Commission-based planners aren’t really planners, advisors, or counselors at
all — they’re salespeople. Many stockbrokers and insurance brokers are now
called financial consultants or financial service representatives in order to glam-
orize the profession and obscure how they’re compensated. Ditto for insurance salespeople calling themselves estate planning specialists.
A stockbroker referring to himself as a financial consultant is like a Honda
dealer calling himself a transportation consultant. A Honda dealer is a
salesperson who makes a living selling Hondas — period. He’s definitely not
going to tell you nice things about Ford, Chrysler, or Toyota cars — unless,
of course, he happens to sell those, too. He also has no interest in educating
you about money-saving public-transit possibilities!
Salespeople and brokers masquerading as planners can have an enormous
self-interest when they push certain products, particularly those products
that pay generous commissions. Getting paid on commission tends to skew
their recommendations toward certain strategies (such as buying investment
or life-insurance products) and to cause them to ignore or downplay other
aspects of your finances. For example, they’ll gladly sell you an investment
rather than persuade you to pay off your high-interest debts or save and
invest through your employer’s retirement plan, thereby reducing your taxes.
TIP: A good financial advisor advices and leaves you, as the client, educated to make your own financial decision.
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