Discussions always arise about which method of payment is better for financial advice.
There are always 2 variations involved. Fee-based consulting or payment on a commission basis.
Consumer advocates, in particular, repeatedly claim that fee-based advice is much fairer, more honest and more favorable for consumers. But is that really true?
Time and again, phrases such as "fat commissions", "commission greed", "cashing in" etc. Sentiment against commissions.
Today I would like to show you what the differences really are and whether a consultation on fee basis is really better, more favorable and fairer.
For this purpose, we analyze fee-based and commission-based consulting with regard to various points.
Transparency about the cost of the advice
With fee-based consulting, you sign a contract that informs you of all costs.
Quite accurate to the euro and cent. It could hardly be more transparent.
With the commission advice you do not see that exactly. You do get told the exact costs in a product information sheet. However, you do not see who gets what commission there. Relatively transparent, but it would certainly be more transparent.
Whereby… must furniture stores, car dealerships, etc. Communicate what their profit margin is? No, or?
Fairness
If you decide to use a fee-based advisor, you have to pay for the advice. Totally doesn't matter if you complete something or not because the advisor provided their service (the advice). Thus, it is legitimate that you have to pay him.
If you choose an advisor who works on a commission basis, he or she will only receive this commission if one or more contracts are concluded. You could say the payment is success based.
So it can be that the fee-based advisor does his job, but you can't or don't want to conclude anything. You still have to pay.
What is fairer for you as a customer now?You decide and write it to me with pleasure in the comments.
This is not problematic at the moment, because you have the choice between fee and commission.
But what if you no longer have this choice?? Would you like to see fee-based advice become mandatory??
Amount of the costs
The topic that gives me the most stomach ache.
The commission consultation can afford everyone. Everyone. Without exception. This is very social. Since, of course, the premiums and contributions must be adapted to each financial situation. How this works for me, you can see in the article financial coaching or also in the topic spring cleaning for the finances.
Fee-based consultants have a fee schedule. You can find these here:
These prices and fees will discourage those most likely to need counseling. Because what small income earner can afford it? I don't know anyone. And no one saves for that either. This is very anti-social in my eyes compared to consulting on a commission basis.
And then please look at the ongoing costs as well. They are not without. In my opinion, the normal little man can not afford it!
Differences in the scope of consulting
I can assume now only from me. Therefore, I compare my activity with that of the fee consultant.
According to the fee schedule, the fee consultant handles 4 sets of issues:
- Retirement plan
- Investment
- BU and health insurance
- Real estate financing
The costs for all 4 areas quickly reach 3.000 € and more.
These are the fees you pay, regardless of whether you do it that way. Cash.
Add to this the monthly installments and contributions for the financial products taken out.
With commission-based consulting you pay cash first nothing. People like me are paid from your premiums, contributions and installments.
But you only pay for what you take out. Exclusively.
What services you get with me against?
I'll color-code for you which advisory services you will NOT get with a fee-based advisor.
- Property insurance (car, liability, household, accident, legal protection, residential building)
- Private loans
- Home savings contracts and loans
- Real Estate Financing
- Retirement plans
- Provision for children
- Private health insurance
- Long-term care insurance
- Statutory health insurance
- Checking account
- Physical gold for asset accumulation
- Investments
- Biometric insurance other than BU (serious illness, life insurance, basic disability insurance)
- Disability insurance
- Energy supply
- Preparation of a budget book with all expenses and income
Do you want to voluntarily do without help in the green areas?
With the fee consultant you have no help at all with property insurances. You can buy all your property insurance on the Internet. It's cheap. But what if you really have a loss? One that may even be complicated? A difficult accident with your car. Or water damage in your house. It's not nice to be left alone there.
Why don't fee based advisors offer advice and help?? I have no answer to this question. At least not a nice.
"Fat commissions" and "greedy brokers"
There is a prejudice that fee-based advisors give fairer advice than commission-based advisors. Because commission advisors mediate what brings the fattest commissions. Allegedly.
If you're a client who wants to do something about retirement planning, you need an annuity policy. How this looks exactly, is to be considered individually. Point.
Fund savings plans and investment vehicles are the way to go to build wealth. But not for retirement provision? Why not? Here I give you as keywords guaranteed annuity factor, lifetime annuity, etc.
The offer fund savings plans do not. Although I am a real fan of mutual funds. But just not for retirement.
As a serious agent, I don't care financially whether you take out Riester, Rurup, a company pension plan or a normal fund policy from the third layer. Really. I get the same money for everyone. Therefore, it is total nonsense that a reputable advisor (regardless of the company, whether broker, insurance agent or investment advisor) offers unsuitable products because it gives more money.
Of course, there are black sheep everywhere, who just do not work so seriously, who sell fund policies for asset accumulation. But this is an absolutely manageable minority. Due to the liability for the advice this also becomes more and more difficult. Reviews on the internet and word of mouth make it increasingly difficult. Usw. etc..
Therefore, this argument is absolutely untenable for me.
What about other arguments? High costs in the products?
Look at what services you get for it. You have lifelong support included here. Without additional costs. With a fee-based advisor you have to pay "support fees" every year. For example, with a construction financing at least 990 €. EVERY YEAR!
I could go on like this for a long time. But I think you know what message I want to get across.
Nevertheless, I would be very pleased to hear your opinion. Perhaps it differs from mine?
Take care and stay healthy!