Financial Advisors Taking Trailing Commissions And Kickbacks Becareful!-00-5843

By Author: Environment Protector
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Today the we have laws introduced to protect us against Financial Advisors taking kickbacks without full disclosure. However this does not stop them from having a conflict of interest. They still may have a vested interest in promoting a certain product to you. So how do you protect yourself against this.

When it comes to using commission based financial advisors it certainly raises up some concerns. Where we have fee for service for financial advice this is the method that will compensate the advisor the effort that they put in, not the product they promote. The advice needs to be sound and completely independent.

Fee for service is more transparent; they receive no trailing commissions or any automatic constant payment from clients apart from the billed amount for services provided.

There maybe a time that you become extremely dissapointed with your current commission based financial advisors and you probably won't deal with him again, but that won't stop him getting his trail commission for as long as you hold your investment. So some ...
... financial advisors may have a high turnover of clients, but they will still continue to collect money from these clients via the investments they recommended.

Financial Advisors in favour of commissions usually argue that there is nothing wrong with commissions as long as they are disclosed properly in accordance with the law. The trouble with disclosure in accordance with the law is that knowing what the adviser is being paid does not tell you anything about the true extent of conflicts of interest.

Disclosure of commissions is only useful when a client is fully informed of what "normal" rates of commissions are. It is unreasonable to expect all clients to understand the range of benefits that are available from a wide variety of products and thus clients really have nothing to compare a disclosed commission with.

Without a sound understanding of the financial industry it makes it difficult to knows what financial advisors are "supposed" to make, they'll just have to take the adviser's word for it that the commissions being paid are reasonable.

There are only really two ways for a client to be fully informed of the true extent of conflicts of interest. Make sure the advisor provides a thorough document giving extensive statistical data explaining possible and actual commissions on all available products; they must be able to show you real life examples and extremely detailed explanations as to why commissions are justified.

The only other alternative is to use the fee for service structure where any commissions, benefits, bonuses are paid back to the client and the advisor charges for the actual services provided.

So make sure you are dealing with a trusted and respected financial advisors and remember if you don't feel comfortable with one of their suggestions then don't invest. Afterall it is your money and you have the final say, if you feel too much pressure always ask to think about and get a second opinion.

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So make sure you are dealing with a trusted and http://www.financial-advisors-auckland.co.nz and remember if you don't feel comfortable with one of their suggestions then don't invest. Afterall it is your money and you have the final say, if you feel too much pressure always ask to think about and get a second opinion.
Click here to read more on http://interpret.co.za.