A Fee-Only financial advisor charges customers for his or her advice and/or continuous management directly. No other financial reward shall be provided by any other institution, either directly or indirectly. Fee-Only financial consultants sell just one thing: their expertise. Some consultants charge an hourly rate, and others charge an annual retainer or a flat fee. Some charge a percentage annually, depending on the assets they manage for you. Fee-Only is often confused with this popular form of compensation, but it is very different. Fee-based consultants receive some of their compensation from fees paid by their customers. They may, however, also receive compensation in the form of commissions or discounts on the financial products which they are authorised to sell. In addition, they are not required to communicate in detail to their clients how their compensation is accrued. The Fee-Based model generates many potential conflicts of interest, as the revenue of the advisor is affected by the financial products selected by the client. If you wish to learn more just view now
Huge conflicts of interest are faced by a consultant who is compensated solely by commissions. Unless a client purchases (or sells) a financial product, this type of advisor is not paid. For each transaction, a commission-based consultant earns money and thus has a great incentive to encourage transactions that may not be in the client’s interest. Indeed, many advisors based on the commission are well-trained and well-intentioned. But the potential conflict inherent is great. Well, I can remember when I was in junior high and high school, when the class became boring and the teacher went monotone, I used to sit in the class, I would start sketching. I have a stack of five or six sheets of paper with my drawings every day. I would save some of them, and I would discard others, while I would give others to friends as well. It’s interesting that I had forgotten how good of an artist I actually was once in a while over the years. I guess you start getting good at it if you do something for 10,000 hours, or so is the hypothesis in the book, Outliers.