Fee-Only
Before I became an advisor, I would always ask why couldn’t
I find planners whose interests were aligned with the
consumer. Why was I being offered bad advice more often
than good advice? It turns out that I didn’t know
about “Fee-Only.” Fee-Only advisors are a
relatively new breed, but growing exponentially because
what we do is the very essence of logic and common sense.
We provide objective advice on every facet of financial
health. We do not sell products or take commissions. We
are fueled by the desire to help each client reach his
or her financial goals, period. Once you remove commissions
from financial advice, you remove most of the conflicts
of interest. These conflicts can cost you, both in out-of-pocket
expenses and in the quality of advice you receive.
For a great description of Fee-Only, see:
http://www.napfa.org/consumer/WorkingwithaFeeOnlyAdvisor.asp
Fee-Based
is not the same as Fee-Only
NAPFA
My firm is a NAPFA corporate member (www.napfa.org).
Financial planners who are members of the National Association
of Personal Financial Advisors (NAPFA) provide Fee-Only
advice to consumers. NAPFA-Registered Financial Advisors
follow some of the strictest guidelines possible for
professional competency, comprehensive financial planning,
and Fee-Only compensation. With more than 1,600 members
across the country, NAPFA has become the leading professional
association in the United States dedicated to the advancement
of Fee-Only financial planning.
Fiduciary
It's also important to note that I serve as a fiduciary
to my clients (www.focusonfiduciary.com).
A financial advisor held to a Fiduciary Standard occupies
a position of special trust and confidence when working
with a client. As a Fiduciary, the financial advisor
is required to act with undivided loyalty to the client.
This includes disclosure of how the financial advisor
is to be compensated and any corresponding conflicts
of interest. Less than 1% of all the financial planners/advisors
in the US meet these fiduciary requirements. Most so-called
financial advisors are considered “Broker-Dealers”
by the Securities and Exchange Commission (SEC). They
are held to a lower standard of diligence on behalf
of their clients. In fact, they are required by federal
law to act in the best interest of their employer, not
in the best interest of their clients! If you have been
asked to sign an NASD binding arbitration agreement
(which is required by almost every broker-dealer firm),
then that advisor is likely not held to a Fiduciary
Standard.
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