politically that did not spring from the sentiments embodied in the Declaration of Independence”. This declaration signed in July of 1776 set forth the independent state of this country. Three years after I broke away from the herd of wirehouse advisors, I am still reflecting on this decision of independence. I had learned best practices and skills, but I felt a need to do more. I wanted to create a firm with values that mirrored my personal beliefs within an environment that reflected loyalty, transparency, integrity, and business on a handshake – old world values that seemed to have been lost in an ever changing industry. So, my dedication to client service and vision for the independent advisor space led me to form Maclendon with the culture of a family and the resources of a large wirehouse. Maclendon is an “independent” financial advisory practice. You might be wondering what “independent” really means? Or, take it one step further – what is the difference in working with an independent advisory as opposed to one of the big Wall Street firms? In this newsletter we hope to provide some clarity on the subject and explain to you the growing trend of going “independent” within the financial advisory industry. Over the years the financial advisory industry has gone through many changes. With the growing need of financial advice, there are now many ways for investors to access the markets and many advisors out there willing to offer advice. Typically, investors have invested their assets with one of the large national firms like Morgan Stanley, Merrill Lynch, or Wells Fargo. They can charge on a fee basis (usually a percentage of assets under management regardless of the number of transactions) or on a transactional or “commission” basis where the investor pays the firm each time a security is bought or sold. So what is an “independent” advisory firm and how are they different from the full service brokerage? Well, to begin, the term independent refers to the fact that the advisor is independent of a major bank or financial institution. They are free to service their clients the best way they see fit as long as they are compliant. They are also able to look for solutions throughout the entire market, not just those offered through their parent firm. The fastest growing subsector of the independent financial advisory industry is the Registered Investment Advisor (RIA). An independent advisor acting as an RIA charges a fee on the assets under management can hold assets at a custodian like Fidelity or Charles Schwab. The custodian segregates the assets away from the advisor and can provide additional services such as account administration, transaction settlements, collection of dividends and interest payments, tax support, and reporting. A variation of the RIA model is the Hybrid model where advisors are dually registered with the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA). Dual registration gives advisors the option to either charge on assets under management or on a commission basis through their Broker Dealer. Because this type of model offers the ability to have both fee based and transactional (commission) based services, Maclendon Wealth Management would fall under this Hybrid model. One of the biggest differentiating aspects of independent advisors operating as an RIA is the fact that we are held to a fiduciary standard. A fiduciary standard in its most basic form charges advisers with putting client’s best interest ahead of their own. Stockbrokers on the other hand are held to the suitability standard which simply requires the person who is handling your investments to put you in products that are suitable for your objectives and risk tolerances. Acting as a fiduciary requires an advisor to undertake extensive due diligence on investments rather than determining if it is just suitable or not. For example, if you are young a growth oriented mutual fund may be suitable, but as you age and your risk tolerances change, as a fiduciary I would have to change the investment unless instructed by the client. So, my transition to independence was the best move for both me and my loyal members. I am able to offer the same breadth of services while aligning my interest with our members’ interests. I am not constrained by corporate policies and bureaucratic obstacles, which frees up time to focus on finding the best solutions – which is my Fiduciary Responsibility. Jeremy Office, Ph.D, CFP, CIMA, MBA is Principal at Maclendon Wealth Management in Delray Beach and specializes in portfolio construction, strategic asset and liability management, and long term planning relating to financial matters as well as real estate, income tax, insurance and estate planning. He is also Managing Partner of SJO Worldwide a venture capital company. 855.MAC.WEALTH