Many financial advisers can only sell their firm's products and earn commissions on sales, creating a conflict of interest. Warren Buffett and Mohnish Pabrai use performance-fee models instead, where advisers profit only when clients profit.
There are lots of people posing as financial advisors and they are, but many are also restricted in that they can only offer you the products that they have in their company. They can't offer you any products outside. And also some of their remuneration, some of their pay is tied to sales. So if they bring in more money, they make more commissions and all that kind of stuff.
My mindset was, okay, I'm fine with people having commission or—
Yeah.
Charging fees and everything. So if their, um, commission or their remuneration depends on the profit that I make, that I thought then I would— they would make it, uh, their, uh, life's mission to get the greatest profit so that they will get a greater remuneration. But, uh, so you thought—
you thought that their performance, which is basically a totally different game— like, one of the people that inspires me a lot is Warren Buffett. So when he had his Buffett Partnership, or I don't know if you know Monish Pabrai, he's from India. We've met in Omaha. We're both shareholders in Berkshire Hathaway. He's great investor. Mohnish Pabrai and Warren Buffett, their partnership that they run, or when Warren Buffett run it, is that they don't make profit before you make profit. So there is a goal like, okay, they are going to hit above 6%, so anything above that, then they get like a percentage of that. So that's their performance fees. In this case, the incentives are now aligned with you because they'll make it their life mission to make sure you do it. Scrubs Investing Workshop, 3 steps to tax-efficient investing for medics. Comment Scrubs, you get the link.
