How I am paid
Two of the five, and both of them are paid by you.
flat fee for a plan and hourly. Nothing else, from anybody else, ever.
Flat fee for a plan
How I am paid
An agreed figure for a written plan, paid by you.
The conflict it still createsThe conflict here is that a plan is a one-off, so there is an incentive to make it longer than it needs to be. You will see the scope before you agree the fee.
Hourly
How I am paid
An hourly rate for sessions on a single decision, paid by you.
The conflict it still createsThe incentive is to take longer. Sessions are quoted with an estimate of hours up front and I tell you when a question does not need a second one.
A percentage of your assets
Not how I am paid
An annual fee, usually around 1%, taken from the accounts a professional manages for you.
What it does to advicePaying down a mortgage, buying an annuity, or giving money to your children all shrink the fee. So does telling you to keep cash. Those are exactly the conversations you need to be able to have.
Commission on products
Not how I am paid
A payment from an insurer or fund company when you buy something.
What it does to adviceThe products that pay most are rarely the products that suit most. This is the model behind almost every piece of financial advice that felt like a sales meeting.
Free, paid by somebody else
Not how I am paid
No fee to you at all, because the compensation comes from the firm's own products.
What it does to adviceIf you are not paying, the advice is being paid for by whoever is. That is not a scandal, it is arithmetic, and it is worth knowing which one you are in.
Five questions to ask anybody, including me
None of them is rude and all of them have short, factual answers. An adviser who becomes uncomfortable at the fourth one has told you something useful.
- 01How are you paid, in every way, including by anybody other than me?
- 02Does your compensation change depending on what I decide to do?
- 03Are you a fiduciary at all times, or only for part of what you do?
- 04What would you earn if I bought the thing you are recommending?
- 05What would you earn if I did nothing at all?