A conflict of interest is defined as a circumstance where someone has a duty in one direction, but has a reward or benefit in different direction. A typical example is when you buy a car, the salesperson gets paid a commission based on what car you buy, but only gets paid if you buy a car. There is a conflict within the information they are providing you based on what they stand to gain personally. In real estate, sometimes an Agent represents both the buyer and seller of a property. There is no better example for a conflict of interest than that! How can you possibly have both parties’ best interest in mind during a negotiation?
In the world of money management and financial planning, there are conflicts behind almost every door. You trust your Financial Planner to help you invest in products that are best for YOU. However, many times, there are big incentives to put your money in products that are not best for you. This conflict of interest is widespread and most likely affects you or someone you know.
The good news is, there is a solution. If you work with a “Fee-only” adviser, your interests will be aligned. The Adviser does well when you do well. There is no incentive to put you in products that pay high commissions because they don’t receive commissions for the products they suggest. This is the ONLY way to ensure you are getting good financial advice. Be careful though, “fee-only” is not the same as “fee-based”. You want “FEE-ONLY”.
Other topics discussed on today’s show:
– What are annuities and who are they good for?
– Why you might be losing money on your money market fund
– What it truly means to mitigate your investment risk and how to do it
Categories: Financial Planning