Why Choose Einstök Wealth Management

There are thousands of financial advisors in the United States. How do you choose the best Financial Advisor for you? Here are three reasons why our firm should be at the top of your list:

Einstök is an Icelandic word that means “unique” or “distinctive.” Here are the three most important ways that we are unique from other advisors.

---

What is a fiduciary financial advisor?

A fiduciary is someone who is required by law to put your interests ahead of their own. A fiduciary duty is the highest standard of care in law. A fiduciary is required to be entirely loyal to the person for whom he is a fiduciary (the “principal”) such that there must be no conflict of duty between fiduciary and principal.

Not all financial advisors are fiduciaries.

Why should you work with a fiduciary?

When working with a financial advisor, you want to know that the advice you receive is fair, unbiased, and in your best interest. A fiduciary is required to provide you this type of information.

A non-fiduciary financial advisor does have to provide you with information that is fair, unbiased, and in your best interest. A non-fiduciary financial advisor does not have to provide you with information that is fair, unbiased, and in your best interest. They are allowed to recommend finacial products that earn them a large commission, even if that investment is not in your best interest.

An example: Fiduciary vs non-fiduciary advisors

Let’s say that a person—let’s call him Thomas—has a long-term investment horizon, is willing to take some risk with his investments, has a 401k with his employer, and wants to invest some extra money with a financial advisor. He finds two options: a fiduciary and a non-fiduciary advisor.

The non-fiduciary advisor, who may or may not work on a commission, could suggest that Thomas purchase an emerging markets technology mutual fund. Thomas could purchase this fund, the non-fiduciary advisor says, without paying a fee to the advisor. What the advisor does not tell Thomas is that this mutual fund pays a fee to the advisor every time the advisor convinces someone to buy the fund; it’s a commission. Moreover, this mutual fund does not do as well as other mutual funds that are similar to it, and this mutual fund has fees that are much higher than other mutual funds that are similar to it—in part to pay the sales commission that Thomas receives.

It is perfectly acceptable for a non-fiduciary advisor to recommend this poor-performing, expensive fund to Thomas, and receive a commission off of the sale.

Contrast this to the fiduciary financial advisor. A fiduciary would be required to compare this mutual fund to other mutual funds that are similar to it, and recommend to Thomas the one that is in Thomas’ best interest, factoring in the fund’s fees, performance, etc.

The fiduciary must always seek what’s best for the client.

---

We have eliminated commissions and hidden fees.

There are three basic ways that financial advisors are compensated: commissions, fee-only, and fee-based.

Financial advisors who work on commissions are salespeople. They earn money when they sell a financial product to a client. These financial products can be annuities, mutual funds, insurance contracts, or other investment products. Their incentive is to sell the financial products that give them the highest commissions.

A fee-only advisor is paid a fee by the client, much like one might pay a fee to an attorney. This is the only form of compensation they receive. No matter what investment product they recommend to their clients, the fee they receive is still the same.

A fee-based advisor is a hybrid of the two previous types. They are compensated through a combination of fees and commissions.

The fee-only financial advisor, since they have no incentive to recommend one investment over another, can give you advice that is unbiased and free of any conflict of interest.

An example: Commission vs no commission

Let’s say that you are having back pain and you need to go to a doctor. Let’s say that it is Saturday, so you go to the urgent care down the street. Let’s say that when you meet with the doctor at the urgent care, she recommends that you get a prescription for an expensive heartburn medication. It sounds a bit strange to you that you would be told to take a heartburn medication for back pain, but the doctor assures you that it will help, because in a few cases in a few trials people reported less pain in their back. What you don’t know is that the doctor at that urgent care has an arangement with the company that makes that heartburn medication and everytime that the doctor prescribes that medication, the drug company gives the doctor a commission on that sale. This is the same way that non-fiduciary advisors work.

On the other hand, let’s say that instead of going to the urgent care on Saturday, you wait until Monday and visit your primary care doctor. She doesn’t have any arrangements with drug companies, so she takes a closer look at your situation, and recommends that you visit a physical therapist to work on increasing mobility in your back. She thinks that this is the best course of action to relieve your back pain.

A fiduciary financial advisor, just like a medical doctor that has no ties to any drug companies, will find a solution that is best for you.

---

Academically-Backed Strategies

We are a fee-only financial advisor in southern California. Many advisors are trained as salespeople, not as actual investment managers. We have experience in the markets, a formal education in finance, and we invest based on academically-backed strategies.

---