(PRWEB) November 14, 2004
How can financial advisers deliver independent high quality service to middle income Americans? Few firms have tackled this question and even fewer have found successful answers. Freedom Benefits Association based in Philadelphia is trying to develop a better approach through a service called OnlineAdviser and recently submitted its ideas to the ÂNew Profiteer  The Business of Change sustainable business plan competition. The business plan was entered under the category ÂBest Community EnterpriseÂ, emphasizing the overall benefit to the community when individuals are empowered to make better financial decisions.
The competition culminates in a presentation at the Sustainable Business Venture Fair, Thursday, November 18, 2004, 4:00-7:00pm, at the Philadelphia Sheraton Rittenhouse Hotel. Tony Novak, the principal of Freedom Benefits and the primary force behind OnlineAdviser, has no unrealistic hopes for immediate community support for the project. ÂDelivery systems for financial advice through employee benefits is a relatively obscure topic to most small business development expertsÂ. Novak says Âthe primary purpose of entering the competition was to raise awareness that this viable option for providing financial support does existÂ. While this business has operated at a profit each year since it inceprion, a range of challenges has slowed growth.
Tony Novak is a financial writer who began focusing on financial services for middle-income individuals in the 1980s. He was the author of an influential article for the financial services industry titled ÂThe Other 95%Â referring to the observation that traditional financial services firms tend to focus on serving only the top 5% of wealthiest Americans. After more than twenty years in traditional financial advisory firms, Novak now devotes himself to writing for consumer-focused publications and providing personal support for non-traditional financial services. Novak emphasizes that high-income individuals and established businesses have always received the best advice from experienced accountants, attorneys and financial advisers. These advisors help build and retain wealth, but at a cost not affordable by most people. There is a wide gap in quality and availability of advice received by the wealthiest clients vs. a person of average means.
Middle-income individuals and small businesses tend to receive advice from product salespeople. These may include stockbrokers, real estate agents, mortgage brokers, accountants who manage investments and insurance agents. While these perform specific valuable services, the quality and range of advice is not the same as received by those with independent advisers. The majority Americans have never met with a fee-based financial adviser. One result is that most Americans do not receive full information on a number of non-transactional financial issues, no cost options or no-load financial products. Advisers naturally recommend only those options for which they will receive compensation; seldom does a middle income client receive truly independent advice.
OnlineAdviser service was launched by Freedom Benefits Association in 1997 to provide low cost public access to an experienced financial adviser, especially at the point of critical financial decisions. The expansion of Internet-based financial services has increased the range of options available to many people but has not provided a way for individuals to get independent one-on-one financial advice. By using newly developed telephone and information technology, it might be possible to connect a person who has a question with a person who has a good answer precisely at the moment the information is needed. Novak admits that the current system is far from perfect, but notes that it is a step ahead of what is now available from event the most sophisticated financial firms. The main obstacles faced by OnlineAdviser include:
1) Compensation for Advisers – Advertising, commissions, asset-based fees or other financial support from traditional financial service companies is not available to support most areas of OnlineAdviser service. OnlineAdviser cannot tap the same revenue sources as banks, brokerages and other advisory firms. This means that employers, business associations, public sources or private donations must pay for the advice. Most advisers with years of experience can command much higher salaries in traditional financial firms that focus on more profitable transactions.
2) Adviser experience  It takes more than a decade for a financial adviser to develop the skills and knowledge base to be comfortable addressing a wide range of financial questions Âon his feetÂ. An adviser must master a working knowledge of law, taxes, insurance, investments, health care system, federal and state entitlements. With so many of these areas in constant state of flux, continuing education alone is almost a full time job for an adviser. There are relatively few advisers who are qualified to provide this type of service.
3) Tax Treatment  The IRS designated retirement planning advice as a tax-free employee benefit but other areas of financial advice are not given the same generous tax treatment. A change in the tax law would encourage more businesses to offer this service to their employees.
4) Skepticism  Individuals are so accustomed to hearing sales pitches that they have a tough time adjusting to non-product based financial advice. Many people with limited financial experience are still more likely to be influenced by firms with the best advertising and most persuasive sales representatives.
OnlineAdviser has served more than 35,000 individuals since 1997 in every state across the country. The majority were free services including support for taxes, unemployment compensation, health insurance, COBRA conversions, retirement plan rollovers, and divorce issues. More information about OnlineAdviser service is available at www.FreedomBenefits.org or from Tony Novak at (610) 664-8669.
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