Dental Finance 101: Why Financial Products Aren’t Financial Plans

By Dentist Advisors    |   Finance 101

The busier your practice gets, and the more complicated your personal life becomes, the harder it is to properly plan for your financial future. A good financial advisor can work closely with you to make sure your financial decisions result in a healthy balance between income maximization and net worth growth. Plus they can help you achieve better balance to take care of the things you really value.

Unfortunately, in our industry almost anyone can call themselves a “financial advisor” regardless of whether they sell products or offer fiduciary services. That’s why it’s important to know the way your financial advisor is paid. It makes a difference in the recommendations they make. It affects the way they build their business. And it is at the heart of their incentives when offering you advice.

Two Types of Compensation

There are basically two types of compensation—commissions and fees. A commission is a payment companies make directly to an advisor who sells their product. A fee is a payment you make directly to an advisor in the form of an hourly rate, a flat rate, or a percentage of assets under their management.

Compensated by the companies they sell for, commission-based advisors sell financial products. Insurance companies and investment brokers (all with big names you’ve heard on commercials while watching golf on TV) design insurance, annuities, and other financial products for agents to sell. They then pay commissions for each of these different product types. The job of a commission-based advisor is to sell these products.

Advisors who sell financial products often get paid with surprising large commissions. Selling an annuity or insurance policy may generate thousands of dollars in commissions (which ultimately comes out of your pocket.)

Fee-only advisors are paid for giving advice. They operate at a higher level of legal responsibility called the fiduciary standard. These advisors can provide more comprehensive financial plans as they are not limited by a predetermined menu of financial products. Plus, they are incentivized to keep you happy by delivering good advice or you probably won’t continue to pay them. This also makes their services more transparent.

Fiduciary means the advisor is legally bound to put their clients’ interests before their own. It means the advisor has more liability and a lot more responsibility as they act for you when it comes to your finances. Essentially a fiduciary is someone that has to legally put themselves in your shoes.

There’s a third category to be aware of called dually-registered advisors who get paid both fees and commissions. They may claim to be fiduciaries, but they can also push you towards certain financial products and receive commissions for those—as well as the fees they collect for their advice.

Conclusion—A Financial Product is NOT a Financial Plan

Before you get advice from someone, you need to understand how they’re being compensated in order to ensure that your interests are protected. Financial products usually only solve one or two of many financial jobs that need to be done, and can come at a high cost.

A real financial plan requires that hundreds of small jobs get done. And you can’t leave any financial subject out—debt, taxes, legal, estate planning, insurance, retirement, and even more. The right financial advisor plays a critical role in helping do these jobs and objectively pointing you towards the right decisions in the right order.

Dentist Advisors is a fee-only firm and is always held to a fiduciary standard. As fiduciaries, we’re legally bound to put your interests before our own. We’re never paid for selling you products. Giving you the best advice possible is always our focus. To book a free consultation, go to and click “Book Free Consultation.” Or, call us at 833-DDS-PLAN to set up an appointment.

To learn more about the difference between commission-based and fee-based advisors, listen to our “What Should You Look For in a Financial Advisor” podcast.

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