You may be surprised to learn that not all advisors are required act in a way that puts your interest first, but it’s true. Brokers and insurance agents, following what is known as the suitability standard, can make recommendations of high commissioned products when there are far cheaper better performing options available, and they are allowed to.
Fiduciaries are legally and ethically bound to put a client’s interest first when making a recommendation. At River City Wealth we proudly chose to operate as fiduciaries, putting our client’s interest first. (Read more about our commitments here...)
There are three alternative methods of compensation that most financial advisors can fall under. We believe the difference can make a big impact in the types of recommendations an advisor makes for you.
Fee Only – Fee only advisors are compensated direct by clients for the advice they give. They receive no compensation, commissions, or referral fees from their recommendations. No matter what they recommend, the compensation received is the same, eliminating many potential conflicts of interest.
Commissioned – Commissioned advisors earn commissions, or some form of kick back, based on the investment transactions they make for clients. Different investments pay the advisors different commission rates, leading to potential conflicts of interest. Is the recommendation made because it is thought to be the best option, or because it will pay the advisor the highest commission?
Fee-based – Fee-based advisors earn fees for advice they give but can also earn commissions on investment and insurance products they sell, keeping the potential conflicts of interest in place.
We proudly choose to operate as fee-only advisors because we believe the fee-only method is the most transparent, objective and fair method available to our clients. The recommendations we make are what we believe are in the best interest of our clients instead of the best interest of the advisors.