Financial Pathways Chooses Independent RIA Business Model for Delivery of Client Centered Financial Advice

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The owner of Financial Pathways of Bridgewater, New Jersey explains why his firm has terminated its broker dealer affiliation to become an independent Registered Investment Advisor. He argues that by aligning the advisors interests with those of the client, the model is a good match for firms that are committed to providing unbiased advice rather than selling financial products.

Financial Pathways of Bridgewater NJ announced today that it has completed a major business transition from broker/dealer representative to become a totally Independent Registered Investment Advisor. Registration with the state of NJ Division of Banking and Securities was completed in late 2011, according to James Kinney, a Certified Financial Planner™ and the firm’s founder and President.

“This has long been an important goal for us” explains Mr. Kinney. “Our firm has always focused on helping people plan their financial lives and make good financial decisions. In other words we are in the advice business. We didn’t become financial planners in order to sell insurance and variable annuities. As an independent RIA, we need only consider the needs and goals our clients, rather than the demands of some Wall Street brokerage firm or insurance company. The independent RIA model puts the focus of our business where it belongs – on the client and on the advice, rather than on selling of a product. “

Registered Investment Advisory firms, often referred to as RIA’s, are firms which offer investment advice to clients for a fee. Many such firms also provide other forms of financial advice, such as comprehensive financial planning services. Firms or individuals that accept payment in return for investment advice are required under the Investment Advisers Act of 1940 and other federal and state regulations to register either with their home state or with the Securities and Exchange Commission.

Firms providing investment advice under the 1940 Act have a fiduciary obligation under that law to always act in their client’s best interest. While it has been the subject of intense debate in Washington in recent years, most brokerage and insurance companies are still exempt from the fiduciary requirements of the act. This means these firms are not required to act in their client’s best interest. In effect a double standard exists when it comes to the regulation of financial advice, with brokerage and insurance companies subject to one standard of care, and Registered Investment Advisors subject o a much higher standard.

Mr. Kinney explains the rationale behind the regulators position. “Regulators have long taken the position that, despite calling themselves financial advisers, representatives of brokerage and insurance companies are in the business of selling financial products. They maintain that the public should understand that this individual’s job is to sell product, not provide unbiased advice. They believe the public should know enough to exercise the same prudence they would use in purchasing any product. In other words, caveat emptor, buyer beware, remains the standard for much of the financial industry. “

“We disagree with this approach. It is our belief that when a client comes to us for advice, they don’t want us to sell them the product that makes us the most money. They want us to help them determine the best strategy to achieve their goals. Suppose the most important task for them right now is to pay down debt. That isn’t advice that is going to put food on an advisor’s table. I am sure that most financial advisors are honest people and wish the best for their clients. However, it simply is not fair to expect someone who makes a living by selling financial products to offer advice that runs counter to his own financial interests. This is why we made a choice to pursue the advice business rather than product sales. And we believe the best way to provide that advice in a truly unbiased and client centered way is as an independent Registered Investment Advisor. ”

About Financial Pathways: Financial Pathways Advisors LLC is a Registered Investment Advisor located in Bridgewater, New Jersey. The company provides financial planning, counseling, and investment advice to individuals, families, and small business owners. More information is available on the firm's website at http://www.financialpathways.net.

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James Kinney
jkinney@financialpathways.net
908-203-4664
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