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Friday, February 6, 2009

Paying your Financial Advisor

By Paul J. Easton

Are you wondering what to look for in a financial advisor? Here is some information you need to know when looking for one.

Begin with investigating on education and experience. This can be observed with the mere confidence during the initial meetings. One important issue to resolve as well is the payment method. By taking the time to look for these qualities in your possible financial advisors, you can eliminate a lot of anxiety in your financial future.

You will hire a financial advisor to render investment advices and other services. The role of a financial advisor is to help you maintain the balance of investment income and capital gains. Your advisor will also assess an acceptable level of risk by using proper asset allocation.

Financial advisors use several financial vehicles like stocks, bond, options, notes insurance, and other products to meet the needs of the clients. Many financial advisors are receiving payment through commissions. By brokering financial products, they get paid by the company but these types of advisors I do not advise. Fee-only financial advisors offer a more balanced and unbiased planning thus it is becoming more popular nowadays in the financial service industry.

If financial advisors are paid through commission for every product their clients subscribe to, they will likely be recommending changes in your portfolio which are unnecessary. You end up being misinformed due to a conflict of interest to increase their commission payments.

With advisors receiving 100% of their compensation directly from you as client, there are no conflicts of interests between theirs and those of their clients. This is often the problem with financial advisors with biases for the company they work with because of the problem created by commissions paid. Fee-only advisors will customize an investment portfolio designed to guide the client realize short- and long-term investment goals. In addition, a simplified performance reporting is provided to make accounts monitoring as easy as possible for clients. Find out how your financial advisor will be paid for his expertise surely is worth the trouble. Many people very frequently make the mistake of ignoring this very vital information. By choosing a scheme that would make your financial advisor as objective as possible, you will never end up regretting your choice.

Always confirm the payment arrangements with your financial advisor. It is one of the single most important parts of this deal.

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