When it comes to Commission only don’t doubt financial planning areas of concern. Fee for service financial advice is the method the compensates the advisor for the hard work the put in. Fee for service is more transparent; they receive no trailing commissions or any automatic permanent payment from clients apart from the billed amount for services provided.
If the results with a commission based financial adviser you probably won’t deal with him again, but that won’t stop him getting his trail commission for as long as you hold your investment.
Advisers in favour of commissions usually argue that there is nothing wrong with commissions as long as they are disclosed properly in accordance with the law. The trouble with disclosure in accordance with the law is that knowing what the adviser is being paid does not tell you anything about the true extent of conflicts of interest.
Disclosure of commissions is only useful when a client is fully informed of what “normal” rates of commissions are. It cannot be expected that clients are going to completely understand the full range of benefits from a wide varitey of products therefore clients have nothing to be able to draw comparision with the disclosed commission.
Financial advisors should make the commissions they are making available to you, not simply taking their word it.
There are only really two ways for a client to be fully informed of the true extent of conflicts of interest. Make sure the advisor provides a thorough document giving extensive statistical data explaining possible and actual commissions on all available products; they must be able to show you real life examples and extremely detailed explanations as to why commissions are justified. The only other alternative is to use the fee for service structure where any commissions, benefits, bonuses are paid back to the client and the advisor charges for the actual services provided.
So make sure you are dealing with a trusted and respected financial advisors.
