Most of us have a goal of obtaining financial independence at some point in our lives. Of course, the sooner, well, the better. Financial independence conjures up more than simply cash or material wealth; it also suggests a certain peace of mind and an approach to life that focuses on abundance and not shortage. 

 Now, how does one go about obtaining financial independence, and once obtained, how does one keep his or her financial independence? Let’s explore four best practice approaches to financial independence practiced by many who have both obtained and maintained their independence over the long term. Simply put, how do many wealthy investors invest?

Best Practice 1: A fee-only fiduciary adviser

A fee-only fiduciary adviser is an adviser who has the highest legal duty to his client, and accordingly, can have no conflicts of interest with his client, offering only objective and truly independent advice, must be 100 percent loyal to his client (and not to a product or brokerage company or commission schedule); must operate with complete transparency and disclosure to the client of all fees, costs, expenses, expected rates of return, risks and so on. A fee-only fiduciary adviser is not a salesperson whose limited duty is merely “suitability.” Simply put, investors receive far more utility in an adviser who must, by operation of law, put his client’s interest first and not his fee.

Best Practice 2: An adviser with substantial education, training and experience

There is simply no substitute for substantial education, training and experience. An adviser needs all three to be truly successful for his client. For adviser educational credentials, we recommend advisers holding a JD, PhD, DBA, MS, MBA, CPA, PFS, and/or CFA. Indeed, it is probably best that the adviser hold some combination of the above degrees and designations. Such sentiment has been echoed by many academics and practitioners especially in recent years as the complexity of finance, law, accounting and taxation has turned financial advising into a rigorous profession. 

In his well-regarded and top-selling book The Millionaire Mind, Dr. Thomas J. Stanley, professor and prolific author on the affluent, makes clear that today wealthy investors almost always look to investment advisers who are lawyers and/or CPAs and seldom engage financial planners and brokers.  

Best Practice 3: Low cost institutional investing

Commissions (or loads) are a real and significant drag on a portfolio’s performance. Commissions are common with actively managed retail mutual funds and are often classified as Class A, B or C. These fund designations have nothing to do with the quality of the funds or its performance and instead merely signify how the commission will be paid to the adviser/broker. This commission is paid on top of the annual expense charges of the mutual fund or exchange-traded fund (ETF). We have similar thoughts and, to be certain, even more heightened concerns with annuities and limited partnerships.

An annuity is an insurance product that, with limited exception, we do not recommend to investors. We encourage investors to review the State of Michigan Office of Financial and Insurance Services’ unambiguous warning letter to the public on annuities entitled: “Seniors Beware: Variable Annuities May Not Make Sense For You!” As for limited partnerships, with few exceptions, we do not recommend these to most investors. LPs are often expensive and very difficult to exit and should be purchased rarely, if at all, and then only by sophisticated investors working with niche professionals who have substantial education, training and experience with these esoteric instruments or their underlying investments.  

So how does an investor obtain and maintain financial independence with all of these expensive/high commission and often hard to get out of investments that are being offered by advisers?  

The best practice for low cost investing is passive institutional investing (wholesale) as opposed to retail investing described above. The problem for investors is that most advisers have limited or no access to passive institutional investments. Investors should seek out fee-only fiduciary advisers who offer 100 percent passive institutional investments that are no-load, penalty-free investments. 

Best Practice 4: Evidence-based investing

What is evidence-based investing or EBI?  Very generally, it is how science is done in the application of investing. More specifically, EBI is the fieldwork of investing science where data are continuously collected, organized and analyzed by professionals who are academically trained in the science. As with any science, EBI demands a rigorous, objective and meticulous analysis of data. The goal, of course, is to find long-term patterns that emerge from the data for application in long-term investing (not short-term market-timing tactics). These long-term patterns constitute the best evidence from which investment decisions can be made by an investor in consultation with the fee-only, fiduciary investment adviser.

EBI is an approach to investing that has come directly from academia and not a sales or brokerage office. As a result of its academic origin EBI is currently practiced by very few investment advisers, usually limited to those highly trained advisers working exclusively with high net worth investors in a fee-only (not merely fee-based) fiduciary capacity. Unlike brokerage, EBI is an objective, research-based, data-driven approach to investing. The data, and not a commission or fee, drive portfolio selection decisions within the framework of the individual investor’s expected return and risk profile taking into account the attendant tax consequences of any investment selection. 

		Stephen L. Hicks, JD, MS, CPA and Roger L. Millbrook, JD, CPA/PFS, are fee-only fiduciary investment advisers and principals of Siena Capital Management, LLC. Part of a larger Siena team, both professionals are lawyers and accountants and hold other degrees or designations in the area of financial services. They can be reached at This e-mail address is being protected from spambots. You need JavaScript enabled to view it .