Confusing This One Phrase Could Cost You More For Financial Advice
How about one who is "fee-based?"
The two terms sound confusingly similar, but it's the former most of us will want to seek out.
That's because "fee-only" means you'll pay that advisor only his or her fee, no matter how the two of you work together. Certified financial planners, who are held to fiduciary duty (they are required by their certification to act in your best interest), tend to be fee-only.
Fee-based advisors, on the other hand, start with their fees - and are then permitted to add commission on top of it, for selling products such as mutual funds or insurance.
The potential conflict of interest is obvious: When an advisor is compensated by what they sell you, they may be more likely to try and make that sale. Since they aren't bound by fiduciary duty, they aren't obliged to tell you if that sale is necessarily in your best interest.
Although it sounds tricky, fee-based advice isn't inherently a bad thing. Sure, fee-based advisors are able to sell you financial products, but you're free to make your own decisions about where your money goes. Plus, a particular fee-based advisor might be the best person suited to your situation, and with whom you feel most comfortable.
That said, working with one could cost you more than you expect to pay.
If you aren't interested in taking that risk, most fee-only advisors disclose that fact right on their websites. And before hiring an expert, you can always ask. In fact, a commonly recommended question to ask a potential advisor is a straightforward way to distinguish between the two types of fee structures and determine exactly how a professional is compensated: "How do you make your money?"
- 2 states where home prices are falling because there are too many houses and not enough buyers
- US buys 81 Soviet-era combat aircraft from Russia's ally costing on average less than $20,000 each, report says
- A couple accidentally shipped their cat in an Amazon return package. It arrived safely 6 days later, hundreds of miles away.
- 9 health benefits of drinking sugarcane juice in summer
- 10 benefits of incorporating almond oil into your daily diet
- From heart health to detoxification: 10 reasons to eat beetroot
- Why did a NASA spacecraft suddenly start talking gibberish after more than 45 years of operation? What fixed it?
- ICICI Bank shares climb nearly 5% after Q4 earnings; mcap soars by ₹36,555.4 crore
- Nothing Phone (2a) blue edition launched
- JNK India IPO allotment date
- JioCinema New Plans
- Realme Narzo 70 Launched
- Apple Let Loose event
- Elon Musk Apology
- RIL cash flows
- Charlie Munger
- Feedbank IPO allotment
- Tata IPO allotment
- Most generous retirement plans
- Broadcom lays off
- Cibil Score vs Cibil Report
- Birla and Bajaj in top Richest
- Nestle Sept 2023 report
- India Equity Market