There are numerous benefits of working with a competent financial advisor who is compensated by fee only and not via commissions.
To be clear in terms, the difference between a fee based and a fee only adviser is that a fee only collects a fee for investment advice, while the fee based receives payments on the sale of a product made by the company offering the product or upon opening a new account for a client.
Income for fee only financial planners is mostly earned by fees paid by clients, although some part of the income could come through other commission sources, such as insurance companies, fund companies or by selling products.
Because of the additional sources of income, fee only planners have to be transparent in their communications. Even though a fee only financial planner can make commission off of the sale, it is the client who makes the final decision as to what types of products he or she is ready to buy.
Fee only financial advisers always follow the suitability rule when it comes to their clients, which says that they can’t sell investment products that don’t fit the needs and objectives of their clients. Not to mention the fact that their fiduciary duty is over duty to dealers, brokers or any institutions.
A fee based financial planner, on the other hand, earns his income on the products he sells or accounts opens. The range of those products is wide and can include insurance packages or mutual funds.
For a fee based planner, the more products he sells, the more money he will receive. Unlike fee only financial planners, they have a duty to the dealers and brokers and not to clients. Besides, they don’t disclose conflicts of interests.
Benefits of using a fee only planner
One of the main benefits of choosing a fee only advisor is the freedom from conflict of interests that happen from time to time when the income of the planner come from the amount of sold products.
The concern you should keep in mind as a client is whether the planner recommends you a product because you really need it or because it just improves his bottom line. In fact, sometimes employers ask to offer some products to clients regardless of their real needs. These products won’t help you at all.
Another benefit of choosing a fee only financial advisor is the opportunity to get a professional opinion on your situation. It often happens when advisors work with clients on the hourly basis or do a financial review for a fixed fee. Services here can range from reviewing your portfolio to answering a financial question that bothers you.
“Fee-only financial planners are registered investment advisors with a fiduciary responsibility to act in their clients’ best interest. They do not accept any fees or compensation based on product sales. Fee-only advisors have fewer inherent conflicts of interest, and they generally provide more comprehensive advice.” -via Forbes.com
Choosing a fee only financial planner isn’t an easy task. You want to have a person with advanced education, training and experience. You also want to be sure you’re the type of clients this person often works with.
Make no mistake and come to Calvert to get transparent services from experts. Give us a call today at 410-435-3270 or click here to place your request online.