Financial coach

 There's a simple but undeniable truth in the financial consulting and wealth planning industry that Wall Street has kept as a "dirty little secret" for years. That dirty little, and often overlooked secret is THE WAY YOUR FINANCIAL ADVISOR IS PAID DIRECTLY AFFECTS THEIR FINANCIAL ADVICE TO YOU!Financial coach

You would like, and deserve (and consequently SHOULD EXPECT) unbiased financial advice in your best interests. But truth be told 99% of the general investing public doesn't have idea how their financial advisor is compensated for the advice they provide. This is a tragic oversight, yet an all too common one. You can find three basic compensation models for financial advisors - commissions based, fee-based, and fee-only.

Commission Based Financial Advisor - These advisors sell "loaded" or commission paying products like insurance, annuities, and loaded mutual funds. The commission your financial advisor is earning on your transaction may or might not be disclosed to you. I say "transaction" because that's what commission based financial advisors do - they facilitate TRANSACTIONS. Once the transaction is finished, you may be lucky to listen to from them again because they've already earned the bulk of whatever commission they were going to earn.

Because these advisors are paid commissions which can or might not be disclosed, and the amounts can vary on the basis of the insurance and investment products they sell, there's an inherent conflict of curiosity about the financial advice given for you and the commission these financial advisors earn. If their income is determined by transactions and selling insurance and investment products, THEY HAVE A FINANCIAL INCENTIVE TO SELL YOU WHATEVER PAYS THEM THE HIGHEST COMMISSION! That's not to say there aren't some honest and ethical commission based advisors, but clearly this identifies a conflict of interest.

Fee Based Financial Advisor - Here's the actual "dirty little secret" Wall Street doesn't want you to know about. Wall Street (meaning the firms and organizations involved in buying, selling, or managing assets, insurance and investments) has sufficiently blurred the lines between the three ways your financial advisor may be compensated that 99% of the investing public believes that hiring a Fee-Based Financial Advisor is directly correlated with "honest, ethical and unbiased" financial advice.

The simple truth is FEE-BASED MEANS NOTHING! Think about it (you'll understand more whenever you learn the next type of compensation), all fee-BASED means is your financial advisor usually takes fees AND commissions from selling insurance and investment products! So a "base" of the compensation may be tied to a percentage of the assets they manage on your behalf, then a "icing on the cake" may be the commission income they can potentially earn by selling you commission driven investment and insurance products.

Neat little marketing trick right? Lead off with the word "Fee" so everyone thinks the compensation model is similar to famous brands attorney's or accountants, then add the word "based" after it to cover their tails when these advisors sell you products for commissions!

FEE ONLY Financial Advisor - Undoubtedly, the absolute most appropriate and unbiased way to have financial advice is via a FEE-ONLY financial advisor. I stress the word "ONLY", must be truly fee ONLY financial advisor CAN NOT, and WILL NOT accept commissions in virtually any form. A Fee-ONLY financial advisor earns FEES in the form of hourly compensation, project financial planning, or a percentage of assets managed on your behalf.

All fees come in black and white, you can find no hidden forms of compensation! Fee-Only financial advisors believe in FULL DISCLOSURE of any potential conflicts of curiosity about their compensation and the financial advice and guidance provided to you.

Understanding the conflict of curiosity about the financial advice written by commission based brokers allows you to clearly identify the conflict of interest for fee-based financial advisors also - they earn fees AND commissions! Hence - FEE-BASED MEANS NOTHING! There's only 1 true way to have the absolute most unbiased, honest and ethical advice possible and that's via a financial advisor who believes in, and practices, full disclosure.

Commission and Fee-Based financial advisors typically don't believe in or practice full-disclosure, since the sheer magnitude of the the fees the typical investor/consumer pays would surely make sure they are think twice.

Consider for a minute you will need to get a truck especially for towing and hauling heavy loads. You go to the neighborhood Ford dealership and communicate with a sales person - that salesperson asks what type of vehicle you're interested in and shows you their distinct trucks. Obviously, compared to that salesperson who earns a commission whenever you purchase a truck - ONLY FORD has the best truck for you. It's the very best, it's the only strategy to use, and if you don't buy that truck from that salesperson you're crazy!

Truth be told Toyota makes great trucks, GM makes great trucks, Dodge makes great trucks. The Ford may or might not be the very best truck to your requirements, but the salesperson ONLY shows you the Ford, because that's ALL the salesperson can sell you and create a commission from.

This is similar to a commission based financial advisor. When they sell annuities, they'll demonstrate annuities. When they sell mutual funds, all they'll demonstrate is commission paying mutual funds. When they sell life insurance, they'll tell you life insurance is the perfect solution is to all of your financial problems. Truth be told, when all you need is really a hammer... everything seems like a nail!

Now consider for a minute you hired an automobile buying advisor and paid them an appartment fee. That advisor is a professional and stays current on all the new vehicles. That advisor's only incentive is to locate you the absolute most appropriate truck for you, one that hauls the absolute most, tows the very best, and is clearly the very best option available. They earn a fee for his or her service, so they desire one to be happy and refer your pals and family to them. They have special arrangements exercised with all the local car dealerships to have you the very best price on the truck that's right for you because they want to add value to your relationship with them.

The analogy of a "car buying advisor" is similar to a Fee-Only financial planner. Fee-Only financial advisor's utilize the best available investments with the cheapest possible cost. A Fee-Only financial advisor's only incentive is always to keep you happy, to earn your trust, to offer the best possible financial advice and guidance using the most appropriate investment tools and planning practices.

So on a single hand you have an automobile salesperson who's going to earn a commission (coincidentally the more you spend for the truck the more they earn!) to sell you among the trucks off their lot. On one other hand, you have a trusted car buying advisor who shops all the vehicles to get the most appropriate one for your specific needs, and then because of his relationships with all the car dealers also can enable you to get the best possible price on that vehicle. Which would you prefer?

Truly unbiased financial advice and guidance is available in the form of Fee-Only financial planning. You know precisely what you're paying and what you're getting in exchange for the compensation your Fee-Only financial advisor earns. Everything is in black and white, and you can find no hidden agenda's or conflicts of curiosity about the advice given for you by a true Fee-Only financial advisor!

Truth be told unfortunately less than 1% of Financial coach professionals are truly FEE-ONLY. The reason for this? There's a definite and substantial disparity in an economic advisor's income generated through commissions (or commissions and fees), and the income an economic advisor earns through the Fee-Only model: