Recently personal finance blogger extraordinaire Barbara Friedberg wrote this guest post for Happy Simple Living entitled Financial Advisors Who Get Paid To Sell Products Bother Me.
I couldn’t agree with Barbara more. While there are of course good advisors who are compensated via commissions, it would seem that an advisor who is compensated in this fashion has a built-in conflict of interest when providing clients with advice.
For tips on selecting a financial planner who is right for you, check out my recent post on the Equifax Personal Finance Blog 10 Questions You Should Ask Before Hiring a Financial Planner – Part 2. Note there is a link to Part 1 on the post as well.
As Barbara indicated in the title of her post, how an advisor is compensated is critical. Also critical is whether the advisor acts a in a fiduciary capacity towards their clients. This in large part determines whether the advisor puts the interests of their clients above all else.
In short, selecting the right financial advisor for you involves asking a lot of questions and understanding how they do business. Will the advisor put your interests first or will their advice be tainted by the need to sell financial products?