Category: Fiduciary

Will AI Replace Your Financial Advisor?

Posted on by Brian Colvert

Do You Still Need a Financial Advisor in the Age of AI?

Artificial intelligence can analyze investments, run retirement projections, compare tax strategies, and process enormous amounts of financial information in seconds.

That raises an obvious question: Do you still need a financial advisor?

AI already handles tasks that once required hours of research and analysis. Ask whether you can retire at 62, and AI can evaluate your income, investments, spending, Social Security, taxes, and life expectancy. It can test what happens if you retire earlier, spend more, convert part of an IRA to a Roth, or experience a major market decline.

Those capabilities will only improve.

But financial planning involves more than finding the mathematically correct answer. Your finances connect to your family, fears, goals, health, priorities, and behavior.

That distinction could determine what the financial advisor of the future looks like.

>> Keep reading, or if you prefer to listen or watch… check out the Podcast or full YouTube video. <<

AI Is Already Changing Financial Planning

Consider a couple wondering whether they can retire. The numbers say yes.

One spouse still hesitates because her father needed years of expensive care after retirement. Her husband wants to help their daughter buy a home nearby so they can spend more time with their grandchildren.

Suddenly, “Can we retire?” becomes a very different question.

What they really want to know is whether they can retire without becoming a financial burden while still helping their family.

AI can calculate the scenarios. A good financial advisor needs to uncover the question behind the question.

That human context matters because two people with identical portfolios may need very different financial plans.

One investor may value security after watching their parents struggle financially. Another may regret spending decades being overly cautious and want to enjoy more of their wealth while they remain healthy.

A spreadsheet can treat those investors the same.

A thoughtful advisor should not.

Information and Advice Aren’t the Same Thing

AI excels at processing information.

It can identify options, calculate tradeoffs, explain financial concepts, and evaluate more scenarios than a person could reasonably calculate alone.

Financial decisions rarely happen in perfect conditions, though.

Markets fall. Family members need help. Health changes. Priorities shift. Fear and excitement influence decisions.

That creates a gap between knowing what you should do and actually doing it.

Morningstar studied nearly 23,000 mutual funds and exchange-traded funds over the 10 years ending in 2025. The funds produced an aggregate annual return of 9.9%, while the average dollar invested earned 8.7%.

That represents a 1.2 percentage-point annual gap.

Morningstar notes that investor behavior does not explain every bit of that difference. People naturally add and withdraw money for legitimate reasons. Still, poorly timed buying and selling can keep investors from capturing the returns their investments generate.

In other words, owning a good investment does not guarantee a good investing experience.

Vanguard has also estimated that behavioral coaching from a financial advisor may add approximately 1.5 percentage points of value annually. That figure represents an estimate, not a guaranteed return.

The larger point matters more.

Sometimes an advisor creates value by preventing a client from making an expensive decision during the worst possible moment.

What Happens When Humans Use AI?

The future may not require choosing between a financial advisor and artificial intelligence.

Research suggests the combination could matter more.

One study partnered with a large European savings bank and compared three approaches to investment advice: AI alone, a human alone, and AI-generated recommendations reviewed by a human banker.

The experiment included 137 customers making real investment decisions.

Researchers found that human review did not reduce the quality of the AI-generated advice. Clients also followed the recommendations more closely when a person delivered AI-assisted advice, particularly when the investment involved more risk.

The human and AI combination increased adherence to the advice by 15.5 percentage points within the experiment.

Technology generated the analysis. A person helped make the recommendation usable.

That distinction matters because financial advice creates little value if someone never acts on it.

AI Can Make Professionals Better, But It Can Also Make Them Wrong

Another experiment involving 758 Boston Consulting Group consultants provides an interesting look at how AI affects professional work.

Consultants who used AI completed 12.2% more tasks and finished them 25.1% faster. On tasks suited to the technology, their performance improved by more than 30%.

The research did not specifically study financial advisors, so those numbers do not transfer directly to financial planning.

Still, the results show how AI can expand what a skilled professional can accomplish.

A financial advisor could use AI to evaluate more retirement scenarios, identify patterns across complicated financial information, prepare clearer explanations, or reduce repetitive analytical work.

Then the research uncovered an important problem.

When consultants received a task outside AI’s capabilities, those using AI became 19 percentage points less likely to reach the correct answer than consultants working without it.

Researchers described this uneven capability as the “jagged technological frontier.”

AI may solve one complicated problem extremely well and struggle with another that looks surprisingly similar.

The bigger danger comes from how convincing a bad answer can sound. An incorrect AI response may still appear polished, logical, and confident.

That means financial professionals need more than access to AI. They need enough experience and judgment to know when to question it.

Think of AI as a copilot, not an autopilot.

Do Investors Trust AI With Their Money?

Trust also changes depending on the financial question.

The FINRA Investor Education Foundation studied more than 1,000 American adults and found an interesting divide.

When participants evaluated projections about stock and bond performance, 34% trusted information from AI and 33% trusted information from a financial professional.

For general market information, the two sources essentially tied.

Personal advice produced a different result.

When participants evaluated portfolio-allocation recommendations, 37% trusted the financial professional compared with 30% who trusted AI.

As the decision became more personal, people placed greater trust in another person.

That suggests a natural division of labor.

AI can process information, perform calculations, and test possibilities at enormous speed. A qualified financial advisor can evaluate those results, apply them to a client’s actual life, and help determine which decision makes sense.

So, Will AI Replace Your Financial Advisor?

It may replace some of what financial advisors traditionally do.

If someone primarily provides investment reports, gathers information, or performs basic calculations, AI will continue to put pressure on the value of those services.

A strong financial advisor should offer much more.

They should understand what matters to you, identify risks you may overlook, explain your choices clearly, coordinate different parts of your financial life, and help you stay disciplined when emotions start driving decisions.

Technology can strengthen each of those capabilities when an advisor uses it correctly.

That leads to a better question than “AI or a financial advisor?”

Is your financial advisor using AI to give you better advice?

What Should You Expect From a Financial Advisor in the Age of AI?

Before deciding whether your advisor still provides enough value, consider three questions:

Are they acting as a fiduciary?

A fiduciary carries a responsibility to put your interests first.

Do they understand more than your numbers?

Your retirement plan should reflect your goals, family, concerns, priorities, and the life you actually want to live.

Are they using modern technology to improve your plan?

Ignoring AI makes little sense when the technology can help advisors analyze more possibilities and work more efficiently. Blindly trusting it makes equally little sense.

The strongest financial advisors may learn to do both.

They can use AI for speed, scale, and analytical power while applying human judgment before a recommendation reaches the client.

The Future of Financial Advice

AI probably will not eliminate great financial advisors.

It will change what clients should expect from them.

Calculations that once took hours may happen in seconds. Research will become easier. Scenario analysis will grow more sophisticated.

As technology handles more of that work, the human parts of financial planning may matter even more.

  • Judgment
  • Context
  • Accountability
  • Behavior
  • Trust.

You should not have to choose between better technology and a better human relationship.

The financial advisor of the future will need to provide both.

What Does Fee Only Really Mean

Posted on by Brian Colvert

The financial world has a jargon problem. It is filled with terminology that feels like it was designed to confuse people. And for decades, some parts of the industry preferred it that way. When clients do not fully understand how advisors get paid, it becomes easier for advisors to hide conflicts of interest, justify unnecessary expenses, or disguise sales incentives as financial guidance.

But there is one term that cuts through a huge amount of that confusion: fee only.

This single phrase tells you almost everything you need to know about the type of advice you are getting, the level of transparency you can expect, and whether your advisor is required to put your interests ahead of their own. At Bonfire Financial, we believe fee only advice is the future of the industry and the clearest path to an honest, trust centered financial relationship.

Today we are going to break down exactly what fee only means, how it compares to commission based advice, why the fiduciary standard matters, and how to protect yourself in a world where not all advisors are required to work in your best interest. Let us dive in.

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Why the Term “Fee Only” Matters More Than Most People Realize

Most people assume their financial advisor works for them. They believe the advice they receive is based on what is best for their financial future, not what is best for the advisor’s paycheck. But unfortunately, that is not always the case.

There are three main types of advisors:

  1. Commission based advisors

  2. Fee based advisors

  3. Fee only advisors

These terms sound similar, but the differences are massive.

A commission based advisor gets paid when they sell something. It could be a mutual fund, an annuity, a life insurance policy, or even a stock transaction. Every recommendation is tied to a payout.

A fee based advisor is a mix of both. They can charge a fee and also collect commissions. This creates one of the most confusing and dangerous environments for clients because you never know which hat they are wearing when they give you advice.

A fee only advisor, which is what we are at Bonfire Financial, gets paid only by the client and only through a transparent fee arrangement. Fee only advisors cannot accept commissions on the products they recommend.

Why does this matter?

Because the way an advisor gets paid directly shapes the advice you receive. If someone makes money when you buy or sell a product, the incentives shift. Suddenly, the advice you receive might not be about what is best for you. It might be about what keeps their mortgage paid that month.

Fee only removes those conflicts. It creates a clean, transparent, and aligned relationship where your advisor only wins when you win.

How Commission Based Advice Became the Industry Norm

To understand why fee only matters, we have to look back at how the financial industry operated for decades.

Before financial planning became a profession, most advisors were essentially stockbrokers. Their job was to call clients and recommend trades.

  • Buy this stock.
  • Sell that fund.
  • Switch into this new product.

Every single trade generated a commission. If an advisor could convince a client to buy something or sell something, they got paid. It did not matter whether the advice was good, bad, or neutral.

This created three dangerous realities:

1. Advisors could profit regardless of performance.

A client could lose money and the advisor could still get paid.

2. Advisors were incentivized to create activity even when unnecessary.

Buying and selling generated income. Holding did not.

3. Advisors could recommend expensive, high commission products even when cheaper, better solutions existed.

Clients rarely knew the difference.

This setup created a system where investors could not always trust whether a recommendation was truly for their benefit or simply profitable for the advisor.

And while the industry has evolved, this commission based model is still alive today.

The Suitability Standard vs the Fiduciary Standard

(Why You Should Care)

One of the biggest problems with commission based advice is the standard advisors are held to.

Commission based advisors follow the suitability standard.

Fee only fiduciaries follow the fiduciary standard.

Let us look at what that means.

The Suitability Standard: A Low Bar

Under suitability, an advisor only has to demonstrate that a recommended product is “suitable” for someone of your general profile.

For example:

  • You are 40

  • You make 150,000 dollars a year

  • You have moderate risk tolerance

If a product could be considered reasonable for someone in that demographic, it meets the suitability requirement.

The advisor does not have to choose the best option.

  • They do not have to choose the cheapest option.
  • They do not have to disclose conflicts.
  • They do not have to put you first.

This is an incredibly low bar.

The Fiduciary Standard: A Higher Level of Care

Fee only Registered Investment Advisors (RIAs) are held to a true fiduciary standard.

This means:

  • They must act in your best interest.

  • They cannot put their compensation ahead of your outcome.

  • They must disclose conflicts.

  • They cannot sell commission based products.

  • They must recommend the best option available, not just a suitable one.

This is a completely different universe of advice.

The Hidden Conflicts Many Investors Never See

When someone can earn a commission, several conflicts appear whether they want them to or not.

Here are the biggest ones.

1. Advisors might recommend a product because it pays more.

Annuities, private REITs, insurance products, and certain mutual funds can pay commissions as high as 5 to 10 percent.

If two products accomplish the same goal but one pays a big commission, which one will a commission based advisor be tempted to recommend?

2. Advisors might encourage unnecessary trading.

If selling generates income, sales magically become more appealing.

3. Advisors might prioritize their own cash flow needs over your goals.

It might not be intentional.
It might not be malicious.
But it happens.

4. Advisors are not required to disclose these conflicts upfront.

Most people only discover these details buried in long documents filled with legal language.

This is the opposite of transparency.

The Power of Fee Only Advice

Fee only eliminates all of the above.

Here is what fee only advisors cannot do:

  • They cannot collect commissions.

  • They cannot be paid more for selling specific products.

  • They cannot hide compensation in product costs.

  • They cannot recommend something because it pays better.

What fee only advisors can do:

  • Charge a clear, transparent fee.

  • Put the client first.

  • Provide unbiased advice.

  • Focus on planning, not product sales.

  • Build long term relationships based on trust.

This is why fee only advice has become the gold standard among educated investors and why more people are seeking RIAs instead of commission based advisors.

How Fee Only Advisors Actually Get Paid

Fee only advisors typically charge one of three ways.

1. Hourly Fees

Like attorneys or accountants. Not our favorite model because clients often rush conversations or avoid asking questions.

2. Flat or Project Based Fees

Great for specific projects like financial plans, retirement strategies, or education planning.

3. AUM Fees (Assets Under Management)

A percentage of assets the advisor manages. For example, 1 percent per year on one million dollars equals ten thousand dollars annually.

This fee covers:

  • Portfolio management

  • Ongoing planning

  • Consultations

  • Strategy work

  • Adjustments

  • Support during major life changes

AUM fees align incentives because the advisor only grows their revenue when your portfolio grows. Your success becomes their success.

How to Know if an Advisor is Truly Fee Only

Sadly, many advisors use confusing language to appear fee only when they are not.

Here are five questions you should always ask:

1. Do you accept commissions of any kind?

The answer must be a clear, direct “no”.

2. Are you always acting as a fiduciary?

Not sometimes. Not only when convenient. Always.

3. Are you dually registered?

If yes, they can switch hats between fee only and commission.

4. How are you compensated?

They should be able to explain it in one clean sentence.

5. Can I see your Form ADV?

This document legally outlines how they get paid.

Any hesitation is a red flag.

Why Fee Only Protects Your Financial Future

Fee only advice is not just about fees.
It is about trust, transparency, and alignment.

When you choose a fee only fiduciary, you get:

  • Clear recommendations

  • No hidden agendas

  • Advice rooted in your best interests

  • More confidence in your long term plan

  • A healthier advisory relationship

Money is emotional. It is tied to your goals, your family, your future, and your security. You deserve an advisor who treats your financial life with the care and clarity it deserves.

Why Bonfire Financial Chose Fee Only

Bonfire Financial was built from the belief that clients deserve transparency, honesty, and unbiased advice. There should never be a moment where a client wonders:

“Are you recommending this because it helps me or because it pays you more?”

That question should not exist in a healthy advisory relationship.

By choosing the fee only RIA model, Bonfire Financial removed all product based compensation and all commission conflicts. When we sit across from a client, we can give clear, direct, transparent advice without worrying about how a product pays or whether a transaction generates revenue.

Fee only allows us to:

  • Dive deeper into planning

  • Spend more time understanding clients

  • Give unbiased recommendations

  • Build long term trust

  • Support families through major life events

  • Focus on what is best for you

This model creates what we consider the healthiest and most ethical advisor client relationship.

Final Thoughts: Fee Only Is the Standard Every Investor Deserves

The financial industry can be confusing, and that confusion often benefits advisors who profit from opacity. But you do not have to accept that. You can choose a relationship built on transparency and aligned incentives.

Fee only advice is not a marketing buzzword. It is a higher standard of care, a commitment to honesty and a structure that ensures your interests come first.

At Bonfire Financial, it is the only way we believe financial advising should work.

If you want to explore what fee only advice looks like for your family, schedule a call with us today to learn more.

Your financial future deserves clarity. Fee only gives you that clarity.

UNITED AIRLINE LAYOFFS – WHAT TO DO IF YOU ARE LAID OFF

Posted on by Nick Coleman

United Airline Layoffs

Economic downturns often hit the airline industry harder than most. Once again, the airline industry has been grounded by the pandemic and the corresponding economic conditions. As such, layoffs are looming.  United Airlines announced it will be laying off thousands of employees, estimated to be 36,000 by October 1, 2020. Additionally, United Airlines said the jobs of more than 14,000 employees are at risk when federal aid expires in the spring of 2021. These layoffs could affect everyone from customer service employees, flight attendants, to pilots. Many other airliners may follow suit.

The fallout from 9/11 and the impact of the 2008 Financial Crisis took the airline industry roughly 2-3 years to recover. It is hard to say how long the coronavirus impact will last or how it will all turn out.

If you are worried you might be one of the airline employees to be laid off or already have been, there are many concerns you may have.  From how to pay bills, to how long will this last, to how to keep medical insurance and benefits… the list goes on.

What should I do if I am laid off?

We have put together some tips, ideas, and strategies to help you get through this tough situation. 

Covering your living expenses

Being able to cover your living is by far the most important question and concern.  There are a number of strategies to help navigate this and there are also some new provisions from the CARES ACT that can help if you are a United Airline employee who has had to face the layoffs. 

Your emergency fund

An emergency fund is a savings account or separate account that is set aside for when the unexpected happens, like being laid off.  We recommend that our clients have 3-6 months of their monthly expenses saved in this kind of account. The goal is to use this money to pay for your mortgage, food, etc.  It is designed to help you bridge the gap of unemployment to your next job or getting rehired when things recover.  

One often-overlooked task is once you are employed again to refill your emergency fund. This account can help you in a tough situation but be sure to replenish it to ensure it is there for the next time something unexpected comes up. 

If you do not have an emergency fund in place, read on for some other ideas that can help. 

Claiming unemployment

If you received a WARN, it is important to start planning ahead now. You can now qualify for weekly unemployment payments from the state in which you worked.  Many people fly out of a hub that is different from the state that they live in. When applying for unemployment, use the state that you work out of. Selecting reason for unemployment: “Coronavirus” can streamline the paperwork process. A quick Google search of your state and unemployment will land you on the right page. Look for “.gov” in the address. 

Mortgage Forbearance

Mortgage Forbearance means you can postpone your mortgage payment temporarily. For 180 days you can request a forbearance from your mortgage lender. If granted it means you will not have to pay your mortgage for about 6 months.  However, this is not mortgage forgiveness. You still owe the full amount and interest still accrues on the months you do not pay.  You will need to work out the details and repayment plan with your lender as each situation is different.  Per the CARES Act, no additional fees or penalties will be applied if you require forbearance.

Retirement Account Withdrawals

Taking a distribution or withdrawal from your 401(k) should be a last resort. Your 401(k) money is intended to support your retirement. However, with the intensity and impact of the United Airline layoffs caused by COVID-19, the CARES Act has set up many relief options.

Traditionally, you could not access your retirement account before the age of 59 1/2 without having to pay a 10% penalty and income tax.  The CARES Act has waived this 10% penalty.  Since all retirement accounts (Roths excluded) are funded with pre-tax dollars and the income tax is normally due in the year of a distribution. 

The CARES act has allowed distribution in 2020 up to $100,000 be taken out and the taxes are due over the next 3 years. That is much better than having to pay all $90,000 in 2020. The money will come out of your account’s investments pro-rata, so if you have half your money in large-cap stocks and half in small-cap stocks, the money will be sold in them equally to fund the distribution.

401(k) Loan

Taking a loan from your 401(k) is not a good idea because you will be taxed on the distribution, and you will have to repay the loan. There could potentially be many more downsides to taking a loan rather than just distributing the money.  If you are furloughed or leave the plan, you will be subjected to a faster repayment schedule.

Taking out a loan from your 401(k) results in taxes on the loan amount. You must also repay the loan using after-tax dollars. Once you repay the 401(k) loan, the IRS will still tax the money again as income when you withdraw it in retirement. This means you face double taxation on the money, rather than being taxed only at distribution.

Miscellaneous Items

Many car manufacturers are offering payment deferrals during this time. If you are unable to make payments comfortably on your car, be sure to reach out to your car’s manufacturer’s finance department to discuss payment options. Many newer cars (2018 or newer) will have more generous payment options than older vehicles.

Also, a voluntary separation could be a good idea if you are close to retirement. The benefits of the United Airlines Retirement Health Account (RHA) can help you pay for medical insurance. 

What about my  Benefits if I am laid off??

United Airline layoffs are hard enough, luckily you can retain certain benefits. For instance, health insurance, RHA, and you’re retirement accounts can still provide you benefits.

Health Insurance

COBRA is a government bill that lets you keep your medical insurance with your company for up to 3 years. You will have the same coverage and plan, except you will have to pay 100% of the premium (plus a 2% premium for administration costs for a total of 102%) Look at your most recent pay stub to see how much you and your employer were paying for medical insurance.

Retirement Health Account

Your Retirement Health Account (RHA) is a unique account granted directly to United from a private letter ruling with the IRS. The RHA is used to pay for out-of-pocket medical expenses and health insurance premiums when retired, furloughed, or separated from service. The RHA can also be used to pay for your COBRA premiums. Click here for more details on how to use your RHA.

401(k) and Retirement Investments

There are some options you can choose to do with your 401(k) when you have faced a layoff.

  1. You can keep it with the company.  Nothing will change as you will have the same investment options and access.
  2. You can withdraw the money, as we mentioned above.  However, this is not the best action to take if it can be avoided.
  3. You can roll your money into an IRA.  There are no taxes on this move, and it can give you more investment options and control of your money.

Our preference is to roll your 401(k) over into an IRA so that you have better access to your account while avoiding the administration and investment fees from United, Fidelity, or Charles Schwab. We can build you a custom portfolio based on your needs and our custom investment research for a fee typically lower than your Fidelity and Charles Schwab 401(k) options.

Our expertise is working with pilots and aircrew in providing them the best investments through our relationship with Charles Schwab. Leveraging our partnership with Charles Schwab we can build you a custom portfolio in your PCRA.

What’s Next?

We can help you navigate one of the most difficult times the airline industry has ever faced, and that is really saying a lot! We work with many pilots, crew members, and their families and help them prepare for a successful retirement and reach their financial and life goals.

Bonfire Financial is a fiduciary, fee-only,  financial advisor.  We have a staff of Certified Financial Planners™ that specialize in helping United Airline Employees and Pilots.

As a United Airlines or major airline employee, we would like to offer you a free consultation to help answer any questions you may have and help you get a game plan in place. Schedule your call now.

Schedule a Call

Retirement Checklist for Pilots Download

4 Reasons to Hire a CFP ®

Posted on by Brian Colvert

4 Reasons to Hire a CFP ®

Managing your finances can be difficult and time-consuming. However, finding someone to handle your finances can be just as challenging. Want a tip to make it easier? Hire A CFP ®.

People often ask us what is a CFP ®, how are they different from other financial advisors, and the reasons to hire a CFP ®. We are going to be breaking all that down for you today.

What Is a CFP® Professional?

First, it’s more than just an acronym. Unlike some designations that are worth little more than the paper they’re printed on, the CFP ® (CERTIFIED FINANCIAL PLANNER™) designation is one of the most esteemed financial certificates around.  Each CFP ® is held to an extremely high standard and requires an immense amount of work. Typically nine months to two years of study.

In the US, as of 2025,  there are only 101,505 CFPs ® and only 3,150 in the state of Colorado, according to the CFP® Board professional demographics.  The exam itself is a grueling 7-hour test that assesses the financial advisor’s ability to apply principles of financial planning. It covers all areas of insurance, investments, income taxes, retirement, estate planning, ethics and conduct, and financial plan development, among many other skills.

Beyond the test, there is so much more that goes into the certification. We have condensed it down to the top 4 Reasons to Hire a CFP®.

4 Reasons to Hire a CFP ®

  1. Fiduciary Standard
  2. Ethics Code
  3. Fitness Standards
  4. Experienced Life-Long Learners

Let’s dive into it:

1. Fiduciary Standard:

Currently, the SEC has NO uniform fiduciary standard that applies to all financial professionals who provide personalized investment advice. This means there is no oversight to protect consumers and clients from paying excessive commissions or receiving substandard performance. Consumers are exposed to even greater and unnecessary risks from products that may be deemed suitable (more on that here) for them but are inferior to other available options and not necessarily in their best interests.

The CFP ® Board has a Code and Fiduciary Standards that require CFP ® professionals to act in the best interest of the client at all times when providing financial advice. So, as a CFP ®, we have a legal requirement to act in your best interest, all the time. In addition to this standard as a true fiduciary, Bonfire Financial is also a Registered Investment Advisor which furthers this obligation.

2. Ethics Code:

All CFP ® practitioners agree to abide by a strict code of professional conduct, known as CFP ® Board’s Code of Ethics and Professional Responsibility, that sets forth ethical responsibilities to the public and clients. This ensures we act with honesty, integrity, competence, diligence, and offer services objectively.

It’s a pledge to protect the confidentiality of all client information, avoid or disclose and manage conflicts of interest and always act in the client’s best interests.

3. Fitness Standards:

Further, the CFP ® Board has also established specific character and fitness standards for the CFP ® certification. This ensures that an individual’s prior conduct would not reflect adversely upon the profession or the CFP ® certification marks. This helps you know that if you hire a CFP ® you won’t find out later that they have:

    • A felony conviction for theft, embezzlement, or other financially-based crimes.
    • A felony conviction for tax fraud or other tax-related crimes.
    • Revocation of a financial license (e.g. registered securities representative, broker/dealer, insurance, investment advisor).
    • A felony conviction for any degree of murder or rape.
    • A conviction for any other violent crime within the last five years.
    • A felony conviction for non-violent crimes (including perjury) within the last five years.
    • Personal or business bankruptcies.

4. Experienced Life-Long Learners:

CFP ® professionals are required to complete 3 years of experience related to delivering financial planning services to clients. They also must have a bachelor’s degree prior to earning the right to be a CFP ®. This real-life experience means that CFP ® professionals have practical financial planning knowledge. They can truly help you create a realistic financial plan that fits your individual needs.

Once certified, CFP ® professionals are required to maintain technical competence and fulfill ethical obligations. Every two years, they must complete a minimum of 30 hours of continuing education to stay current with developments in the financial planning profession and better serve clients.

Need more reasons to hire a CFP ®? We’d love to answer any other questions on what it means to have a CFP ® working for you, feel free to contact us.

At Bonfire Financial we pride ourselves on having a team of CERTIFIED FINANCIAL PLANNERs™ and we can’t wait to help you!

 

4 Reasons to Hire a CFP

 

How do Financial Advisors Get Paid?

Posted on by Brian Colvert

HOW DO FINANCIAL ADVISORS GET PAID?

Do you ever wonder how financial advisors get paid? If so you are not alone. It has been estimated that more than one in five people who have a financial advisor does not know what they are paying in advisory fees. You don’t hire a plumber or join a gym without knowing the cost. So why be in the dark about the cost of a financial advisor?

It should be simple enough…sadly, it’s not really straightforward. Understanding the compensation for financial advisors is often puzzling. It’s a perpetual source of confusion, so we are here to break it down.

Let’s first look at 3 different types of advisors you could choose to work with.

3 Types of Financial Advisors:

  1. A broker or broker-dealer
  2. Hybrid or dually registered advisor
  3. Register investment advisor

Broker or Broker Dealer:

First, if an advisor is a broker, which the majority of advisors are, they receive a commission based on the products that they sell and the investments they recommend.

The commission can be upfront (when you buy), it can be on the back end (when you sell), or it can be trailing (they get paid a portion annually).  The problem is that with most of them you “should” read the prospectus (the gigantic legal document you get when you buy or get sold a product and throw away when it arrives in the mail) to find out what you are really paying.

Moreover, there is an even bigger problem with brokers which has to do with what is in your best interest.  They only follow the “suitability” standard. This says the product or recommendation only needs to be “suitable” for the client. This suitability standard is established by the Financial Industry Regulatory Authority (FINRA) a private nongovernmental organization.

The suitability standard is problematic.

For instance, a broker could recommend a Mutual Fund that is ten times more expensive to own than a comparable Exchange Trade Fund, and that is acceptable because it’s “suitable” for the investor.  This obviously raises questions as to why a broker would prefer one investment over the other.

Many brokers push annuities as they are notorious for heavy hidden commissions, but keep in mind any investment could carry a commission. Mutual funds can carry sales loads up to 8.5% and brokers may take 1 to 2% off of a bond’s value for themselves. Think of it as a kickback.

To us, this is a huge conflict of interest and why Bonfire Financial is not a broker.

Dually registered or a hybrid advisor:

Next, let’s look at advisors that are dually registered or considered hybrid advisor.  There are some nuances between to a hybrid/dual-registered advisor. For the purposes of this discussion let’s focus on the fact that they are registered investment advisors AND licensed through FINRA (again, a private corporation that acts as a self-regulatory organization).

While that sounds good on the surface there are issues with this format.  As a registered investment advisor, they act as fiduciaries and do what is in the best interest of the clients. Great news, but they are also filing with FINRA to sell products as a broker. What? Yes, they can sell investment products and collect a commission.

These advisors can wear two hats with the same client. Not a good look.   They can have accounts on which they are acting as fiduciaries on and then have another account with the same client in which they act as brokers and only follow the suitably standard.

In a recent research paper published by Nicole Boyson, professor of finance at Northeastern University, The Worst of Both Worlds? Dual-Registered Investment Advisers, she finds dual registrants “have numerous conflicts of interest.” These include cross-selling insurance products, revenue sharing with third-party mutual fund companies, and selling proprietary investment products. She also found dual registrants charge an average of 2.1% on assets under management. This is much higher than the 1% fee most registered investment advisers collect. On top of that, they are more likely to be the subject of disciplinary actions by securities regulators.

How can someone be a fiduciary to a client but not on all their accounts or money?  I am still scratching my head on this one.  In my opinion, a client would never really know if the recommendations were in their best interest or not! This model was a pass for Bonfire.

Registered Investment Advisor:

Finally, there is the Registered Investment Advisor (RIA). These advisors have a legal obligation to act as fiduciaries.  Meaning that they have to act in your best interest at all times. They also must register with the Securities and Exchange Commission (SEC). The SEC is a governmental agency responsible for protecting investors.

Further, a Registered Investment Advisor must explain upfront how they receive compensation. Fees range but generally average somewhere between 1-2% of the total value of the investments under management. An RIA must disclose any conflicts of interest.  RIAs usually earn their revenue through a management fee comprised of a percentage of assets held for a client. However, the most important thing to know about RIAs is that they must act as fiduciaries for their clients.

Unfortunately, few advisors that are acting full-time in this capacity, less than 13,000 total in the US, surprising, right?

Fee-Only Vs. Fee-Based

Another thing to consider in determining how financial advisors are paid is whether they are Fee-Only or Fee-Based. While the term Fee-Based may sound very similar to Fee-Only, there are important distinctions.

The Fee-Based model can be susceptible to the same conflicts of interest that the commission structure has. There are many advisors who are mostly fee-based and the majority of their revenues come from fees, yet they can offer you a mutual fund or an investment that normally has a commission, and a conflict.

Fee-Only advisors don’t sell products, don’t accept commissions and they operate as true fiduciaries. Fee-only advisors work for their clients and clients pay an hourly rate, a fixed annual retainer or a percentage of the investment assets.

In conclusion:

I have always strived to be upfront and honest with people and my clients.  At a young age, I started my career at a big wire-house and believed I was a fiduciary for my clients and that I could act in their best interest.  However, the more I was learning, the more I began to realize the cards were against me. Decisions made at the top made it difficult to truly act in the manner of a fiduciary.  I was a vegan in a butcher shop, a sheep in wolf’s clothing.

So, I made a switch and I started Bonfire Financial, a Fee-Only Registered Investment Advisor.  Now my core values are in line with the company I am with and I can be a true fiduciary all the time.

If you have any other questions on how Financial Advisors get paid, or if you are curious what category your advisor falls in, feel free to give us a call. 

Why Bonfire Financial?

Posted on by Brian Colvert

Why Bonfire -The story behind the name.

A BONFIRE IS A FIRE OF CELEBRATION.

As I look back on my life some of the best memories and conversations have happened sitting around the fire.  I have been pumped up at a homecoming bonfire. Inspired by having deep conversations with friends about the future around the fire. I have felt close to my family on camping trips roasting marshmallows on the fire, and I have felt at peace sitting at a fire and staring at the stars.  Fire is life and all of these are moments are cherished.

Life is meant to be experienced.

That sounds good and all but I am a financial advisor and what does that have to do with financial advising?

I say everything!  Or at least it should.  Money is a vehicle for those experiences and the time to enjoy those moments.  The more money you have, the more experiences you can afford to have with your family and friends. You can give more to the causes you care about. The more peace of mind you can have.

I wanted to create a company that focused on that outcome, not just dollar figures.

Everyone has different goals and dreams and how they want to spend their life. What Bonfire Financial does is focus on those and come up with solutions to meet them as efficiently and as quickly as possible. My hope is that our clients will enjoy even more moments sitting around the proverbial bonfire celebrating their lives.

In the many years I have spent in the financial industry I have seen that most financial companies only focus on the bottom line. They prioritize their shareholders’ value.  This means that the decisions made about the company are not necessarily about how to add more value to the client. They are often about how to improve the share price.  A good share price is nice but it comes at the expense of the client, and the employees of the company.

So why is Bonfire Financial different?

We created Bonfire Financial as a fee-only registered investment advisory firm (RIA) so that we could be true fiduciaries to our clients. We are based in beautiful Colorado Springs, but serve clients throughout the US. All of our advisors are CERTIFIED FINANCIAL PLANNERs™  As such, we are true fiduciaries and we must do what’s in the best interest of our clients at all times.  In effect, putting our clients first, which is where we think they should be. We have a belief that if we add more value to our clients than anyone else, not only will they be happy, the company will thrive.

So, as a constant reminder of these philosophies, we came up with a name that reminds us to focus on the client’s outcome every day so that hopefully soon we will all be sitting around the fire celebrating!

All the best,

Brian

President & CEO | Bonfire Financial

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