A financial advisor says on his radio ad that he charges no fees for his advice. This is all very well, but I don’t know what to make of it – he must earn his money somehow. Is he being paid to steer his customers in a certain way? In which case, wouldn’t I be better to pay for truly independent advice?
You’re onto it. Clearly, I do not know how this particular financial advisor makes his money – so, let’s talk generally.
It seems likely that financial advisors who don’t charge clients for advice get some sort of payment or commission from the supplier of the financial products they recommend. Maybe some advisors are actually employed by financial institutions. As you say, advisors have to make money somehow. They will argue that this doesn’t skew the advice they give, but I would be dubious about that.
I would much rather use financial advisors who made their living charging clients for quality advice. At least I would know they weren’t relying on commission from the products recommended. Besides, I would be making sure that I was making more money out of taking their advice than I was paying in fees. If I did use a financial advisor that didn’t charge clients a fee, I would want a statement in writing, outlining where his or her money did come from.
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