Does the way you pay your financial advisor matter?
Perhaps not. Perhaps you don’t care. As long as you get to retire when you want to. Or have enough for your kid’s education when you need it.
Maybe you are not someone who likes to know the details. Just a “tell me where to sign and I’ll do it” type of person.
Maybe price doesn’t matter to you.
If so, stop reading this and continue managing your finances as usual.
For those still reading, let’s look at why a fee-only financial planner offers the best method of financial advice.
The essence of “fee-only” advice is to reduce and hopefully remove the conflicts of interest that are commonplace in the financial services business. This is different from “fee-based” and from commissioned salespeople (representatives). Most financial advisors are employed by a company or are sales representatives for insurance, banks, broker/dealers or other investment companies. Can you guess what their motivation is?
To sell products. Sometimes the product is perfect for you, but other times it’s a stretch or may not be a correct for your situation. The sales reps. have a manager that looks at their “production” (sales of products to those like you), and tells them to sell more. On a higher level, the corporation’s motivation is to make money for the shareholders. These motivations likely are not the same as your motivations.
You are interested in taking actions with your money that will lead to you having more money, not the corporate shareholders having more money.
By choosing a fee-only advisor, you are hiring someone to work WITH you. A team member that is on the same side as you. Your motivations are more closely aligned. By knowing more about the financial services industry and the motivations of the financial advisor, you can make a more informed decision.
After looking into a potential advisor’s motivations, I think you will choose fee-only.