Retirement Planning

Forward Thinking Financial Planning

In an environment when many financial planners are moving away from the traditional commission-based model to a fee-based model, Raymond Birch, president of Pinnacle Wealth Advisors, finds himself more and more in good company. He has long been a proponent of this client-friendly business model.

Birch, who emigrated from South Africa to Oregon by way of California thirty years ago, was among the first to embrace a fee-based practice as far back as 1995. “It’s always been a model that we believe aligns our interest on the same side of the table as the client’s interests,” he said.

In the wake of a painful recession and period of disillusion following the Madoff debacle, clients are more wary and demand greater transparency. Fee-based practices are one solution, because clients know up front exactly how advisors are getting paid, and can trust a fee-based advisor’s motives for recommending products. “No question this is the model of the future, and you are going to see more planners move toward it,” Birch said.

Electing to adopt this type of business model years before it was popular, attests to Birch’s position about transparency in the industry. However, as much as he supports initiatives to improve transparency, he admits having concerns about the regulatory burdens created by measures such as the Dodd-Frank Act. He considers it to have been a somewhat knee-jerk reaction to the crisis on Wall Street and worries that the regulatory costs will overwhelm smaller practices.

Birch’s concern is that Dodd-Frank is too broad-sweeping for many independent firms that didn’t necessarily need to have the government impose regulations. They are already treating clients with fairness and transparency.

“There’s a little bit of a disconnect between planners like myself, who are more in tune with Main Street, than with some of the things that happened on Wall Street,” he explained. “Unfortunately, what you are finding at this stage is that everybody has been painted with the same brush.”

When asked about long term care insurance, Birch was cautious, citing rising costs to the providers and subsequently higher costs to policy holders.“The future of long term care is really unknown at this time, but hopefully the providers will structure products that also could be endorsed by the fee-based planning community” he stated. For this reason, Birch noted, many advisors are beginning to follow their lead of turning to alternative investments as an additional source of income, and a complement to fixed income and stock ownership.

Committed to embracing industry trends, Birch is working with young advisor Aaron Christopherson, as they collectively look at ways to address the “robo-advisor’ online tools and software advances, designed to bring the Gen X and Gen Y demographic into the financial planning arena. With an aging advisor and client demographic, Birch states that “The future of the financial planning industry depends on our ability to get young advisors and younger clients to work together, without compromising personalized attention.

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