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Originally Posted by Detroitdad
The rule of thumb that I have read is to get a financial planner who either gets paid by the hour, or gets paid as a percentage of appreciation. Even with an FP who gets paid comission their advice isn't that bad. There is a conflict of interest, but it is mitigated by the Financial Planners interest in maintaining a relationship through performance.
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I prefer the incentives to be aligned for somone to do the best job. I believe in your example, the incentive for a quick commission far outweighs incentive to please a customer.
Incentives are not aligned in a lot of the financial/real estate industries. Realtors and loan officers spend all their time prospecting for new clients and little time actually providing them service. Financial planners/stockbrokers/insurance salesmen who get paid on commission will steer you towards their products. Many of them are not that educated, and have been brainwashed through corporate "training" that they actually believe the crap they spew. I'm thinking specifically of an extended relative of mine who sells the multi-level life insurance--used to be WMA. He would actually guarantee his clients high returns with no risk. He's college educated and I believe he's an honest man, he's just been duped. And now you have an army of these guys duping other people. Same with stockbrokers. How can a stockbroker with a straight face suggest a stock to me that his company is trying to sell?
I believe it's possible any one person who is paid commission could do a good, honest job for their clients in all these industries. But as a rule, I wouldn't trust anyone.
If a financial planner was paid by the hour, then I would tend to trust that person. But my guess is that it would be very difficult to get people to pay for that kind of service on a fee basis. People would rather get free, bad advice.