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I know of Certified Financial Planners who earn a commission from the investments their clients make, but there is an explicit agreement between the planner and the client for this.

There are also fixed-fee CFP's who take a fixed annual fee from the client, create a financial plan, recommend debt and equity funds and fund houses to the client. Is that all there is to it? They earn only the fixed fee? Or is it possible they have tie-up's with the fund houses in a way that if they prove (by showing email records (although that can be spoofed too)) that they were the reason the client invested with that fund house?

Asking because I've noticed fixed-fee financial planners recommending clients to open an account with a brokerage firm which allows you to invest into various fund houses with a single account. But the firm will charge you a tiny percentage from every investment you make.

So couldn't it be that this kind of a firm (or the normal fund-houses too) will have incentive to get financial planners to recommend its services to others; in turn paying the planner some fee/commission for every successful recommendation?

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Fixed fee CFPs are supposed to earn only their "fixed fees" from you. For them to do otherwise, that is also get paid by the people whose products they use, is unethical and illegal.

They do have to "look up" things, which is why they use these services. Essentially, you pay them to look up things for you. If you are capable of doing this yourself, to the point of formulating your own financial plans, there is no need to use the services of financial planners.

  • About your mention of "to look up things they use these services", may I know what services are you referring to? I figured they'd be using something like MorningStar's ratings, but there is a difference between them using a service to look up things vs informing the service provider that they are recommending a product to a client, to get a commission (which is what I wanted to know). Although you say it is unethical, the question is whether it is a general practice for many planners to ignore ethics and still do it. – Nav Sep 5 '16 at 4:49
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    @Nav: Yes, Morningstar is the best source, followed by S&P and Value LIne (which have mutual fund products). Financial advisors are supposed to disclose whether they are "fixed fee" or "commissioned-based" earners, so clients can judge where their interests lie. To say one and do the other would be "false advertising," and illegal. – Tom Au Sep 5 '16 at 4:52

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