Alright, let's get straight to the point. Is that commission paid to a financial planner a scam or not? We've all heard the chatter on social media and even seen it in the newspapers. Apparently, if an advisor suggests mutual funds or segregated funds, they're just looking to get paid. They want that sweet commission from your invested assets.
To make things crystal clear, let's break it down with an example. Say you work with a planner and invest $50,000 through their recommended mutual fund. The fund comes with a 1% annual commission to the advisor. So, on your $50,000 investment, the advisor pockets $500. But hang on, that $500 doesn't stay stagnant. Let's say your investment grows to $55,000 by the end of the year. Next year, the advisor collects $550. You get the idea, right? As your investment grows, so does the advisor's compensation. If your investment hits $1 million over the next 30 years, that advisor is raking in$10,000.
But let's not get ahead of ourselves. I'm not here to talk about the millionaires. I'm here to talk to you, someone just starting out with under $100,000 to invest. And for you, commission-based planning might actually be the right move.
Now, on the other hand, we have fee-only financial planners. These folks charge you a fixed price for a financial plan, regardless of your assets. Many people automatically assume this is the better option because there's no conflict of interest – no pressure to sell mutual funds and make more money from it.
But let me ask you this: If you only have $50,000 or less to invest, and you know the advisor's commission is only $500, are you really being scammed? Most fee-only financial plans cost over $1,000 to $2,000. You can clearly see that you're ahead of the game. You've saved $500, or more, and you have an advisor on your team guiding your investments. Seems like a no-brainer, right? That is until you start reaching the $300,000 mark in assets.
Now, here's the caveat. All of this assumes that your advisor is doing a whole lot more than just investing. They're providing a full financial plan, looking at ways to improve your budget, reduce your tax burden, and set you up for success in achieving your life goals.
So, let's revisit the question: Is a 1% commission really a scam? This is why I offer it as an option, and a valid one at that. If I only offered fee-only services, I would immediately exclude a significant number of people, just like you, who are looking for help but can't afford to dish out$1,000 to $2,000 for a plan. For some, that commission allows them to get a full financial plan when their assets are lower, and they don't have the cashflow to pay hefty fees.
So, my friend, I'm here to challenge you to think critically about the options on the table. I invite you to book a free meeting with me, where we can dive deeper into your specific situation and discuss the best approach for you. Together, we can navigate the complexities of the financial world and make informed decisions that will shape your future. Let's challenge the status quo and take control of our finances. Book your free meeting now and let's get started!
