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Old 10-20-2017, 04:30 PM   #121
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I find financial advisers who charge for their services as a percentage of assets under management to be just as distasteful as commissioned financial sales people.

The only proper way to utilize the services of a financial adviser is to pay them hourly for the time they spend on your account. Anything else opens the door to conflict of interest and having them take advantage of you.
I think there's a place for most if not all compensation models.. As long as you're aware. You should be fine.

There is ALWAYS a conflict of interest in any business transactions. Take the hourly model for example:.. What is the incentive for the FA to work on being more efficient with his processes. The more experienced FA who use their knowledge and don't have to research as many questions are getting paid less than the ones who have to research questions and then have to charge you for the time they spent researching a problem and coming up with a solution.

I work with plumbers and they have the same dilemma. The more experienced plumbers work more efficiently because of their knowledge, they spend less time diagnosing a problem. You end up paying more for worse service because you don't know any better.
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Old 10-20-2017, 05:22 PM   #122
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I work with plumbers and they have the same dilemma. The more experienced plumbers work more efficiently because of their knowledge, they spend less time diagnosing a problem. You end up paying more for worse service because you don't know any better.
A silly comparison when we are talking about churn and burn commissioned salescritters. I also love the false equivalency displayed by suggesting that the hourly financial planner is as compromised as the commissioned slimeball.
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Old 10-20-2017, 05:32 PM   #123
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A silly comparison when we are talking about churn and burn commissioned salescritters. I also love the false equivalency displayed by suggesting that the hourly financial planner is as compromised as the commissioned slimeball.
CHurning and burning is something you can easily point out. If you know someone is on commission, and is moving money around from funds to funds .. it's something you can stop in its tracks. Whereas you don't know exactly what someone is doing to charge you for hours of work. You don't know what the research entails.

THat's not to say hourly is bad .. but my point is there are always conflict of interests in any business transactions , we as customers have to be responsible for ourselves. I

Someone who has a ton of assets and the charge per hour is nothing to him could benefit greatly from an hourly advisor. Find what's best for you , and go with it.
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Old 10-20-2017, 06:31 PM   #124
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I know you guys hate commissions but that's the beauty of it.. You have insurance agents who work for free until they get the sale, put them to work. Unlike most of their customers, you're on top of your finances, you can ask the right questions and test their knowledge. You can chose the one that's honest and knowledgeable.
I wasn't complaining about commissions, I was complaining about secrecy.

It's like a car company saying you can't test drive a car, and you can't price it. Ordinary ignorant consumers shouldn't waste their valuable time learning stuff like that. Just talk to the salesman, explain your needs, and he'll put you in the car that's best for you.
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Old 10-20-2017, 06:35 PM   #125
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I think there's a place for most if not all compensation models.. As long as you're aware. You should be fine.

There is ALWAYS a conflict of interest in any business transactions. Take the hourly model for example:.. What is the incentive for the FA to work on being more efficient with his processes.
As with any service provider that you hire, you are still responsible for doing your homework to qualify the person you are thinking about hiring. But a responsible financial advisor who charges hourly will certainly give you an estimate of the number of hours they plan to spend once they understand what you are asking them for. The potential for conflict of interest here is quite minimal compared to commissioned salespeople or PAUM FAs.
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Old 10-20-2017, 08:01 PM   #126
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As with any service provider that you hire, you are still responsible for doing your homework to qualify the person you are thinking about hiring.
I'd say less than 10% of people would know how to pick a financial advisor. As has been said often here: By the time you know enough to choose one, you don't need one and can do it yourself. Which is mostly true.
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Old 10-21-2017, 09:35 AM   #127
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I'd say less than 10% of people would know how to pick a financial advisor. As has been said often here: By the time you know enough to choose one, you don't need one and can do it yourself. Which is mostly true.
This is true, but it's true about almost any service provider you hire. Generally if you knew how to do the task yourself you wouldn't need to hire someone.

I know nothing about plumbing but at some point when things break I need to hire a plumber. You can check references, read reviews, ask questions, and do other basic things required to validate the person is a good hire. It's not full proof, but for the most part it works fine.
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Old 10-21-2017, 10:42 AM   #128
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This is true, but it's true about almost any service provider you hire. Generally if you knew how to do the task yourself you wouldn't need to hire someone.

I know nothing about plumbing but at some point when things break I need to hire a plumber. You can check references, read reviews, ask questions, and do other basic things required to validate the person is a good hire. It's not full proof, but for the most part it works fine.
But with a plumber, you know if they did a good job if the pipes don't leak. And the damage they can do is relatively limited. Someone churning your accounts and pulling a nice fee off the top, to boot, can do relieve you of a lot of money without you ever realizing you've been ripped off.
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Old 10-21-2017, 05:32 PM   #129
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You can check references, read reviews, ask questions, and do other basic things required to validate the person is a good hire. It's not full proof, but for the most part it works fine.
But none of those methods work when looking for a good FA. Yelp reviews for an FA? "A great FA! Five stars!!!! He helped me buy a great variable annuity inside my IRA, it even has full return of premiums in case of meteor strike! I never would have found this on my own. And he always sends a nice Christmas card." Similarly, do many of us have friends who can offer a meaningful recommendation for an FA? Credentials-- mean not very much IMO. A person who is a CFP can still sell overpriced insurance products. Maybe we can trust a membership organization, they'll put their members first. AARP surely wouldn't steer an oldster to a high-priced annuity. . .
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Old 10-21-2017, 05:37 PM   #130
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I get it. No method is perfect. But there are crooks in any industry. I've been ripped off numerous times when taking my car in for repairs. There's only so much one can do to protect against this stuff.

But I do agree that the impact can be much more severe with a financial adviser due to the potential commissions they can steer from your portfolio if you give them long enough to do so.

As with any of these types of businesses, it's buyer beware. The uninformed can easily be taken advantage of.
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Old 10-21-2017, 05:48 PM   #131
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This is true, but it's true about almost any service provider you hire. Generally if you knew how to do the task yourself you wouldn't need to hire someone.
Sort of. Or else you'd know if the task was more of a hassle than you wanted to deal with, you hire someone. Or if you wanted guaranteed work, you'd find a professional who would stand behind it. And with most services you can tell if the work is shoddy pretty quickly.

It's not just people who don't know how to do something who hire professional help. That said, in the financial industry there is snake oil all over the place, and if someone wants to hire a good fee-only financial planner for a one-time or occasional review of their investments, so be it. But IMO that's about it.
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