The 80/20 Financial Advisor

There’s a simple but undeniable reality in the financial consulting and wealth preparing business that Wall Road has held as a “dirty little secret” for years. That dirty little, and often ignored key is THE WAY YOUR FINANCIAL ADVISOR IS PAID DIRECTLY AFFECTS THEIR FINANCIAL ADVICE TO long island financial advisor!!

You would like, and deserve (and consequently SHOULD EXPECT) neutral economic advice in your very best interests. But truth be told 99% of the typical trading community doesn’t have idea how their financial advisor is compensated for the guidance they provide. This can be a sad error, however an all too common one. There are three basic payment models for financial advisors – commissions based, fee-based, and fee-only.

Commission Centered Financial Advisor – These advisors promote “loaded” or commission paying services and products like insurance, annuities, and loaded mutual funds. The commission your economic advisor is making on your own exchange might or might not be disclosed to you. I say “transaction” because that’s what commission centered financial advisors do – they aid TRANSACTIONS. After the exchange is over, perhaps you are fortunate to listen to from them again because they’ve currently earned the bulk of whatsoever commission these were planning to earn.

Since these advisors are paid commissions which might or may possibly not be disclosed, and the amounts can vary greatly based on the insurance and investment services and products they offer, there’s an inherent conflict of interest in the economic advice given for your requirements and the commission these economic advisors earn. If their income is dependent on transactions and selling insurance and expense products and services, THEY HAVE A FINANCIAL INCENTIVE TO SELL YOU WHATEVER PAYS THEM THE HIGHEST COMMISSION! That’s not saying there aren’t some sincere and ethical commission based advisors, but clearly that determines a struggle of interest.