Financial advisors come in handy to help you with your financial choices, including making investments and other action courses regarding money. They use their expertise to make personalized financial plans that aim towards achieving a client’s financial goals.
Anyone can use a financial advisor; you only have to find one that suits your financial plans. One of whom is a fee only financial advisor. But first, you need to know who fee only financial advisors are and what they do.
WHO ARE A FEE ONLY FINANCIAL ADVISORS?
Just as the name sounds, a fee only financial advisors operate solely on a fee only basis. It means that they receive compensation only on the fees they charge clients for their services.They will collect fees only from you as a percentage of the total assets under management.
In a nutshell, a fee only financial advisors do not earn commissions, kickbacks, referral fees, or generally any fees from recommending or the sale of certain financial products or from other hidden forms of commissions. They act in their clients’ best interests, and if they don’t, they are legally liable, which is why they are preferable.
Benefits of working with a fee only financial advisors
There is no conflict of interest
A fee only financial advisor acts in your best interest. Therefore, no conflict of interest is prone to come up when a large portion of the advisor’s income comes from recommending you particular financial products.
Some financial advisors earn all their income from commissions, which requires them to recommend or sell assets offered by their employer, which may not be the best vehicle to suit your financial plan.
As a client, be concerned if the financial advisor recommends a particular product because it improves his/her bottom line at the end of the day. Because fee only financial advisors do not sell commission-based products, there will be no conflict of interest.
A fee only financial advisors act as a fiduciary
Acting as a fiduciary means that they are legally accountable and required to serve your best interests. Such a financial advisor earns money solely from financial planning and advisory. They seek to help you with your finances but not their own as they don’t rely on selling products to earn commissions
Even though that is not a guarantee that you will get the best financial advice, it means that they advise you genuinely intending to help you.
For that reason, work with a fee only advisor as they are legally accountable in guarding your best interests.
They are transparent
Since a fee only financial advisor has no ties with specific companies, he/she is free to offer a wide spectrum of financial solutions that will help you achieve your goals.
In contrast with commissioned financial advisors, they tend to limit their suggestions to assets that will earn them the most money. That means that you will not get holistic advice that a fee only advisor would give you.
While the financial advice you need does not solely depend on the advisor’s earning model, it is advisable to start with a fee only financial advisor. You have a guarantee that they don’t have any hidden motive to sell you a product for their gain. Even though they may be expensive, getting the best financial advisor has long term benefits.