When you accept professional advice on how to invest, save and grow your hard earned money, you have certain expectations of your financial advisor: experience, professionalism, ethics and solid and independent financial advice. If you are not working with a financial advisor for fees, you may not get what you negotiated. With best investment firm Why?
According to the Bureau of Labor Statistics, in 2008 there were more than 208,000 financial advisors in the United States, and that number is expected to increase to 300,000 in 2018. However, of those, only 2,000 are paid and members of the Association National of Personal Financial Advisors (NAPFA). Unlike the financial consultants based on transactions that make money with the commissions obtained from the sale of financial products, the financial advisers of only payment do not sell any product nor work in commissions. Instead, the client pays a flat fee for the independent financial advisory services they provide, rather than the recommended investments. We are going to break it down:
No sales / no commissions
Many financial advisors are "Commission-based", which means that their income is directly related to financial products and the investments they sell to them. Make no mistake, they are selling; These individuals may call themselves financial advisors, but in reality, they are only financial sellers. Here's why: it's more lucrative to recommend certain investment products than others because of the commissions they earn. Therefore, it is very difficult for you, the client, to assess whether the particular investment recommendation of the "advisor" is the most appropriate for your portfolio, or whether it is financially more lucrative for the consultant. In contrast, Fee-Only financial advisors do not sell any products or earn commissions; his only source of income comes from his clients. Therefore, customers understand that Fee-Only Advisor works only for the best interest of their customers, and they are not linked to any investment company, product or even insurance company. As a result, the advice is impartial and independent, without conflicts of interest, they are free to recommend investments and products that are the best for the client instead of the results of the company. It is important to determine who your financial advisor is really working for: do you or the company whose products are being recommended?
Based on fees
In recent years, the term "Fee-Based" was introduced by large investment companies in response to the growing demand for just payment. Beware of the buyer: based on fees is not the same as only payment. Fee-based financial advisors can charge commissions and commissions, and they can also be encouraged to recommend certain products backed by their sponsoring companies.
Fiduciary Standard
A fiduciary is a financial professional who stays in trust, and is legally obligated to put the interests of his clients above his own. Financial advisors with a single rate are the only financial consultants that operate under a fiduciary standard; Transaction-based financial consultants operate under what is known as a suitability standard, which is a much more flexible standard. In addition, Fee-Only financial advisors are highly regulated by state or federal regulators. If your financial advisor is not willing to sign a fiduciary oath pledging to put your interests above yours, then it's time to work with someone who only pays.
Based on solutions vs. Product based
A product-based approach is whereby a specific product is recommended or sold to the customer, sometimes irrespective of the client's particular financial circumstances and objectives. Transaction, commission and fee advisors generally receive training on the products they sell and/or recommend, and adopt a product-based approach to their clients' portfolios. The problem with the product-based approach is that the provision of comprehensive financial advice should be a multi-step process, integrating the client's financial and non-financial holistic reality. Financial advisors with a single rate always adopt a holistic approach to each client and offer more objective advice on a large number of investment options. As part of the holistic approach, Fee-Only financial advisors recognize that they can not work in financial silos, but rather in coordination with the other professional consultants of the client, such as CPA, lawyers, and real estate planners. In this way, customers can be sure that all actions related to their finances are proportional to their needs
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