Financial conflicts of interest are omnipresent, especially when it comes to financial advice.  There are a number of finance-related tasks that need to be done to manage your finances, and there are many different types of professionals who would like to be paid to do so.  We all need to hire help at some point or another.  You simply cannot do everything yourself, no matter how diehard a do-it-yourselfer you are.  But before you do, it's best if you know what you want them to do (the task), and that you understand the adviser's conflicts of interest.




  • Task: Develop and implement an appropriate insurance plan.
  • Professional: Insurance agent
  • Degrees (or certifications) to look for: CLU, ChFC
  • Method of payment: Commission
  • Conflicts: The more money you spend on insurance, the higher the commission the agent makes.  No sale, no commission.  The agent benefits if he can get you to overinsure, and especially if he can get you to buy insurance products such as annuities and cash-value life insurance instead of investments.  But even selling the “good kinds” of insurance such as disability and term life, the agent benefits from selling you higher face amounts, longer terms, and more bells and whistles than you may need.

Financial Planning

  • Task: Develop a budget, savings plan, debt management plan, and cash flow plan.
  • Professional:  Various.  Insurance agents, brokers, commissioned investment salesmen, investment managers, financial planners.
  • Degrees (or certifications) to look for: CFP, ChFC, CFA
  • Method of payment: Often included when purchasing other services such as insurance or investment management but also one-time flat-fee, annual retainer fee, and hourly fees.
  • Conflicts: If the advice is included as part of other services, an insurance agent may recommend (due to either ignorance or conscious or even subconscious desire to make money off of you) an insurance product or amount that is inappropriate for you.  A broker or commissioned investment salesman is more likely to recommend a plan that involves saving a lot of money in order to purchase and churn through as many investment products as possible.  An investment manager paid on an assets-under-management (AUM) basis is more likely to recommend against anything that might decrease the amount of AUM, such as paying off student loan, mortgage, or even consumer debt.  An adviser who makes you a one-time plan based on a flat rate is more likely to recommend a very simple, unpersonalized plan because it takes less of his time to develop than a more complex, personalized one.  An adviser paid on an annual retainer (assuming that is his ONLY method of making money), increases his hourly rate by spending as little time with each client as possible.  On the other hand, an adviser paid hourly is more likely to spend more time than required with a client.  Why else do you think he's so interested in your cousin's kid's soccer team?  A financial planner often likes to portray himself as “your primary physician” or your “financial team's quarterback.”  Then he refers you to accountants, attorneys, and insurance agents that provide him kickbacks, or at least referrals.  Or worse, they don't refer you to another qualified professional when they should, and try to perform the other professional's function in order to increase his own fees.

Investment Management

  • Task: Develop and implement a portfolio, manage new contributions and investment-related taxes, and rebalance the portfolio
  • Professional: Various.  Insurance agents, brokers, commissioned investment product salesmen of many stripes, investment managers and financial planners.
  • Degrees (or certifications) to look for: BS or MS in Finance, CFP, CFA, ChFC
  • Method of payment: Commissions, annual fees, AUM fees, hourly fees.
  • Conflicts: Although often lumped in with financial planning, it is probably best to separate these functions so you know exactly what you're paying for each.  Most people need a great deal of financial planning early on, but little as the years go by.  Investment management is an ongoing function, but can be done with very little time or effort once a portfolio is established.  Commissioned advisers have an interest in getting you to buy investments with high commissions, and to churn them frequently.  Unfortunately, the best commissions are usually offered for the worst investments.  An advisor working on an annual fee (IMHO the best arrangement for you) have an interest in portraying their services as complicated, time-consuming, and valuable to you, even if they may require only minutes per year.  Advisors working on an AUM basis have the above mentioned conflict to keep the assets under management.  While it is good that they want to grow your stash as much as you do, they are also likely to recommend a very conservative withdrawal rate, and recommend against paying down debt, making big purchases, or investing in asset classes they don't manage.  An hourly advisor, of course, has the incentive to spend more time than necessary on a portfolio, overbill, make a portfolio overly complicated, meet with you more often than necessary etc.

Asset Protection and Estate Planning

  • Task: Develop an asset protection plan and develop an estate plan
  • Professionals:  Various, but generally attorneys.
  • Degrees (or certifications) to look for: JD
  • Method of Payment: Hourly or Piecemeal
  • Conflicts:  The conflict here is primarily selling you stuff you don't need.  Imagine a 28 year old single resident with a net worth of negative $300K who does a little moonlighting and is talked into a $5000 asset protection and estate plan involving an LLC for his moonlighting, a will and a revocable trust, and a family limited partnership.  The more the lawyer does, the more he gets paid.  So when you ask, “Do I really need that?,”  expect a variation on “Yes, you sure do and here's why!”  Attorneys are more likely to recommend trusts and corporations.  Insurance agents are more likely to recommend annuities and cash value life insurance.  Investment managers and commissioned investment salesmen are more likely to recommend using retirement accounts.  All can play an important part in your asset protection and estate planning.

Tax Planning

  • Task: Prepare and file personal and business income taxes and make recommendations to lower them
  • Professionals: Accountants, tax attorneys, enrolled agents, and various other less-trained tax preparers
  • Degrees (or certifications) to look for: CPA
  • Method of payment:  Hourly or piecemeal
  • Conflict:  A tax preparer has every incentive to make things look complicated in order to justify their fees.  What they won't tell you is that they're just in the backroom using Turbotax or some other tax software.  Sometimes when you think you're paying for an accountant, your return is being prepared by someone with much less training.  Fortunately, it's usually a fee for service arrangement, and most tax returns are pretty straightforward anyway, so while you may save some money doing it yourself, this isn't anywhere near as painful as bad investment or insurance advice.

Lots of docs have “their money guy.”  But I'm often amazed to see how little understanding they have of the qualifications and costs of that money guy.  When you do hire help, I suggest you select a method of payment that minimizes conflicts of interest as much as possible.  You can do this by following these steps:

1) When you need insurance, know what you need before you go in.  Use the agent as a resource, but recognize that only you can really determine how much insurance you really need.  Don't mix insurance with investing.

2) Understand the difference between financial planning and investment management.  Don't lump the two together.  Pay for your financial planning as a lump sum or an hourly rate.  If you're not sure how much it's costing you, it's surely costing you more than you'd guess.

3) The best method for investment management is a flat annual fee with no commissions.  That way you can get advice even for a small portfolio, and you're paying the same price for the same amount of work $500,000 later.  If you must use an AUM planner, be sure the percentage charged decreases as your assets increase.  Calculate out your fees each year and decide if it is really worth that much to you.  If you're paying 10% or more of your manager's annual salary for a few hours of work a year you're doing something wrong.  The going rate for investment management can be as low as $1000 per year or 0.15% of your assets under management for simple but sophisticated investing solutions.

4) Get a second opinion before buying an expensive trust or other asset protection or estate planning tool.  Prices vary a lot, and expensive set-ups might not be worth it to you.

5) If you're going to pay someone CPA rates to put your tax info into Turbotax, be sure your time is worth it, and make sure you're getting solid tax planning advice for next year.  A good pro can probably save most docs some money, but only you can decide if it is worth the fees.

6) Remember that lots of high-quality, free financial advice (or just a second opinion) is available at your local library, on blogs, and on forums such as or  The more you can do yourself, the less professional advice you have to pay for and the better you can evaluate that advice.