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Why I Don't Receive Commissions


STOCKBROKERS AND INSURANCE SALESMAN

It took about two years of hard work to get my mom to stop calling me her "stockbroker." She wasn't aware of the negative connotations associated with the title, and I didn't want her to ever introduce me as such.


Stockbrokers and insurance salesmen are what most people think when they hear "Financial Advisor," and for good reason.


This supposed financial advisor has burned many. Someone with no financial experience, yet crammed hard enough to pass a test saying as much. After a few sales courses, they went out into the world ready to invest your life savings.


They are confident and smooth in speech (the only criteria necessary to be hired... maybe they can't be a felon, but I'm not sure). They make whatever life insurance policy seem like the best of insurance AND investments wrapped into one package.


5 years later, you're thousands of dollars worth of premiums into something with a value far short of what was promised and what your friends have received in the stock market.


CONFLICT OF INTEREST

Why were you sold this policy? Large commissions. These are typically between 60%-80% of the first year's premium and then 5%-10% for subsequent years.


Herein lies the conflict of interest. Financial advisors who are paid with commissions may be incentivized to recommend products that are not in their client's best interests, as they may earn a higher commission from those products.


The best product for the client will likely have a lower commission and won't be recommended.


THERE IS A BETTER WAY

I'm paid for my labor by charging a flat percentage fee every month on the assets I manage.


Not only does this eliminate the conflict of interest, but it also aligns my interest with the clients: if they make more, I make more. If they make less, I make less. Thus, I'm incentivized to make my clients more.


Since I'm not paid differently to invest my clients in Fund A (best) or Fund B (okay), I can put them in the best investment vehicle (Fund A) that will help them achieve their goals.


FINAL THOUGHTS

I don't think that most financial advisors who charge commissions are being malicious.


They are simply doing what they were taught.


I, however, have been taught both of these business models and chose mine because I find it to be the best.




 

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Risk Disclosure: Investing involves risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Past performance does not guarantee future results.


This material is for information purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. The content is developed from sources believed to be providing accurate information; no warranty, expressed or implied, is made regarding the accuracy, adequacy, completeness, legality, reliability, or usefulness of any information. Consult your financial professional before making any investment decision. For illustrative use only.







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