Financial planning has been something most of us have discouraged, but like holiday shopping or preparing our taxes, we know we have to, but sometimes it just ends up in the background. When the time comes, and it’s time to choose a financial advisor to help you and guide you through complex economic conditions, rules, investments, and strategies, it can be challenging to know who is the right fit for you.
One of the considerations you want to consider is how to compensate the advisor. The two main ways to reimburse your advisor are by paying a fee or paying a commission.
Compensation of costs only.
A paid-only financial advisor bills their clients directly for their advice and ongoing management. No other financial compensation is provided, directly or indirectly, by any other institution. Fee-based financial advisers only sell one piece of advice. Some financial advisors charge an annual fee while others charge a yearly percentage, based on the value of the assets they manage for you. Many people like this option because they feel less conflict of interest when the advisor makes an offer to buy or sell something. On the other hand, some people feel that they are not getting the service or advice they deserve. Once enrolled in this program, the advisor gets paid regardless of how some clients feel the advisor has less interest in managing their accounts.
Committees
This type of advisor is only paid if the client buys (or sometimes sells) a financial product. Many of our certified commission financial advisors are well trained and well-intentioned. But the potential conflict lurking could be more significant than a paid counselor. Some investors feel that they get more attention and advice, and with this type of advisor because he is continually reviewing their accounts. The customer can then choose not to act on the suggestions made to them, but they now have options to consider. It can be said that a consultant who is only paid through committees has a conflict of interest when making recommendations.
Many people ask friends and family for suggestions and referrals because “trust” is a significant factor in choosing someone to help you manage your money. Nowadays, all brokerage firms, banks, and credit unions have very similar products and investment strategies to offer their clients. Hence, the playing field is excellent even when it comes to products. And services available with that in mind again, it is usually up to who you feel comfortable with. Some comfort comes in the form of a “connection” they feel or think they have with someone. For others, it may be experience and knowledge, while some prefer a counselor with similar feelings or hobbies. Each individual is unique and different, just like each financial advisor, which is why it is advisable when looking for a consultant to meet several to learn more about the different investment philosophies, services, and the kind of person everyone appreciates.