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What is a Fee-Only Planner?
Fee-Only refers to a specific method of compensation in which financial planners are compensated exclusively from the fees paid by their clients. They specifically choose not to accept commissions, kick-backs, finder s fees or compensation from any other source. This is significant and important because earning one s living by selling products or services for which a commission is paid, leaves the financial planner with an inherent conflict of interest. The success of a financial planner should not be based on the number of products a client purchases, but on the success of his or her clients. This is why no referral fees, commissions, or other reimbursements from the implementation of recommendations are accepted.
The fee is often less than the sales load you would pay on just one mutual fund purchased through a commissioned broker. Being compensated by a predetermined client fee rather than commissions reduces conflict of interest as well as Advisor bias, and enhances the advice you receive, based completely on your specific needs.
Why is Fee-Only Compensation of Critical Importance?
A financial planner who has a financial stake in the course of action that he/she recommends to a client faces an inherent conflict of interest and cannot be considered objective and unbiased. This is true even if the planner truly believes that he/she has only the best interests of the client at heart. Unfortunately, the vast majority of financial advisors in the United States are sellers of financial products. Some or all of their income may be dependent upon their ability to steer their clients to a limited number of the thousands of financial products available today. These advisors include stockbrokers, analysts, insurance agents, accountants and attorneys, as well as financial planners. Many of their clients are not aware of their advisors dependence on selling products, or do not recognize its difference.
Precise Financial Planning believes that many of the problems that beset Americans today in their financial affairs including the mismanagement of debt, failure to protect retirement assets and poor allocation of savings and investments relate directly to the conflicts of interest that pervade the marketplace.
What is the Fiduciary Oath?
The advisor shall exercise his/her best efforts to act in good faith and in the best interests of the client. The advisor shall provide written disclosure to the client prior to the engagement of the advisor, and thereafter throughout the term of the engagement, of any conflicts of interest, which will or reasonably may compromise the impartiality or independence of the advisor. The advisor, or any part in which the advisor has a financial interest, does not receive any compensation or other remuneration that is contingent on any client s purchase or sale of a financial product. The advisor does not receive a fee or other compensation from another party based on the referral of a client or the client s business.