Fee Based Financial Planning

FEE BASED VS COMMISSION BASED FINANCIAL PLANNERS!

When deciding on choosing a financial planner, you should understand the difference between fee based financial planners and commission based financial planners.

By definition, a fee based financial planner charges fees for their advice on  financial plan. Unlike fee based financial planners, commission based financial planners earns from the financial products that you buy.

How Do Commission Based Financial Planners Get Paid?

Similar to an insurance agent, a commission based financial planner makes money when you buy a financial product such as life insurance. In many cases, a commission based financial planner will create a financial plan for you, without incurring further cost; however, this individual hopes that you will follow his or her recommendation and purchase insurance protection i.e. life insurance or health insurance and other financial products that may include mutual funds, stocks or annuities . Usually, the financial planner only will recommend products from companies that he or she is licensed to sell. If the financial planner does not sell you anything, then he or she probably will not get paid.

Understanding Fee Based Financial Planners

Some financial planners will charge you for a financial plan, even if you decide not to implement his or her recommendations. These individuals are referred to as fee based financial planners. The goal is to create a comprehensive financial plan that will allow you to address your financial concerns ranging from budgeting to estate planning. Yet, it is important to understand that a commission based financial planners also may do so. The difference between fee based financial planners and commission based financial planners centre’s around how you as a potential client will pay for his or her services. A fee based financial planner may not even want you to buy financial products from him or her, but you will be writing a check for the financial plan. In addition, the fee charged by a fee based financial planner will correspond with the number of hours needed to perform the financial analysis and to create the plan. If a fee based financial planner sells financial products and you decide to implement some of the investments of the plan, then you might have to pay an additional fee to the planner for the amount of assets under management.

Which Is Better?

Both a commission based financial planner and fee based financial planner can help you to achieve your financial goals. Consider the fees associated with choosing a fee based financial planner and the amount of commission earned from the financial products that you might purchase from a commission based financial planner.

 The advice of the fee based financial planner is independent of product sales and hence unbiased. The recommendations are client centric and professional. But many customers are of the view advice are available freely from the neighbour adviser, insurance agent or so called trusted relationship managers. But there is a risk in free advice. It is always better to pay for the advice and make the adviser accountable for the advice.