You Want an Hourly Advisor!

The word fiduciary is thrown around a lot in the world of financial advising. If you are unfamiliar with what this means, it is simply a person who must act in the best interest of the client, even above his or her own interests.

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Commission based or even AUM (Assets Under Management) price structures prevent an advisor from truly acting in your best interest. When the advisor earns a commission products need to be sold in order to make money. If no products are sold the advisor makes nothing. Now of course the advisor needs to make money but how can this arrangement be done as a fiduciary?

The same is true for AUM pricing. Some say because the advisor make more if you make more and less when you make less, this may sound good, but the advisor only makes money when he manages the funds. What if the best choices cannot be under the advisor's management? Additionally, AUM advisors use the size of the assets under management as a marketing tool. The more you give to him the better he looks. A professional advisor removes as many potential conflicts of interest as possible; AUM management inserts a big conflict of interest into the advisor-client relationship.

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With a flat fee and/or hourly advisor you pay only for the advisors time, and regardless of whether or not custody and discretion exist, the advisor is not influenced by how much is under management, and how much is earned (thus increasing his pay even if the investment is too aggressive for the client's situation).

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Flat fee or hourly advising is the best way to remove the most conflicts of interest and have a truly unbiased financial advisor.