Just because an advisor is compensated through commissions does not mean he or she is going to solely recommend investment and insurance products that are going to pay out the biggest commissions. And if advisors are compensated through fees paid by the client, it does not mean they don't have any conflicts of interest. Compensation is certainly one aspect of an advisor's business model that must be taken into consideration, but it is a small part of the bigger disclosure puzzle.
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Disclosure is, simply put, the act of making information known. In the advisory world, that means being completely transparent of all material facts and information that are important in the advisor/client relationship.
You are probably saying to yourself, "Yeah … that makes total sense. Why wouldn't my advisor be willing to divulge this information?" But in my nearly three decades as a financial advisor, I've observed that full and fair disclosure by advisors does not, in fact, always happen. And that is usually to the detriment of their clients.
A good place to start learning about an advisor—if he or she is a registered investment advisor with the Securities and Exchange Commission or a state securities agency—is to review his or her Form ADV Part 2.
This vital document, according to the SEC, requires "investment advisors to prepare narrative brochures written in plain English that contain information such as the types of advisory services offered, the advisor's fee schedule, disciplinary information, conflicts of interest, and the educational and business background of management and key advisory personnel of the advisor."
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While this form is a great place to start, not every advisor has one. That's because those not registered with the SEC or their state—including brokers affiliated with a wire house and insurance agents—are not required to have one. So while having full disclosure in writing is ideal, you need to have a conversation with your advisor, or prospective advisor, to fully understand who she is and how she is going to work for you.