How an Advisor Makes Money Matters

One time my car wouldn’t start so I took it to a repair shop. The first shop I took it to got paid only for the work they did on the car. The more expensive the repairs, the more they made. The mechanic took a day to look the car over for free and told me I needed a new $500 fuel pump plus labor, which would come to about $1000. My extremely wise wife suggested I get a second opinion. I took the car to a mechanic who charged a fee to diagnose the problem. I paid the $75 fee, and they looked it over for half an hour and said it was a $15 relay that had gone out. Not the fuel pump! They switched out the relay, and the car worked perfectly. The moral of the story is that if an advisor only gets paid when they sell you a managed portfolio, a financial product, or you consolidate to their firm, their advice may be biased towards their paycheck rather than what you need.