by beconrad

In the wake of the Bernie Madoff scandals and other high profile Ponzi schemes many investors are asking themselves if it is possible to find a financial advisor they can truly trust.…  The good news is that there are plenty of honest financial planners out there.…  The bad news is that it can take quite a bit of time and effort to track them down.…  But with a little bit of knowledge and some good planning investors can find the professionals they need to help them achieve the goal of financial independence.

One of the most critical parts of your financial education should be learning to tell the difference between commission based, fee based and fee only financial planners. This difference may not seem that important, but as you continue your financial education you will come to see just how critical it really is.

Commission Based Financial Planners

The vast majority of men and women working as financial planners and financial consultants today are commission based individuals.…  That means that they receive a commission each time they sell a particular mutual fund, stock, annuity or other investment vehicle.…  These financial planners do not charge clients for their services — instead they make their money off of the products they sell.

While investors may feel that they are getting a good deal with this type of financial advisor — after all there are no fees — in the end it is hard to determine whether the advice given is really in their best interest and not the best interests of the planner.…  Even if there is no overt attempt to deceive there can still be a subtle pressure for the planner to steer clients into investments that will generate fat commissions.

Fee Based Financial Planners

A smaller part of the financial planning market is occupied by fee based financial planners.…  Unlike financial advisors who work strictly on commission, fee based advisors are also paid by their clients, either on an hourly basis or as a percentage of the portfolios they manage.

The problem is that fee based advisors can fall victim to the same conflicts of interests as their commission based peers.…  Even though they may derive a substantial portion of their income from the fees charged to their clients, fee based planners also are paid commissions, and this can influence the kinds of investments they recommend.

Fee Only Financial Planners

Unlike the other two types, fee only financial planners do not derive any income at all from commissions.…  This means that they can truly be an independent voice for their clients and that they can recommend investments that are truly in his or her best interests.

When looking for a fee only financial planner it is important to look for an individual who is willing to serve as a financial fiduciary, meaning that the advisor takes on a legal obligation to act in the best interests of the client at all times.…  Be wary of any financial planner who will not agree to act as a financial fiduciary.

Finding a financial advisor you can trust is never easy, but in the end the results are well worth the effort.…  Putting your hard earned money in the hands of a financial advisor who makes poor recommendations based on his or her own self interest can set your financial goals back many years, so it is definitely worth your while to look for an advisor you can trust.