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How financial planning fees
affect your financial future...
The financial planning fees which financial planners could
charge you can be classified into three main categories:
- Commission-Based Planners are those who
receive a commission when you purchase an investment product
or insurance policy which they sell. It is for this
reason that you may find advisors who offer free or low cost
- Fee-Only Planners which are paid a fee
directly by you. There are some variations in which a planner
which only earns a fee, such as:
- managing your shares or funds and charging
by the hour,
for a specific project,
- or for a fixed fee.
- Fee-Based Planners charge fees for
services which they provide in addition to receiving
commissions on product they sell.
Below we will see the pros and cons
together with the possible conflicts of interest which can
result when you decide to use a commission based planner, and
in following article we will consider those planners who earn
What is covered in these two articles, will naturally apply
to planners who earn a combination of fees and commissions.
Advantages, disadvantages and conflicts of interest of
commission based planners.
|Free or low cost advice
- The advisor may not be qualified to
advise you, being only trained to sell.
- Since his primary interest is to sell his products, he
may overlook various factors which could affect your life.
(See the financial planning pyramid)
- Your advisor will not tell you if there are better
products that what he is attempting to sell.
- The commissions on the products you buy could be
very costly because they not only provide an income for
the advisor, but also for the company which offers the
|There is a very high risk of a conflict of
interests because his income is directly
dependent on how much he can sell you. He/she probably will put his/her interest before yours.
As you've seen in in this first part, the financial planning
fees can have an important impact on your financial future,
so that it is important that you know what these are and how to
choose a financial planner.
Now we'll go to the next part where we analyze planners who
only earn fees.
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