Why Pay Fees for Financial Planning
Why pay fees for financial Planning in Vadodara?
We all know that there are no free lunches in this world. Hence, the "free advice" you think you are receiving may not be free at all! It is just that you are not paying directly – that's all. Unfortunately, most people do not realize that. The entire financial services space operates on commissions based on product sales.
These agents' "advice" is tailored to pushing their products without any real understanding of the client's full picture – their specific situation and hence their requirements. Also, such "advice" generally returns centric and not tailored to the needs of the client. Therefore, such "advice" may neither be of excellent quality, nor would it be conflict-free.
The fee-only advisor's fee like us for services rendered is partly defrayed by the savings we ensure. We suggest commission-free products in most categories.
Paying a fee should not be a problem as we already pay for so many services.
We Already Pay For Various Services…
When we employ a driver, we pay him a salary every month. He transports one in comfort from point A to point B, allowing the passenger to relax and have time to think & prepare for any meetings ahead.
The driver performs a vital function. However, the role he plays is transactional. For this, he is paid, say, Rs.15, 000 a month.
Assuming a driver is with a person for 30 years (with a 5% salary increase), the amount the driver would be paid overtime is Rs.1.2 Crores (without adjusting for the time value of money)! Similarly, we pay maids, gym trainers, beauticians, lawyers, doctors, architects, etc. These days, there are so many new services – Image consultants, marriage planners, life coaches, etc.
Financial advice has been "free" all this while. They have been paying indirectly through the embedded higher costs of products sold, which goes back to the agent as commission. Hence there is a mental block against paying for these services.
It is purely psychological. People don't realize that by availing of bundled advice, they get substandard "advice," and they pay dearly for it, without realizing it.
The Compensation Mechanism Determines the Quality of Advice
That may surprise you very much. But that's very true. Let us see how.
Agents who sell products represent their principals & get paid by them. Their loyalties lie with their principals, and do their bidding to sell whichever product they want to promote at that point. Clients are a means to achieve their targets. They can never be true Fiduciaries who put their client's interest ahead of their own. The mode of compensation ensures that they can never offer unbiased, conflict-free advice; they can never be dedicated advisors, even if they have the knowledge. All of us want our best investment advisor in vadodara to act in our best interest, have sufficient knowledge to advise us, and are interested in us rather than selling some product and scooting.
Then it would be best if you employed high-quality advisors who don't sell products and are interested in offering aligned advice to you. For that to happen, they need to be only & indeed be interested in your welfare.
To fully align clients & advisors' interests, the best investment advisor in gujarat should be only answerable to clients and should receive their compensation only from their clients. Only in such a case you can be sure that their advisors work only in the client's best interests.
This is why the compensation mechanism is essential. Even if commission-based & fee-based compensation are the same in money terms, the outcome will be widely different.
We are fee-only advisors. We work in your best interests, always!
Will Paying A Fee Be A Good Proposition For A Client ?
The short answer is – Yes. They will be paying a small amount after considering the savings that a fee only investment advisor like us will make possible for the level of services they will get.
The compensation paid to an advisor would vary based on the services bouquet that would be offered. As a client, you need to pay attention to what services you are being delivered and the quality, knowledge, experience & expertise of advisors providing it.
In our case, we offer a differentiated bouquet of services, as may be needed by different client types. We provide a comprehensive suite of services for those who want a deep, immersive experience. We also have a compact offering for those looking for an essential bouquet of absolutely vital & necessary services. Based on this, our fee will vary.
The fee-only advisor's fee like us for services rendered is partly defrayed by the savings we ensure. We suggest commission-free products in most categories, like Mutual Funds, PMS, AIF, Bonds, NCDs, etc. The client saves a lot of money, which would have been an embedded cost for them.
These savings alone take care of a significant portion or all of the fees. This is a beautiful by-product of fee-only advice. As a client, you will be paying less for a whole lot more in terms of services.