There is a simple but indisputable fact that financial advice and wealth planning has been treated as a “dirty little secret” by Wall Street for years. This dirty little secret, and almost always overlooked, is how paying your financial advisor directly affects their financial advice to you!
You want and deserve (and therefore should expect) unbiased financial advice in your best interests. But the truth is, 99% of the general investing public has no idea how to pay their financial advisor for their advice. This is a terrible but all observation. There are three types of compensation for financial advisors: commission, fee, and fee only.
Commission-Based Financial Advisor – These advisors sell “loaded” or commission-based products such as insurance, annuities, and loaded value funds. Your financial advisor’s role in your business may or may not be disclosed to you. I say “business” because that’s what financial advisors and commissions do – they support businesses. Once the transaction is complete, you may be lucky to hear from them again because they already have a lot of work to do.
Since these advisors receive commissions that may or may not be disclosed, and their income may vary depending on the insurance products and investments they sell, there is a conflict of interest in Financial advisors center on these companies and funds. tips to earn. . If their income is based on marketing and selling insurance and investment products, THEY have a financial incentive to sell you something that pays them the highest commission! That’s not to say there aren’t commission-based advisors who are honest, but it clearly highlights the conflict of interest.
Paid Financial Advisor – This is the real “dirty little secret” Wall Street doesn’t want you to know. Wall Street (which means companies and organizations involved in buying, selling, or managing assets, insurance and investments) has blurred the line between the three ways a financial advisor will be paid and the 99% which the public investors believe and take based. A financial advisor is associated with “honest, ethical and unbiased” financial advice.
The truth is, TARIFF does not explain anything! Think about it (you’ll understand better when you learn about the third type of debt), all paid means that your financial advisor can pay the fees AND commission and sell insurance and investment products! Therefore, a “base” that they pay can be tied to a percentage of the assets they manage on your behalf, and then the “icing on the cake” is the income they can earn by selling you products. income and service-based insurance. A good little marketing trick, right? Starting with the word “Fee” as the public thinks that the payment model is akin to that of lawyers or accountants, then add the word “based” when covering their backs when these advisors and -sell you products for work!
Fee-Only Financial Advisor – By far, the most convenient and unbiased way to get financial advice is through a fee-only financial advisor. I emphasize the word “ONLY” because a real fee-based financial advisor cannot and will not accept services of any kind. Only a reputable financial advisor receives FEES in the form of an hourly fee, commission fee, or percentage of assets held on your behalf. All charges are written in black and white, no hidden mistakes! Indemnified Financial Advisors agree to full disclosure of any potential disputes with their indemnity and financial advice and guidance provided to you.
Understanding the conflict of interest in financial advice provided by brokers allows you to clearly identify the conflict of interest for financial advisors based on income – they earn fees and commissions! So – TARIFF does not explain anything! There is only one true way to get unbiased, honest and ethical advice and that is from a financial advisor who believes in full disclosure and practice. Financial advisors and commissions and fees do not agree or make full disclosures because the high fees paid by the investor/client will make them think twice.
Think for a moment that you are going to buy a truck specifically for towing and hauling heavy loads. You go to a local Ford dealership and talk to a salesperson – this salesperson asks you what kind of car you’re interested in and shows you their line of cars. In fact, for the dealer who gets service when you buy a truck, ONLY FORD has the right truck for you.