Your Financial Planner May be Biased Too

Karen Damato of the Wall Street Journal has written an article (free) that everyone should read that goes along with what I have been saying for a long time: you have to know the motivations of your financial advisor/planner. You also have to look out for conflicts of interest.

One of the main areas of concern is the fact that a lot of financial planners and accountants have teamed up with broker-dealers. The broker-dealers have formed agreements with certain mutual fund families. The broker-dealers then urge their financial planners to use those mutual fund companies that they have relationships with by paying the financial planner a greater percentage of the commissions from those sales. Unfortunately, clients are rarely made aware of these arrangements.

The only advice I have for people looking to work with a financial planner is ASK QUESTIONS like:

1. Do you work or have a relationship with a broker-dealer?

2. Do you receive incentives or are incouraged to sell one mutual fund family over another?

3. Do you work on commission?

4. Ask to see Part II of the ADV, which is available to all who ask.

Those are a few pointers. A good planner will have no problem answering those questions.

Tag: Picking a Financial Planner