Hi, my name is Austin Lane, and I am a brand-name consumer. *You say "Hi Austin"*. While I'm primarily in recovery, I still have relapses now and again. In my younger years, you wouldn't find me shopping for anything that was not a name brand. I bought the name, and we're talking about shoes, cereal, or whatever. Now listen, there are some things I will not yield on; if my wife buys non-JIF peanut butter, a fight will occur. However, as I matured, I learned that there are differences in quality, and name brands don't always equal quality.
I spend considerable time thinking about how and why people choose to do business wherever they do, whether grocery shopping or choosing a financial advisor. There are two main things I want to highlight: brand name bias and trust, which are somewhat related. Trust can be earned or imputed, so while you may now trust your advisor, it's possible that initial trust was attributed to them being at a brand-name firm, something I have benefited from in my career.
Working with the name brand makes sense in manufacturing or a business with tangible goods. When you buy a new car, it's probably a Toyota or a Ford, not a Daewoo (no offense to Daewoo). The scale needed to manage the consistency in production at an affordable price will line up well with large, well-funded companies. What about in a nontangible industry, an industry based on ideas and advice without the overhead of tangible companies? What advantages exist in that brand name for financial advice? With brand names comes comfort, but I would argue it's misunderstood comfort. The challenge I see from a consumer perspective is that differentiation is hard to identify from the myriad of financial firms and advisors, and from 30,000 ft, they all sound similar.
If you approach the idea of investing and financial planning from the concept of investing your trust rather than resources, what questions would you ask? Can you talk to the owner of the company you are trusting? Does your advisor and their firm give back meaningfully to your local community? What are their economic incentives? Would you take advice from them beyond financial?
I've been in the financial industry since 2010, and I've met a lot of financial advisors. While the natural inclination of a consumer is to go with a brand name, the natural inclination of financial advisors is to go with independence under their brand. If your advisor is independent, ensure they continually earn and deserve your trust. If your advisor is with a name-brand firm, that is fine, but ask why they have not gone independent. If I died, and my wife, in the depths of her grief, had to pick up the pieces of her life and find a financial advisor, she would see that in my will, I insist she only buys brand name JIF peanut butter, and that I left her a list of advisors to call, none of whom are brand name. The correlation between quality and name brand is different from what you think it might be in this industry, so only invest your trust if you verify the quality.