How You Pay Your Financial Planner Can Cost You More Than He's Worth

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Financial planning has become an important if not essential service to those who have the money to afford one. Professional career people who are just starting out and who are in fields that generate substantial financial rewards are the most likely new clients for a financial advisor. Those who have come into an inheritance, those whose businesses are really beginning to generate more cash than they ever expected, a lottery winner even, all of these people will do well to seek professional help when it comes to planning their financial futures and their lives.

Once you’ve narrowed down your choices of planners to the most competent you can find, you’ll next have to decide which charges the best rates for their services. In this regard, financial planners will either charge a flat fee, and are known as fee only financial planners, or charge commissions, or both.  Commission based charges are attractive in that you will be paying a percentage of earnings on the assets your planner is managing and, hopefully, making grow. Unlike fee only financial planners, the commissioned planner is putting up his time and effort at his own risk. If he fails to produce, he, as well as the you, both lose; but if he produces well, both him and the you win, money that is.

Commission only financial planners can earn a great deal of money if they do their job well, and we would not deny them, but we’re going to a financial planner because we want to use our money wisely. Sometimes commissions can be more than what planners would have earned as fee only financial planners, a great deal more, but this means a great deal less for you. Fee only financial planners may not make as much as commissioned only planners, because they are limited to what they charge, usually on a monthly basis, but if their planning exceeds their expectations and yours, they have earned their fee, but that is it. They’re not going to get more than that, not participate in your fortune. If it is the other way around, if his plans fail, if you go into the red, your fee based financial planner will lose nothing, and you still have to pay him. Fee base financial planners do not take on risks.

Fee only financial planners will normally charge a great deal for their services, so that only the wealthy or nearly wealthy can afford one. The only way you can tell if you can afford one is to contact some and find out their prices. If you can see the possibility of earning through a fee charging financial planner, and what you expect to earn will cover the planner’s fee, you’d be missing out on an opportunity to become richer if you didn’t go with him. It all comes to choosing a financial planner who can generate the income to pay his fees and to lift you up to greater wealth. If his service doesn’t do that, fire him, search again, and this time, go commission only.


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