Clark Howard is known as “a nationally syndicated consumer advocate who advises consumers how to save more, spend less and avoid getting ripped off.” His recent advice regarding being willing to pay for investment advice was right on the money:
Are you willing to pay for investment advice? Or do you prefer “free advice” from commissioned salespeople? If free is for you, I want you to know that is probably the most expensive “free advice” you’ll ever get.
I was shocked by a study I read about via Bloomberg that found the majority of people, by an almost 2:1 ratio, say they will not pay for financial advice. They would rather pay commissions than pay somebody for his or her expertise.
You may think that by not paying a fee-only financial planner that you’re getting advice for free. But as I said, that is the most expensive free advice you’ll ever get. Insurance salespeople and full-commission stockbrokers are legally allowed to put their interests first and yours second when you work with them.
In legal speak, it’s said that they have no “fiduciary duty” to you. In plain language, here’s how that plays out and what it means to you: At some point, that commissioned salesperson will be confronted with the choice of putting you in a product that earns them huge commissions but has huge fees for you or putting you in a product that pays them smaller commissions because it has much smaller management fees for you.
I couldn’t say it any better than Clark Howard.
The only reasonable way I know to deal with this conflict is that if you need financial advice, pay for that advice! You can find fee-only financial planners in your area by visiting NAPFA.org.
It is critical that investors understand the difference between “fee-only” NAPFA advisors and “fee-based” agents and brokers. You Deserve A Fiduciary Standard of Care. Perhaps this list of ten questions to ask your financial advisor might help you in choosing the right advisor.
You can work with a NAPFA advisor even if they are not near you. We work with clients remotely through email, Skype, and conferrence calls. But go to the NAPFA website if you want to find a NAPFA advisor in your area.