When it’s time to work with a financial planner, it’s important to find one that intends to take care of your money. CFPs and chartered financial analysts (CFAs) come in two main varieties: fee-only planners, who charge you a flat rate for their services; and commission-based planners, who earn a portion of the financial transactions they make on your behalf. Fee-only planners pledge to act in your best interest, monitoring your money and helping you make decisions regardless of whether the decision will benefit them. They earn their income based on charging a flat or hourly rate, or from a percentage of your assets that they manage.
Being a fiduciary is voluntary. Commission-based financial advisors are only required to adhere to the “suitability standard,” which means that the financial planner may not be as clear about their processes and aren’t obligated to monitor the health of your accounts after a trade is made. They don’t need to disclose conflicts of interest. Their income is based entirely on the products they sell you or accounts they open.
It’s easy to see why you’d want to work with a fiduciary, so ask if they are fee-only or commission-based first when screening potential financial advisors. To find a fee-only fiduciary near you, search the XY Planning Network (www.xyplanningnetwork.com) or FeeOnlyNetwork.com (www.feeonlynetwork.com).