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Financial Planners - Who Needs Them?

Commission on Products

As a third strategy of financial planning services is percentage of products sold. Perhaps this is the most common method financial planning, but is also the most controversial. This is similar to a car dealer specializing in Chevrolet sales. It is unlikely that car dealer will tout the assets of a Chrysler vehicle. The same can be argued to be true with a financial planner. That is, they are earning commissions off of various products in various fund families, for example, Fidelity Investments or Oppenheimer Funds. Some funds like these may charge fees to clients who use these products. In turn, these products pay high commissions to financial planners who recommend clients to purchase these products. There may be better funds paying lesser commissions that may be better suited for the client than the higher commission products being sold by the financial planner. The argument is that many financial planners will not recommend the lower commission products, if there is a viable higher-paying commission alternative, even if the returns are not as favorable for the client. This is an over-generalization, but a savvy investor should know that this scenario exists. Advantages of this type of financial planner are that the services of the planner are usually free to the client. The disadvantages are that there are usually too many conflicts, or even temptation to be involved in conflicts. Also, there may be too much product loyalty, and there may be no debt-analysis, since paying off debts as a form of financial planning strategy, will deplete the available dollars for the purchase of mutual funds or other investments on which commissions may be earned.

Financial Planners - Who Needs Them?
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