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Conflicts of Interest in Planning: 4 Ways to Make Sure Your Plan is Best for You, Not Just Your Broker

While the Department of Labor is implementing rules that will require your financial team to be your “fiduciary”, there are still incentives for some agents to pitch financial products that may be better for them than for you. So, how do you know who’s got your best interests in mind and who’s just a snake oil salesman?

Ask How They Get Paid.

No one becomes a financial professional just because they enjoy it – they’re trying to make a living. But, sometimes the financial incentive of pitching one product over the other can result in a cash boost for them and a poor investment for you. Ask your broker how they’ll get paid from whichever decision you make. Is it a commission for each transaction or product, or is it a fixed-rate fee based on your assets or a specific number of transactions, or is it an hourly rate? This compensation mechanism can have a substantial impact on what financial products will be pushed by your broker. This is why some brokers really push whole life insurance and variable annuity plans – the commission on the sale is lucrative even if it’s not the best option for you. That’s not to say commission-based brokers are all bad – just realize there is a potential for abuse.

Do Some Research on the Recommended Products.

If it sounds too good to be true – it probably is. Never rely solely on the person who’s selling you insurance or financial products. Do some independent research after your meeting and to determine whether the broker is being truthful or if he’s selling you some oceanside property in Idaho. Some financial products can be perfect for one person and horrible for others.

Ask Some Hypotheticals.

No financial product, aside from maybe an employer-match 401k plan, is an absolute one-size-fits-all. Ask the broker some hypotheticals about how their recommendations would change if different life events happened to you or if you were younger, older, or had a lot less or a lot more money. If they’re still pushing the same financial product regardless of all of these hypothetical changes in your circumstances, move on to a different broker. They’re looking for a maximum commission, not for the plan that will best fit your wishes.

Watch Out For “Multiple Hats” Planner/Broker.

A jack of all trades is a master of none. That saying has some application here, but the real issue is how a professional wearing two hats can create a conflict of interest. Perhaps your CPA is also a financial advisor, or perhaps your estate planning attorney is an insurance agent. While there is nothing inherently wrong with those situations, you have to be careful of the intersection of those two roles and the potential for abuse. For example, the estate planning attorney could recommend you move all of your investments into an annuity product and, oh, by the way, she just happens to sell annuity products – all of this being recommended without ever consulting your financial advisor. Red flags should be going up.

Ultimately, consider the financial motives of the people you’re dealing with to determine whether you believe your best interests are in mind.

By the way, I don’t sell insurance or any other financial products, don’t worry.

Paul Yokabitus

Author Bio

Paul Yokabitus

Paul Yokabitus is the CEO and Managing Partner of Cary Estate Planning, a Cary, NC, estate planning law firm. With years of experience in estate and elder law, he has zealously represented clients in various legal matters, including estate planning, guardianship, Medicaid planning, estate administration, and other cases.

Paul received his Juris Doctor from the Campbell University School of Law and is a North Carolina Bar Association member. He has received numerous accolades for his work, including being named among the “Best Attorney in Cary” in 2016 and 2017 by Cary News and Rising Star in 2020-2023 by Super Lawyers.

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