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What
does "fee-only" mean?
This term refers to the method of compensation for the financial planner.
"Fee-only" planners are compensated solely by fees
paid by their clients and do not accept commissions or compensation
from any other source.
"Fee-only"
planners believe there is a significant "conflict of interest"
if an advisor stands to gain financially from the purchase of any
product he or she recommends to the client.
What other forms of compensation are used by financial
planners?
Some planners are compensated entirely by commissions from the providers
of products recommended and sold. Others, referred to as "Fee-based"
or "Fee-offset", charge both a fee and receive commissions
from selling products.
What is comprehensive financial planning?
Comprehensive planning focuses on all areas of the client's financial
situation and develops a course of action to help the client achieve
personal goals. A comprehensive plan includes:
- Analyzing the
client's existing situation.
- Defining the
client's goals.
- Creating a plan
that considers all the financial aspects of the client's objectives.
- Assisting the
client in implementing the recommendations.
- Periodically
reviewing and revising the plan to adjust to changes in the financial
environment and the client's goals.
What are the
benefits of working with a fee-based advisor rather than an advisor
who is compensated by commissions?
Paying financial advisors through a fee arrangement based on total assets
puts the interests of the investor and the advisor into closer alignment.
When the investor pays under a fee arrangement, the advisor's income
is tied directly to the successful growth of the portfolio. Thus, a
fee arrangement for services is usually based on a long-term relationship
between the investor and the investment advisor, rather than a more
transaction-oriented service. An individual who is compensated via a
commission is primarily interested in the sale of an investment product,
not the other advice and planning that can be so important to a client.
An investor wants a professional who is loyal to the client, not to
a fund company or insurance company.
What are some
of the questions I should ask when selecting an investment advisor?
Your specific needs and objectives will determine many of the questions
you need to ask an investment advisor. However, here are some basic
questions that you should keep in mind.
- What is your
educational background?
- Do you have a
background in sales or in a profession such as accounting or law?
- How are you compensated?
- What is your
management style and philosophy?
- How will we work
together?
- Will you provide
a customized investment plan?
- Who will be accountable
to me for the performance of my portfolio?
- Who will have
custody of my money?
These questions
are not meant to be inclusive, but they are a start when looking for
a competent investment advisor.
What areas are
covered in a comprehensive plan?
A comprehensive plan includes analysis and recommendations in appropriate
areas including:
Investment Portfolio
Cash Flow Management
Income Tax Management
Estate Planning
Retirement Planning
Risk Management
Education Funding
Business Planning
Employee Benefits Planning
Other Specific Client Needs
Why is it important
to get a comprehensive review of all the facets of your finances?
Because in this day and age you cannot evaluate your investments or
income without considering the impact of taxes or inflation. You must
consider cash flow and monitor expenses. All aspects of your financial
picture are interrelated and you must consider how each individual decision
fits into the overall plan.
Does the planner
have any fiduciary responsibility?
As registered investment advisors, Crossroads Financial planners have
a fiduciary duty to their clients. The client's best interests must
be placed before the advisor's.
5001 Horizons Drive,
Suite 201
Columbus, Ohio 43220
Phone: 614.459.1145
Fax: 614.459.9920
e-mail: jjarvis@crossroadsfinancial.com
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