Why Fee-Based Planning?
Our decision to operate as a fee based planning platform is rooted in our belief in a fiduciary standard of practice, whereby our clients come first and our mutual interests are aligned.
A common misperception is that financial advisors provide their services for free. Most investors give little or no thought to the hidden costs they pay when an advisor recommends an investment or product. In an ideal situation, all advisors would give objective advice that solely benefits the client or investor. However, because many advisors’ generate their income by means of commissions, which are embedded into the investment or financial product the clients purchase, it becomes increasingly challenging for advisors to provide objective advice that is not skewed towards the purchase of a product or investment.
The traditional financial planning industry says “if you don’t sell, you don’t get paid”. The reality is that in most cases if clients knew how much their advisors got paid to promote a particular product, they would likely question if it was truly the right one for them.
Many advisors do great work educating their clients and guiding them towards proper overall wealth management. However, as there is lack of transparency as to how much clients are paying in fees and how the advisor gets paid, it often leaves room for doubt or confusion as to the actual value the advisor provides in return for the fees they pay.
Here are 5 reasons why fee-based financial planning;
1. No Sales! Fee-based financial planners provide expert advice and assistance and are not motivated to sell you any financial products. We know that some planners offer “free” financial plans. We do not. But we also know that there is no such thing as a free lunch—there is a cost for that “free” plan and you will likely be very surprised what the real cost is to you.
2. We Work For You. A Fee-based financial planner has a moral, ethical and fiduciary responsibility to work solely on your behalf without any conflicts of interest.
3. Planning for Anyone, Regardless of Your Wealth. A flat fee or hourly rate financial planner works with clients interested in assessing and improving their financial situation regardless of how much money you currently have.
4. Planning for What You Need, When You Need It. A fee for service planner can work with you to prepare a full and comprehensive financial plan or can address very specific issues regarding your investments, debts, education funding, estate planning, insurance or any topic of your choice on an hourly or project fee basis. In short, there is no “one size fits all” solution.
5. Want Some Other Opinions on the Value of Fee-based Financial Planning?
“Ask how the advisor is compensated. Orman recommends someone who charges a flat or hourly rate (in other words – a Fee-Only planner)… How you pay someone to give you advice or manage your investments speaks volumes about whether advice best serves the advisor OR you. If product sales are mixed together with advice, the potential for conflicts of interest go UP and objectivity may be compromised.”
“Understand the compensation. The planner should be up front about this. Commission-based planners are paid for the financial products they sell. Fee for service planners charge a flat fee for all services or a fixed advisory fee plus a percentage annual fee or flat retainer to manage your money. Ask specifically if the planner will provide services with the “duty of care of a fiduciary,” meaning they’re obliged to base their recommendations on your best interests and to fully disclose any conflicts of interest. If he or she can’t answer affirmatively, find another planner.”
“With fee for service planners, there is no conflict of interest because the adviser will charge … an hourly fee. The bottom line: Financial professionals make their money through various compensation models, so make sure you ask about any real or perceived conflicts of interest and know exactly how your advisor is being compensated.”
“Consider the planner’s pay structure. You typically want to avoid commission-based advisers. Planners who work on commission may have less than altruistic incentives to push a certain life insurance package or mutual fund if they’re getting a cut of that revenue.
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