1.) How They Get Paid
Many financial advisors get paid on commission. This means that if they recommend a product and the client buys their recommendation, the Advisor makes money. Further, advisors receive perks, such as trips, bonuses, dinners etc. The sad fact is, unless your advisor is Fee-Only (meaning they do not make anything if their client buys one of their product recommendations), you may not be able to completely trust the advice they are giving, because everything you do affects the amount of money they make.
Many financial advisors get paid on commission. This means that if they recommend a product and the client buys their recommendation, the Advisor makes money. Further, advisors receive perks, such as trips, bonuses, dinners etc. The sad fact is, unless your advisor is Fee-Only (meaning they do not make anything if their client buys one of their product recommendations), you may not be able to completely trust the advice they are giving, because everything you do affects the amount of money they make.
2.) How They Make
Recommendations
Many consumers are under the false impression that their advisor has some sort of inside knowledge that gives them the expertise to offer investment advice. The plain fact is they usually don't. Typically, the information given to clients is provided to the advisor from someone in their organization or a mutual fund company. Many times the advice is based on products that need to be pushed because of factors that benefit the brokerage firm or insurance company, but not always the consumer.
Many consumers are under the false impression that their advisor has some sort of inside knowledge that gives them the expertise to offer investment advice. The plain fact is they usually don't. Typically, the information given to clients is provided to the advisor from someone in their organization or a mutual fund company. Many times the advice is based on products that need to be pushed because of factors that benefit the brokerage firm or insurance company, but not always the consumer.
3.) Hidden Costs
Advisors don't want you to know that there are hidden costs attached to their recommendations. Many times they lead the investor to believe they have purchased a financial product at the lowest cost available when is reality that is not the case. These additional costs can include fees, expenses, and commissions than could cost you hundreds if not thousands per year.
Advisors don't want you to know that there are hidden costs attached to their recommendations. Many times they lead the investor to believe they have purchased a financial product at the lowest cost available when is reality that is not the case. These additional costs can include fees, expenses, and commissions than could cost you hundreds if not thousands per year.
4.) They Don't Work For You
Usually, your advisor is not actually "your" advisor because they are not employed by you. They work for banks, investement firms, or insurance companies. At the end of the day, the job of a commission or fee-based financial advisor is to make money for themselves and the companies they represent.
Usually, your advisor is not actually "your" advisor because they are not employed by you. They work for banks, investement firms, or insurance companies. At the end of the day, the job of a commission or fee-based financial advisor is to make money for themselves and the companies they represent.
5.) How Little They Actually Spend Working on Your Account
The commissions and fees earned by a fee-based financial planner can be very high in comparison to the amount of work that actually they actually do for you. You need to ask your financial advisor some tough questions. Ask are you a fee-only or fee-based planner? If they are fee-based, then ask for a written statement of all compensation for the advisor and the firm. Does it state that there is no other compensation? If you choose to work with a fee-based or commission-based financial advisor, do your homework and ask them, "what fees are included", "are you a Certified Financial Planner?" Additionally take the time to ask the if they will supply a written statement attesting to the fact that they are a fee-only financial planner.
The commissions and fees earned by a fee-based financial planner can be very high in comparison to the amount of work that actually they actually do for you. You need to ask your financial advisor some tough questions. Ask are you a fee-only or fee-based planner? If they are fee-based, then ask for a written statement of all compensation for the advisor and the firm. Does it state that there is no other compensation? If you choose to work with a fee-based or commission-based financial advisor, do your homework and ask them, "what fees are included", "are you a Certified Financial Planner?" Additionally take the time to ask the if they will supply a written statement attesting to the fact that they are a fee-only financial planner.
For more about me Jason W. Qualls, CFP and Fee-Only Financial Life Coach go to www.jasonWqualls.com or call 615-878-2134.
1 comment:
You have pointed out some great points. Glad you made this very relevant topic for those who are trying to find this out. Likewise thanks for sharing this. Keep it up!
retirement planning jacksonville
Post a Comment