Fee Based Financial Advice
A financial planner can review your entire financial picture and help you structure a program to achieve your financial goals. Traditionally, financial advisers earned their income from commissions on the insurance and investment products they sold to customers. Fee based planners avoid the temptation of recommending products based on the rate of commission they could earn.
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The Big Picture
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A fee based financial planner will develop a comprehensive financial plan and manage its implementation. She will charge a fixed fee for the plan and ongoing oversight. Fees can be an hourly rate similar to how a lawyer bills for services or can be an annual percentage of the assets under management. A financial plan can cover: Investment management, retirement planning, tax planning, insurance planning and estate planning. Your income, assets and stage of life will determine which of these different areas are managed by the financial planner.
Qualifications
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Financial planners come from different backgrounds. The most common backgrounds are investment sales, accounting, insurance and law. Understanding the financial planner's background can give you a good idea about her areas of expertise. The minimum requirement should be a Certified Financial Planner, or CFP, certification. CFPs go through an extensive study and testing process before they receive certification. CFPs also agree to a high level of ethical standards when they receive their certification. Ask a prospective financial planner about his background and planning philosophy. Also, if a planner claims he is fee based, ask if he earns any commissions from the products he recommends. The National Association of Personal Financial Planners requires members to be strictly fee based.
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Selection
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If you believe a financial planner could help improve your financial situation, use the CFP and NAPFP websites to find planners in your area to interview. Fee based financial planning services can be especially helpful for complicated financial situations where you need guidance in several of the different financial disciplines. For example, a financial planner will make sure your retirement planning, estate planning and the tax consequences are all coordinated to meet your goals. Financial planners, especially strictly fee based ones, should work to optimize all aspects of your financial picture. If you are looking for an adviser to provide market beating investment advice, it's not likely to be a financial planner. When you pick a financial planner you should understand exactly the type of service she will be providing.
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