What you need to know about product driven vs fee-based financial planning

In today’s world, motivation seems overrated.

And for many reasons.

However, that doesn't make it any less important – especially when applied in the right context.

For example, people who are motivated to lose weight do so for many reasons [which serve as their end goal].

This end goal is why they set targets, make plans, and ensure they crush them.

“OK Rachelle, but how is motivation going to help my financial plan right now?”

The answer lies in how your advisor gets paid.

If your financial advisor gets paid only when you buy what they sell you – even though they believe it's in your best interest – that's product-driven financial planning.

Behind this is a strong motivation drawn from potential commissions.

So, he/she will need to convince you to make adjustments to your portfolio regularly to earn a living.

As we discussed in the previous newsletter, that's the definition of a salesperson.

However, a fee-based financial plan involves you paying a pre-stated fee and this makes up a huge part of your advisor's income.

So, if your advisor recommends some product or solutions to you, you know he/she's not trying to drum up more business.

In other words…

There’s little to no bias in fee-based financial planning when compared with a product-driven [or commission-based] plan.

But I know besides transparency, you also want someone whose interests align with yours…

Someone who gives you a Fiduciary standard of care…

…offers a depth of financial expertise…

…doesn’t try to sell you investment performance…

And most importantly, helps you create a comprehensive strategy that keeps you on track with your financial goals.

Now, you know the difference.

Always in your best interest,

-Rachelle Allen.