We all know about “hidden fees” and what they can do to a service-oriented relationship. Unfortunately, the financial planners of the world are sly enough to get most of these fees past their customers. Since the financial planning industry has come under fire for unscrupulous business practices, many such professionals lure their customers in with the promise of “fee-only” services. This means that they charge an up-front fee, but don’t earn any money off the back end with commissions. But are you really getting fee-only services? Following are tips on evaluating your financial planner’s fee structure.
Get Referrals
One of the best ways to evaluate your financial planner’s fee structure is to get a referral from a satisfied customer, preferably someone you know personally. It is easy enough for a service professional to list their daughter-in-law as a client, who will of course give you a glowing recommendation, so stay away from referral numbers given by your planner. Instead, talk only with financial planners who come highly recommended from people you know and trust. It’s also a good idea to make sure that person has worked with the financial adviser for more than one year.
The person in question should be in charge of the wealth management firm as financial planners are pretty strong about the market value of products and how to manage expenses in trying times that most people are ignorant about, which is why they are hired as financial advisers in the first place.
Demonstrate Knowledge of Commissions
They say that knowledge is power, and in this case, it’s true. You can not only evaluate your financial planner’s fee structure, but also put him off-guard when you demonstrate knowledge of commissions versus fee-based pricing structures. Unscrupulous financial advisers work under the assumption that their clients are going to be less-than-prepared to negotiate fees. If you’ve already done your research, you can catch the planner off-guard and perhaps negotiate a more favorable fee structure.
Read Contract Carefully
Never work with a financial planner that doesn’t have a contract, and make sure that you can evaluate his or her fee structure within the document. If the fees are outlined in another document, you should have it attached to the contract or have it signed separately so that you know what you are getting. Before you sign, however, take the contract home and read it from beginning to end. Don’t rely on the financial planner to explain wordy legalese; instead, take it to your attorney and have him look it over to make sure everything looks okay.
Continue to Get it in Writing
In most cases, you’ll have a written agreement involving each individual investment, in addition to the main contract, which covers your business relationship. As you continue to use your financial planner, make your evaluation of his or her fee structures continuous, as well. Don’t be surprised if he or she changes things after you’ve gotten comfortable with the relationship. A new agreement which includes commissions will overwrite a pre-existing contract, which means that you have no legal recourse for investing in something so that your planner can make a profit.
