"Try to use a planner whose self-interest is aligned exlusively with your own ...
Consumer Reports continues to believe that fee-only planners remain your best option."
A financial planner who accepts commissions makes money when his clients transact. The more his clients transact, the more advantageous it is for the advisor, since more commissions will be generated. Consider the following scenario: You currently own XYZ mutual fund, which continues to have good prospects for a future in your portfolio. Your financial planner, who earns commissions, recommends that you sell XYZ mutual fund and buy Pot O’ Gold mutual fund. Pot O’ Gold has entry fees amounting to 5% of your investment amount. Furthermore, since you had a gain in XYZ mutual fund, and you sold all of your holdings in that fund, you now have to pay capital gains tax.
Are you sure that selling XYZ and buying Pot O’ Gold was the right thing to do for you? Maybe it was. But how can you be sure? The truth is, you will probably never know for sure whether the planner was looking out for your best interests or his own. That’s why it is important to hire an impartial advisor to advise you on investments that are in your best interest. Fee-only planners provide this impartiality and avoid all potential conflicts of interest. If you want to make sure that your best interests are always put first, and that the Pot O’ Gold is for you and not for your advisor, ask him if he is a fee-only financial planner before hiring him.