Frequent financial reviews are an important part in managing one’s financial plan. On-going life changes require continual analyses of one’s financial situation. However, managing your personal situation can be a daunting task. It demands time, industry knowledge and the ability to remove emotion from decision making. Hiring a financial planner may be the best way to assist you in reaching your financial goals.
When searching for a financial planner it is important to consider the persons experience, education, professional dedication, designations and compensation structure. Some financial planners earn commissions by selling specific products, while others work on a fee-only structure and are paid on an hourly or advisory basis.
There are many different types of advisors to choose from, so how do you know the differences between them? Is there really a difference between the different types of firms and do they provide the same advice and services?
Fee-only financial planners are compensated on an hourly rate or on a percentage of the assets managed. Fee-only financial planners provide advice and, unlike advisors at brokerage firms, do not sell financial products, such as annuities, life insurance, and mutual funds.
How do I identify who is a brokerage firm advisor and who is a fee-only financial planner?
Will the advisor sign a Fiduciary Oath stating that your best interest is placed ahead of their own and that their advice must reflect the same? Not signing a Fiduciary Oath should be a red flag.
Ask the advisor if they are affiliated / licensed with a “broker dealer” or if they are independent. Brokerage advisors are sometimes required to sell proprietary products, which may have higher commissions.
If you feel that the financial planner you are speaking with is more concerned with your investments or cross-selling than the overall picture of your financial situation, consider obtaining a second opinion.
Understanding there is a difference between the types of financial planners will help you understand the recommendations that you are presented with.
The top 5 reasons why working with a fee-only financial planner is in your best interest:
1. Fee-only financial planners are able to consider what options are in the client’s best interest.
When commissions are not involved, financial planners are best able to analyze the client’s current situation and assist with life planning that focuses on the client’s needs and wishes.
2. A fee-only financial planner considers every financial asset and the concern of the client.
When commissions are involved, an advisor may choose to emphasize those products which will add to the advisor’s income, such as insurance and/or investment opportunities. But a fee-only financial planner will take the time to consider other aspects, such as retirement, estate planning, or employee benefits.
3. Fee-only financial planners are legally obligated to place the client’s best interests ahead of their own when providing advice.
The majority of fee-only financial advisors are under legal obligation to consider their clients’ best interests first. Many of these advisors are registered under professional boards of standards that emphasize a client-based strategy for financial planning.
4. Fee-only financial planners tend to have professional designations.
As a way to stand out from the competition, and also to provide better services for their clients, fee-only advisors will often seek professional designations. A Certified Financial Planner®, for example, is required to obtain 30 hours of continuing education every two years that must include ethics training.
5. Financial review performed by a fee-only financial planner can be provided on an as-needed basis.
For an investor who needs advice for one financial planning issue, such as retirement funding or has a few simple financial questions, fee-only financial planners are capable of analyzing these questions on an individualized basis without conflict of interest or the need to make a sale.
Working with a fee-only financial planner offers some of the best advice at the best value. It enables advisors to offer counsel without conflict of interest, while enabling the investor to properly analyze and prepare for the future.
When making financial planning decisions, seeking out a Certified Financial Planner® who works as a fee-only advisor will eliminate the risk of conflicts of interest.
Wayne B. Zussman, MBA, CFP®
Triton Wealth Management, LLC
116 South Piney Avenue, Suite 204, Chester, MD 21619