Oftentimes, making financial decisions can be overwhelming and emotional. In a world inundated with information via the internet, it can be hard to make heads or tails of it all. Working with a financial advisor can provide direction and peace of mind when making decisions, but how do you find a relationship that you can trust?
A good place to start is asking how the advisor is compensated. Working with a fee-only advisor can largely impact the services you receive. A fee-only advisor is paid by the client for the advice they give, not by product sales or commissions. This fee is typically on a project, hourly or retainer basis, or a percentage of assets under management. Be careful not to confuse fee-only with fee-based, which can include a client fee and commission component.
By working with a fee-only advisor, you can be confident in knowing there will be no product sales by the advisor. The focus is on advice and meeting your goals rather than closing a sales deal. A fee-only advisor will want to review your overall financial situation and if there is a recommendation for additional insurance coverage, he/she won’t be the one to sell you the policy. This eliminates conflict of interest between you and your advisor.
Other financial representatives that are compensated by commissions are likely to be restricted to the products offered by the company they represent. In addition, there can be an incentive for them to recommend the product that pays them the highest commission. This limits the available options to help meet your goals. A fee-only advisor is not bound to certain investments or insurance products and can recommend what best fits your needs without the influence of a kickback.
Beyond no product sales or commissions, a fee-only advisor acts as an additional tool and resource for an unbiased and objective second opinion. In utilizing a trusted advisor, your needs and goals are recognized and incorporated in a plan specific to your situation. Your best interests are our priority, without being influenced by a recommendation that will increase a bottom line. The value of a fee-only financial planner is increasing your options and possibilities toward financial peace. When the advisor is paid by you for advice, your success is their success.