How do you pay for financial advice and service? It is very important to have full and specific disclosure for how a financial professional receives compensation for advising and serving you.
Why is this important? This is important because the greater the advisor’s dependence upon commission income, the greater the conflict of interest between them and you. That conflict of interest can cost you in out-of pocket-expenses and the quality of advice and service you receive.
It is a significant conflict of interest if an advisor stands to gain financially from any recommendation you may follow. Some examples of conflicts of interest between client and advisor include, but are not limited to:
A qualified fiduciary receives compensation only from fees paid by their clients and do not accept commissions or other compensation from any other source for providing financial planning services on your behalf.
It is my opinion that individuals and families are best served by an independent, fee-only advisor. The following include various compensation arrangements by fee-only advisors:
Qualified fiduciaries have a basic fee schedule of their compensation arrangements. Some are non-negotiable. Others negotiate fair and reasonable fees based on their client’s unique financial situation, time involved, and the complexity of the client’s situation.
Fee-only advisors are not limited to company-sponsored offerings or sales-driven opportunities. Fee-only advisors have access to no-load investments and insurance as well as discounted products and services for their clients. The result is an unbiased financial planning engagement with a fair and fully disclosed compensation arrangement between client and advisor - a qualified fiduciary, dedicated to helping their clients achieve their goals with peace of mind.
QUESTION: What are your current compensation arrangements with your financial professional?
Chris Bryant is an American financial advisor.