Financial Planners

[DrumNFeather]

What are your feelings towards financial planners? Do they help? hurt? do nothing?

Any thoughts?

[jay santos]

Originally Posted by DrumNFeather

What are your feelings towards financial planners? Do they help? hurt? do nothing?

Any thoughts?

I don't know exactly how they work, but I'm extremely skeptical. I would like to know how they get paid. My guess is that they get paid by commission for what you buy from them, whether it be life insurance or stocks or mutual funds or mortgage loans or whatever. If that's how they get paid, then their advice is worth absolutely zero, in fact worse than zero.

[Detroitdad]

Originally Posted by jay santos

I don't know exactly how they work, but I'm extremely skeptical. I would like to know how they get paid. My guess is that they get paid by commission for what you buy from them, whether it be life insurance or stocks or mutual funds or mortgage loans or whatever. If that's how they get paid, then their advice is worth absolutely zero, in fact worse than zero.

The rule of thumb that I have read is to get a financial planner who either gets paid by the hour, or gets paid as a percentage of appreciation. Even with an FP who gets paid comission their advice isn't that bad. There is a conflict of interest, but it is mitigated by the Financial Planners interest in maintaining a relationship through performance.

[jay santos]

Originally Posted by Detroitdad

The rule of thumb that I have read is to get a financial planner who either gets paid by the hour, or gets paid as a percentage of appreciation. Even with an FP who gets paid comission their advice isn't that bad. There is a conflict of interest, but it is mitigated by the Financial Planners interest in maintaining a relationship through performance.

I prefer the incentives to be aligned for somone to do the best job. I believe in your example, the incentive for a quick commission far outweighs incentive to please a customer.

Incentives are not aligned in a lot of the financial/real estate industries. Realtors and loan officers spend all their time prospecting for new clients and little time actually providing them service. Financial planners/stockbrokers/insurance salesmen who get paid on commission will steer you towards their products. Many of them are not that educated, and have been brainwashed through corporate "training" that they actually believe the crap they spew. I'm thinking specifically of an extended relative of mine who sells the multi-level life insurance--used to be WMA. He would actually guarantee his clients high returns with no risk. He's college educated and I believe he's an honest man, he's just been duped. And now you have an army of these guys duping other people. Same with stockbrokers. How can a stockbroker with a straight face suggest a stock to me that his company is trying to sell?

I believe it's possible any one person who is paid commission could do a good, honest job for their clients in all these industries. But as a rule, I wouldn't trust anyone.

If a financial planner was paid by the hour, then I would tend to trust that person. But my guess is that it would be very difficult to get people to pay for that kind of service on a fee basis. People would rather get free, bad advice.

[bluegoose]

Originally Posted by jay santos

If a financial planner was paid by the hour, then I would tend to trust that person. But my guess is that it would be very difficult to get people to pay for that kind of service on a fee basis. People would rather get free, bad advice.

I think that if you can find someone who is paid on an hourly basis, they will likely not be very good at their job. The best FP and brokers would be crazy to not go after a commissioned position. Thats where the real $$ is.

And you are right in your assessment of brokers, real estate agents, etc in general. The financial planner that I've got right now bent over backwards to get my business, including frequent personal visits to the office, taking me out to lunch several times, personal phone calls, and so on. Once I signed on with their company, now its an occasional post card or mass mailer. I feel so used...