The ideal financial planning process consists of gathering information, identifying objectives, developing a plan to meet those objectives, implementing the plan, and monitoring and updating the plan. The client’s objectives, not the planner’s method of compensation, should drive the planner’s recommendations. Unfortunately, this is seldom the case.

The vast majority of people who call themselves “financial planners” or some similar term are actually financial product salespeople who do not have a fiduciary relationship with their customers. Instead, they have a principal-agent relationship with a product provider and a salesperson-customer relationship with a consumer. Thus, they must do what is in the best interest of the product provider, not what is in the best interest of their customers.

Additionally, their compensation is determined solely by the quantity of the products they sell rather than the quality of their advice. These “planners” mass-produce “financial plans” that are merely props for their sales pitches. Most of their customers would be shocked to learn that they pay a commission that is many times the value of the advice they receive. This explains why commissions are rarely disclosed.

Compass Advisors LLC does business differently. We believe that commissions entice planners to recommend products that are often not in their clients’ best interest. Therefore, we believe that accepting commissions is inherently unprofessional since it impairs a planner’s objectivity.

We believe our compensation should come from the party to whom we owe our loyalty–the client. We do not accept commissions from product providers. We work on a fee-only basis and recommend only no-load products. The following oath is included in all of our service agreements:

“The advisor shall exercise his best efforts to act in good faith and in the best interests of the client. The advisor shall provide written disclosure to the client prior to the engagement of the advisor, and thereafter throughout the term of the engagement, of any conflicts of interest which will or reasonably may compromise the impartiality or independence of the advisor. The advisor, or any party in which the advisor has a financial interest, does not receive any compensation or other remuneration that is contingent on any client’s purchase or sale of a financial product. The advisor does not receive a fee or other compensation from another party based on the referral of a client or the client’s business.”

Read what consumer advocates say about fee-only financial planners.

Just because an advisor works on a fee-only basis, however, that does not mean that he or she is acting as a fiduciary or that he or she has no potential conflicts of interest. In recent years, the financial services industry has discovered how profitable asset management fees are, and is now transitioning from transaction-generated commissions to asset management fees, which are based on a percentage of assets under management. These fees increase as the size of your portfolio increases despite the fact that the additional time and effort required by an advisor as your portfolio grows is negligible. Virtually the entire financial services industry is now primarily concerned with gathering assets under management.

We are different from most fee-only financial planners in this regard, as our fee for ongoing financial planning services is a flat dollar amount that does not automatically increase with the size of your portfolio. This removes virtually all remaining potential conflicts of interest; in the fee-only community, it is known as being “pure.” This ensures that we do not have a financial incentive to take an inordinate amount of risk with your portfolio in pursuit of unnecessarily high returns, to recommend that you convert non-financial assets to financial assets or not pay off debt, or to advise against spending your money or giving it away as part of your estate planning.