Financial advisors: The good, the bad, and the ugly paid Impact_Partner
Financial advisors and insurance agents may have a certain reputation in many circles. While I believe the majority are honest, some advisors may give the rest a bad name by focusing on the commission instead of the client. And, even if you meet an honest advisor, how can you know they will do the job suited for you?
Being a good advisor should be simple: Understand the client’s situation, know the products you are offering, and give advice you believe is in the client’s interest. After over 35 years in the financial and tax business, I’ve witnessed many instances of an advisor not acting in a client’s interest.
Other times, the advisor is a captive agent, meaning they can only sell the products of a certain company, or they will only get rewards if they sell particular products. If an advisor has to hit a sales goal with a certain product to win a luxury trip, what’s stopping them from pushing that product to everyone, even to clients it may not benefit?
One popular method advisors go for is the fee-only method. These advisors won’t handle products that pay them a commission but instead derive their compensation from overarching fees charged for their advice. This looks like a good arrangement on the surface, as it takes the issue of commission away. But, a fee-only advisor is probably not going to recommend any commission-based product that could be an appropriate fit for a client, instead deferring to fee-based accounts.
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