by Tony Vidler
Which financial adviser is going to be right: the one who charges a fee; the one who is “free”; or; the one charging a commission? Or is it the one who does all of these?
Well I suggest that it depends on what you are hoping for and what you want from them, but the only one that is suspect is the “free” offer.
I have a simple response which I have used for many years now when presenting cost (or fee proposal) to a prospective client and then encounter any version of “the guy down the road will do this for free“. That response is:
“if you aren’t paying them then they are not working for you; so who do they work for?”
The typical reaction at this point is silence as the implications of that line of thinking sink in….and most prospective clients get the implications of that pretty quickly. IF further explanation is required then one expands upon by saying something like
“well they have an office, and a car they are running, and they are housing themselves and feeding their family, so money is coming from somewhere…..but you say it won’t be coming from you or any other clients. So who is paying them? Because whoever is paying them is who they work for. And if it is not you paying them then they are clearly not working for you, right?”
More often than not this leads to an excellent piece of conversation about the types of advisers there are, or more accurately, the types of roles that advisers can fulfill for a client. Advisers can:
None of these are “free” to the consumer though.
“Free” to the consumer simply means the consumer is either unaware of how the adviser is being remunerated, or who the adviser is working for. Let them know that you are working for them, and how you are being paid by them regardless of the function being asked of you. If at the end of all that a consumer objects to the concept of paying you for your time, expertise and the legal risks you take in being an adviser, then don’t work for them.