How your financial planner is compensated can make all the difference in the recommendations they make for you. That’s because some advisers work under a standard that requires only that their recommendations be suitable to your particular situation. Other planners, like Objective Financial Solutions, work under a fiduciary standard that requires advisers to consider what is in their client’s best interest. Why would your adviser make a recommendation that is not in your best interest? That’s where the issue of compensation comes into play.
There are three basic ways in which financial advisers are compensated:
- Through a commission-based model
- Through a commission & fee model
- Through a Fee-Only model
Both commissioned and commission & fee advisers receive a compensation based on the specific financial products they sell to you. Because of the conflict of interest inherent in these transactions, these advisers might have difficulty putting the client’s interest above their own.
At Objective Financial Solutions, our position is that the Fee-Only method of compensation is the most transparent and objective method available. This model minimizes conflicts and ensures that your financial planner acts as a fiduciary. Fee-Only planners are compensated directly by their clients for advice, plan implementation and for the ongoing management of assets.