Published by: Harrison Wolfe, Associate Advisor
I started in the financial planning industry in January of 2015 during my last semester of college. Being young and eager to start my journey as a financial planner, I took the first job offer I was given to work for a firm that was affiliated with a large insurance company. I spent three years with this firm, where I was compensated by commissions received from the products sold to clients. I saw firsthand how a conflict of interest can arise from being able to sell financial products and earn a commission. At the time I was unaware that there were other ways to operate as a financial planner and I soon discovered that there is a better way to serve clients and deliver unbiased advice.
In January of 2018, I made the jump to independence and joined Oxford Financial Partners. Oxford is a fee only firm, as we are legally not allowed to receive commissions from the sale of financial products. By not worrying about a product sale, I am able to focus on delivering advice to clients to make good financial decisions. Becoming a fee only financial planner was an easy decision for me and I am so happy that I can now bring this fee transparency to my clients.
When interviewing advisors, one of the first questions you should ask is how they get paid. Advisors can be compensated in a variety of ways. Advisors, or salesman who call themselves advisors, who receive commissions may not always do what is in the best interest of the client. Most independent advisors’ fees are a percentage of your account balance, so the advisor is usually incentivized to grow your accounts. They only make more money when you do.
One thing you should watch out for is those who hold themselves out as a fee-based advisor. Fee-based advisors may charge an up-front fee for financial planning but also receive commissions from the financial products used on the back end. Don’t get confused by fee-only and fee-based, they are different.
If you are already working with a financial planner and aren’t sure how they are compensated, it isn’t too late to ask. DO NOT BE AFRAID TO CALL YOUR ADVISOR AND ASK HOW THEY ARE COMPENSATED. IT IS WELL WITHIN YOUR RIGHT. You may be surprised that most advisors don’t advertise how they are paid. Many fee only firms will gladly advertise their fees on their website. It’s important to know exactly how much you are paying, and what exactly you are receiving for that fee.
Our industry has historically done a bad job of educating consumers on the different types of compensation structures for advisors. Having been on the other side of the fence myself, I feel it is my duty to educate people so that they don’t get taken advantage of. If you are unsure how your advisor is compensated and would like a second opinion, we would be happy to help you uncover your fees and show you exactly what you would pay if you hired Oxford.