Paid Financial Planner vs Paid Financial Planner

Financial Planners


Young couple with financial advisor at home

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When looking for a financial advisor, you will come across a variety of compensation arrangements. Paid Advisors and Paid Advisors are very similar, but there are some significant differences between the two that can greatly affect the type of advice you receive as a client.

Here’s what you need to know about paid financial planners and paid financial planners.

What is a Paid Financial Planner?

A rewards-only financial planner is someone who gets rewarded for their services, but does not receive a commission on the sale of certain financial products as an additional reward. Fees may be paid as an hourly rate, a flat rate, or as a percentage of assets under management (typically around 1%).

Fee-only advisors act as fiduciaries for their clients. In other words, they put the interests of their clients above the interests of themselves and their company. Certain professional designations, such as Certified Financial Planner (CFP) and Certified Financial Analyst (CFA), are governed by fiduciary standards. Before hiring an advisor, always check their qualifications and understand how they are compensated. This is her one of the best questions to ask a financial advisor.

What is a Paid Financial Planner?

Paid financial planners are compensated for their services and may receive additional compensation in connection with the sale of certain financial products, such as mutual funds and insurance policies.

Unlike fee-only advisors, fee-based financial planners are not bound by fiduciary standards and are instead only required to recommend appropriate investments to their clients. A conflict of interest exists because paid advisors may be motivated to refer clients to products they benefit from. While you may arrive at the right investment based on your goals and risk profile, it may not always be the best fit for you.

Compare paid financial planners to paid financial planners

The main difference between commission-only and commission-based advisors is that commission-only advisors do not earn additional compensation beyond the commission paid by their clients, while commission-based advisors earn commissions on the sale of certain products. can be obtained.

In most cases, a price-only advisor is the best choice. Because they act as fiduciaries for their clients, they don’t have to worry about potential conflicts of interest when giving advice.

However, some people prefer working with one financial planner rather than buying insurance from one and receiving investment advice from another. A paid advisor might make sense in this case, but make sure you understand exactly how you are getting paid. You need to make sure you are doing what is in your best interest, not just watering your advisor’s wallet.

Conclusion

Fee-only financial planners and fee-based financial planners are two of the most popular fee structures in the financial advice industry. Fee-only advisors can earn only from commissions paid by their clients, while commission-based advisors can also earn commissions from the sale of certain products. When choosing an advisor, a fee-only advisor is the best choice for most people.

Consider using Bankrate’s Financial Advisor Matching Tool to identify potential advisors in your area.



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