We work for you, not the financial institutions. We don’t sell financial or insurance products of any kind, nor do we accept or pay commissions or referral fees. We uphold a legal duty to put your interests first.
Many of our clients come to us with a good understanding of their financial goals. They expect us to listen and provide solutions to achieve those goals. What they find in us are trusted advisors, not high-pressure salespeople.
We place a high value on giving you a good value. Before our relationship even begins, you’ll know exactly what will be delivered and what you will pay because we clearly describe our services and fees on our website and closely adhere to this structure.
Is the CFP designation important?
In an industry where virtually anyone can call themselves a “financial advisor”, narrowing your search to those with a CFP or CFA credential is a good starting point. These designations suggest a commitment to the field based on experience, and enough proficiency to pass a qualifying exam. But don’t give this more weight than it deserves—no professional credential or job title can guarantee the quality of an advisor’s services or ensure that your needs will be met. Most of those who tout the CFP, CFA or even the CPA designation are commissioned or fee-based. These salespeople are paid based on what they sell rather than the quality of the advice they provide. Furthermore, in every field including the financial services industry there are providers with a wide range of skill-levels. Only your due diligence will help you determine the caliber of the advisor you select.
Why should I choose a Fee-Only Fiduciary?
If you are like most people, you might assume that someone you entrust to provide investment advice is required to act in your best interest. Unfortunately, that’s only true for those advisors who are designated as “fiduciaries.”
Financial laws and regulations have two sets of rules. One set is for people who sell financial products. These include brokers, financial company and insurance company representatives. These salespeople are contractually obligated to place the interests of their employer first – and consequently, ahead of the interests of their clients. They usually work on commission. For example, if you buy a mutual fund or other financial product from them, they will typically keep 5% or more of your investment as compensation and/or receive trailing commissions that are deducted from your returns each year you own the product. Those commissions reduce your investment returns dollar for dollar. Additionally, it incentivizes these representatives to recommend investments that pay the highest commissions. This means more money for them and less for you, and presents a clear conflict of interest between the representative and the client.
The other set of rules is for those who are registered as investment advisors with the Securities and Exchange Commission (SEC) or comparable state regulators, like Sentry Financial Planning, LLC. Registered investment advisers are fiduciaries, meaning they are legally obligated to place your interests first. The fiduciary’s interests and the client’s are aligned.
Is Fee-only the same as Fee-based?
The answer to this question is related to the explanation above.
Advisor fees can be difficult to understand and quantify. In simple terms, there are three business/compensation models an advisor can choose from: fee-only Registered Investment Advisor (RIA), commission only, and fee-based.
Fee-only Registered Investment Advisor firms receive compensation from only one source— the client. Although this doesn’t eliminate all potential conflicts or bad actors, it most effectively aligns the interests of the client and the advisor. The idea is to produce unbiased recommendations in the client’s best interests.
Many advisors work solely as commissioned salespeople. Instead of a transparent compensation structure where the client knows how much they are paying, commission arrangements are confusing and subject to abuse. Clients often pay exorbitant fees without realizing they are doing so. This puts the salesperson and the client on opposite sides of the table.
In an effort to side step the harsh light cast on the abuses of commissioned sales representatives, the financial services industry came up with a new moniker called fee-based. Fee-based means the advisor receives fees from both the client and the financial institution whose products they represent. While it may be lucrative for the salesperson, it does little to protect the client from the problems of a pure commission structure.
Ignore the sales pitches. When assessing a potential advisor, be sure to ask the question, “Am I the only one who pays you? ” The answer to this question and whether the firm and the representative is a fiduciary will make a critical difference in your financial future.
Sign up for our newsletter to get interesting news and updates delivered to your inbox.
Join Our Newsletter List
Read John’s Financially Speaking Blog for up-to-date financial tips.
2 Elm Square
Andover, MA 01810
Phone: (978) 475-2533
Crane Brook Office Park
150A Andover Street
Danvers, MA 01923
Phone: (978) 475-2533
Copyright © 2015
Sentry Financial Planning, LLC
All Rights Reserved