Financial advisors are paid for their services in one of the following three ways. It is important to understand ahead of time how an advisor is paid.

Hourly Fee: Fee-only advisors charge for the time spent with a client and working on the client’s business. Total charges can become substantial for a comprehensive plan and implementation.

Sales Commissions: Some advisors offer free planning service with an expectation of making a commission on the investments People select. If People choose this type of advisor, be sure of his or her qualifications and that the investments offered fit their needs.

Combination: Some advisors calculate a fee based on the time spent on their business. Then, the customer may choose to pay the fee and go elsewhere to implement their plan; or, if they buy investments from the advisor, any commissions received are credited to their account. Most people prefer this approach as it offers some savings along with freedom to choose who handles their investments. Good financial planning is a combination of analysis and application tailored to their specific needs and circumstances. It is not a sales approach for marketing investment products. Therefore, customers need to sort out the method of compensation that best suits their situation.

3.10.2 Choosing an Advisor

When People decide to engage the services of a financial advisor, start by checking with others for recommendations. Then, schedule meetings with two or three to see which one best fits their needs. Here are some questions to ask on their first visit.

 What are their background and experience?

 What degrees and designations do People hold? Look for someone who holds one of the three designations mentioned earlier. While they are not guarantees of qualifications, they are indicators of education and experience.

 Consult other professionals? Seldom is one person an expert in everything. Expect an advisor to consult with a CPA, insurance specialist, investment advisor, estate attorney, and a tax attorney in developing a comprehensive plan.

 How do People charge for their services? People need to know if there is any chance of advice being tainted with greed.

 What are their typical client’s financial circumstances? People want an advisor who deals with clients similar to People.