How To Choose The Right Financial Planner
Posted March 13, 2008 12:00 pm.
This article is more than 5 years old.
The majority of financial planners are paid using the commission model. In this model, planners get most of their income in the form of commissions for selling you funds.
However, a small group of planners have opted for the “fee-only” payment model, in which they get 100% of their income from their clients, and no money from fund companies. Many such planners charge clients by the hour, and some charge a fixed percentage of your assets.
The main benefit of hiring a fee-only planner is that you know your planner won’t have any conflicts of interest. For instance, your planner would have no reason to recommend life insurance if you didn’t need it, since he or she wouldn’t get a commission for selling it to you. It’s also easier to keep track of what you’re paying your planner.
The main drawback with fee-only planners is that many are not licensed to sell you investments directly, so they provide you with a general plan and you have to put it into action yourself. As well, their hourly rates can be high, so fee-only planners tend to make more sense for larger portfolios.
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