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In this case it's actually backwards. Financial advisors who are involved in companies that sell financial products necessarily have a conflict of interest - th

In this case it's actually backwards. Financial advisors who are involved in companies that sell financial products necessarily have a conflict of interest - they only get paid if you buy something they get a cut from. Fee-only financial planners, however, are unbiased.

lutusp 13y ago
> Fee-only financial planners, however, are unbiased. How so? Their bias is that they need to justify their fees, and, according to many studies, their fees can't be justified: WSJ: "Darts Top the Readers' Stock Picks": http://online.wsj.com/article/SB10001424127887324235104578243910435616872.html http://online.wsj.com/article/SB1000142412788732423510457824... Someone earlier suggested buying and holding an index fund -- that's good advice, for reasons given here: http://arachnoid.com/equities_myths http://arachnoid.com/equities_myths
- superuser2 13y ago
  I don't think we're talking about the same thing. My parents' financial planner is not even slightly involved in picking stocks. His advice was on how to structure our family's savings, which included buying and holding an index fund and pulling the college UTMA account my grandpa started out of whatever instrument it was in. Unlike someone who worked for a bank or an index fund, though, he didn't have a perverse incentive to sell us one of his company's products.
  - lutusp 13y ago
    > I don't think we're talking about the same thing. My parents' financial planner is not even slightly involved in picking stocks. His advice was on how to structure our family's savings, which included buying and holding an index fund and pulling the college UTMA account my grandpa started out of whatever instrument it was in. Fair enough, but since this kind of general investment information is freely available online, I personally wouldn't pay someone to provide it. > Unlike someone who worked for a bank or an index fund, though, he didn't have a perverse incentive to sell us one of his company's products. Except his own fees as a financial advisor, presumably ongoing. Also, you may not be aware of this, but if a financial advisor steers a client toward a particular fund, he gets a commission, despite the fact that he's an independent agent, not an employee of the fund.
    - superuser2 13y ago
      > NAPFA defines a "Fee-Only" financial advisor as one who is compensated solely by the client, with neither the advisor nor any related party receiving compensation that is contingent on the purchase or sale of a financial product. This definition is in direct contrast to most advisors, who earn commissions, discounts, and other incentives when their clients purchase financial products. Also, unlike other financial planners, NAPFA members are required to clearly disclose the fee in advance. Source: http://en.wikipedia.org/wiki/National_Association_of_Personal_Financial_Advisors http://en.wikipedia.org/wiki/National_Association_of_Persona... What you're saying is true of most financial planners, but not fee-only planners. That's the whole point of being fee-only. Also I will use the Internet as long as I can starting out, but things aren't always that simple. We hired an advisor this year because we received two complex inheritances (one foreign) and started drawing down college savings, all at once. My dad is a CPA and an ardent DIYer, but even he knew he was in over his head and needed to hire a professional.
      - lutusp 13y ago
        You make good points, upvoted.

lutusp 13y ago

> Fee-only financial planners, however, are unbiased. How so? Their bias is that they need to justify their fees, and, according to many studies, their fees can't be justified: WSJ: "Darts Top the Readers' Stock Picks": http://online.wsj.com/article/SB10001424127887324235104578243910435616872.html http://online.wsj.com/article/SB1000142412788732423510457824... Someone earlier suggested buying and holding an index fund -- that's good advice, for reasons given here: http://arachnoid.com/equities_myths http://arachnoid.com/equities_myths

superuser2 13y ago
I don't think we're talking about the same thing. My parents' financial planner is not even slightly involved in picking stocks. His advice was on how to structure our family's savings, which included buying and holding an index fund and pulling the college UTMA account my grandpa started out of whatever instrument it was in. Unlike someone who worked for a bank or an index fund, though, he didn't have a perverse incentive to sell us one of his company's products.
- lutusp 13y ago
  > I don't think we're talking about the same thing. My parents' financial planner is not even slightly involved in picking stocks. His advice was on how to structure our family's savings, which included buying and holding an index fund and pulling the college UTMA account my grandpa started out of whatever instrument it was in. Fair enough, but since this kind of general investment information is freely available online, I personally wouldn't pay someone to provide it. > Unlike someone who worked for a bank or an index fund, though, he didn't have a perverse incentive to sell us one of his company's products. Except his own fees as a financial advisor, presumably ongoing. Also, you may not be aware of this, but if a financial advisor steers a client toward a particular fund, he gets a commission, despite the fact that he's an independent agent, not an employee of the fund.
  - superuser2 13y ago
    > NAPFA defines a "Fee-Only" financial advisor as one who is compensated solely by the client, with neither the advisor nor any related party receiving compensation that is contingent on the purchase or sale of a financial product. This definition is in direct contrast to most advisors, who earn commissions, discounts, and other incentives when their clients purchase financial products. Also, unlike other financial planners, NAPFA members are required to clearly disclose the fee in advance. Source: http://en.wikipedia.org/wiki/National_Association_of_Personal_Financial_Advisors http://en.wikipedia.org/wiki/National_Association_of_Persona... What you're saying is true of most financial planners, but not fee-only planners. That's the whole point of being fee-only. Also I will use the Internet as long as I can starting out, but things aren't always that simple. We hired an advisor this year because we received two complex inheritances (one foreign) and started drawing down college savings, all at once. My dad is a CPA and an ardent DIYer, but even he knew he was in over his head and needed to hire a professional.
    - lutusp 13y ago
      You make good points, upvoted.