Mon, 23 November 2015
Over the 17 plus years that I have built my financial practice, I have lost track of how many times I’ve heard differing opinions on what kind of financial professional I should be. Should I be a commission based advisor or a fee based advisor? Although I have long since addressed this question in my own practice, it is still a topic of contention in the highly competitive financial services industry. The subject is further complicated by financial entertainers who dole out alleged financial wisdom without so much as a 10 minute consultation.
So what’s the difference between a fee only advisor and a commission based advisor and why would you want to work with one or the other? The most common answers invariably include the word bias, objectivity, and impartial. I hear people say things like “a fee only planner can be impartial” or a “commission based advisor is biased in favor of products that offer the biggest payday”. So which point of view is right? As with most things in the financial world, the complete answer cannot be delivered in a 30 second sound bite. Personal biases should not be overlooked so, with that in mind, let’s examine the biases which exist in both practice profiles.
Before I get too far along, it’s important to understand that we all have a bias of some kind or another and financial professionals are no different.
Everyone has a bias of one kind or another. Financial professionals, whether commission or fee based, are no different. That begs the question, how do you know which is the right one to work with? When searching for a financial professional to work with, I suggest that you look for one bias in particular.
Find the advisor who is biased in favor of you, their customer. Make sure that your financial advisor’s core objectives put your needs first.
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