Bench Talk: What Makes Fee-Only Different

 

There is a hierarchy of Investment Advisors that we would like to share with you.

At the bottom of the hierarchy, we see stock brokers, registered representatives, and investment representatives. These are all the different names they are referred by. Their primarily job is to sell you a product, whether it be stocks, bonds, mutual funds, or annuities. They are the classic “man do I have a deal for you today” salesman and they make commission on the products they sell you.

Towards the middle of our hierarchy, we see advisors that do give advice, but they do so on a fee-based platform. This means that they charge you a fee for giving you financial advice, but they might also recommend you to certain funds that they know they will make commission on.

The problem with these two levels of our hierarchy is that they are not objective. Their motivation is to sell a product whose responsibility is to the insurance company, the investment company, the mutual company, etc. In other words, they usually don’t have your best interest at hand.

At the top of our hierarchy we have the objective, fee-only financial advisor. They have a fiduciary duty to their clients and do not sell products or make any type of commission. They charge a fee for advice much like you would for an attorney or CPA. We at First Financial Consulting fall into this category. We provide our clients with objective, fee-only advice. In other words, our success is measured completely by your success.

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