Discount brokerage firms such as Schwab and TD Ameritrade will refer you to an independent investment adviser if you request one. This may sound like an unbiased referral, but it is not. What you don't know is how these firms are chosen for the programs and how the adviser's fee plays into that decision.
A few years ago, when I was managing money directly for clients, I looked into receiving referrals from Schwab and TD. I completed the application process and had an interview. Both firms rejected me; not because I didn't qualify professionally, but because I didn't charge enough money. How can this be? Why would I be rejected for the program because I didn't charge enough?
Buried deep in the fine print of THIS AD is this disclosure:
I was rejected because the brokerage firm was to receive a percentage of the fee I received from each client and neither Schwab nor TD had any interest in an adviser who charged low fees when the average adviser in the program was charging 1.0%. Even though referring to a low-fee adviser is the best thing for their client, remember that brokers are not in business to do the best thing for clients.RIAs will pay TD Ameritrade fees for their participation in the AdvisorDirect program. Those fees will usually constitute a percentage of the advisory fees you will pay your RIA.
Brokers are not fiduciaries. If a comparable low fee fund or service is available, they don't have to tell you about it. The can recommend the high fee fund or service as long as it is "suitable" for your needs. This is why getting investment "advice" from Schwab or TD or any brokerage firm isn't trustworthy. There's an ulterior motive to their recommendations. You can do better most of the time.
Rick Ferri