Pruco Securities, LLC is both an investment advisor registered with the Securities and Exchange Commission (SEC) and a broker-dealer registered with both the Financial Industry Regulatory Authority, Inc. (FINRA) and the Securities Investor Protection Corporation (SIPC). It markets its financial planning and investment management services under the name Prudential Financial Planning Services.
Prudential Financial Planning oversees more than $6.54 billion in client assets. All 2,400 of its investment advisory representatives (IARs) are also brokers and insurance agents. As you would probably expect of a large corporation, it has representatives across the country - with headquarters in Newark, New Jersey.
Prudential Financial Planning Services Background
The parent company of Prudential Financial Planning, aka Pruco Securities, is The Prudential Insurance Company of America. The insurance company in turn is owned by Prudential Financial, Inc., which is a Fortune 500 company. Most people think of the Rock of Gibraltar when they hear Prudential. It is the largest insurance company in the country, and its ticker symbol is PRU.
Prudential Financial Planning is only one of the Prudential’s investment advisor firms. There are also PGIM Investments LLC, PGIM Inc., Prudential Customer Solutions LLC, Prudential International Investments Advisers, LLC, Prudential Private Placement Investors, L.P. and QMA LLC. If that’s not confusing enough, many of these firms have alternate names.
Prudential Financial Planning Services Client Types and Minimum Account Sizes
Prudential Financial Planning primarily works with individuals who do not have a high net worth. According to its most recent SEC filings, it counts 49,195 such individuals as clients - and only 228 high-net-worth investors as clients. The firm also works with trusts, charitable organizations, corporations and other business entities.
Each investment program has its own minimum. For the Managed Assets Consulting Services (MACS) program, where you have a third-party money manager, the minimum is $100,000. For PruStrategist Portfolios (PSP), which invests in mutual funds and exchange-traded funds (ETFs), the minimum is $10,000. For PruChoice, a non-discretionary mutual fund and ETF program, the minimum is $25,000. And for PruUMA, a discretionary unified managed account program, the minimum is $150,000. That said, Prudential Financial Planning may waive program minimums at its discretion. Though, managers and funds may have higher or lower minimums that you’ll need to meet, too.
Services Offered by Prudential Financial Planning Services
As just mentioned, Prudential Financial Planning offers investment management through four wrap fee programs: MACS, PSP, PruChoice and PruUma. Except for PruChoice, all are on a discretionary basis. With MACS, you pick the investing strategy or strategies, which are developed and managed by third parties. The PSP and PruChoice programs invest only in mutual funds and ETFs. PruUMA is an umbrella account for multiple accounts.
Additionally, IARs offer financial planning and may sell variable life insurance, variable annuities, mutual funds, 529 college savings plans and general securities.
Prudential Financial Planning Services Investing Philosophy
The firm does not adhere to a single strategy or method of analysis. Instead, it provides access to the universe of options to meet mostly any person’s needs (the exception may be uber-wealthy people). These different strategies or model portfolios are developed by outside money managers who have expertise that IARs may lack. That said, Prudential Financial Planning’s programs are designed generally for people with intermediate to long-term investment time horizons.
Fees Under Prudential Financial Planning Services
Client fees are based on the value of their assets under management. Regarding the MACS programs, these fees are negotiable and range from 1.14% to 3.00% for equity, balanced and convertible securities managers and from 0.79% to 1.25% for fixed income managers.
In the PSP program, client fees range between 0.75% and 2.25%. The client fee covers the firm fee, manager fee and IAR fee. The latter runs from 0.50% to 1.20% and is the only part of the client fee that’s negotiable.
In PruUma accounts, the client fee covers the firm fee, IAR fee and model provider fee. (The latter is applicable only if you have assets in a model portfolio and is applicable only to the assets in it.) The total fee ranges from 0.90% to 2.25%, and the advisor fee portion, which ranges from 0.50% and 1.20%, is the only part that’s negotiable. There is also an optional tax management and impact services overlay fee that follows a tiered schedule and runs from 0.10% to 0.05%.
PruChoice clients pay an annual maximum 2.0%. This is the net of the maximum 2.75% allowed minus the 0.75% credit applied to offset advisory fees that affiliates receive from Prudential funds in the program.
Standard financial plan fees generally range between $600 and $15,000, at an hourly rate that runs between $50 and $450.
What to Watch Out For
As noted earlier, IARs also sell securities and insurance products. These multiple roles can pose a conflict of interest when they are advising clients to buy products that they earn commissions on. This is especially the case when a client first engages an IAR to create a financial plan and then asks him or her to implement it. The IAR is technically bound by their fiduciary duty only when making the plan - and not when implementing it. When given investment recommendations, clients should ask why the IAR recommended them over other similar products and whether the rep will earn a commission.
In its most recent SEC filings, Prudential Financial Planning reported 56 disclosures. Affiliate individuals were responsible for 19 of them and affiliate firms, mostly The Prudential Insurance Company of America, were responsible for 27. That leaves 10 actions where Prudential Financial Planning or Pruco Securities was actually at fault. Resulting fines ranged from $3,000 to $750,000. In the latter case, the Illinois Securities Department alleged that Pruco Securities failed to reasonably supervise or enforce supervisory systems regarding certain variable annuity sales in the state from 2013 to 2016.
All information was accurate as of the writing of this article.
Tips for Finding the Right Financial Advisor
- Want an advisor who isn’t also a salesperson of financial products? Then you need what’s called in the industry a fee-only advisor. To find one near you, use SmartAsset’s free matching tool. After answering questions about yourself, you’ll be matched with up to three advisors vetted by us.
- Ask prospective advisors about their certifications. Surprisingly, you don’t need to have any training to be a financial advisor. So those who have professional credentials will have that much more preparation - and probably a speciality. As you get into the nitty gritty, consider the CFA vs. CFP comparison.