A version of this article originally appeared in ThinkAdvisor magazine. This is a candid, extended version of the original article that takes a more in-depth view of net worth pricing and other pricing issues in wealth management. We recommend talking with your financial advisor to discuss the best pricing structure for your situation.

As an investor, one of the most important decisions you have to make is who to work with to help your money grow so you can achieve your dreams. Let’s take a look at your alternatives.

If you choose to engage a stockbroker or advisor who works on a fee-based or commission basis, you may not be getting the best advice, because those folks get paid more for making some recommendations than others. It’s going to be in their best interest to suggest you invest in funds or trading strategies that provide THEM with the biggest return — and that’s a pretty big conflict of interest.

If you choose to engage with an advisor who works on a fee-only basis you’ll be charged a percentage based on the amount of your assets under management. That means you can trust this type of advice, because what is recommended doesn’t impact what the advisor earns; you’re the only one who’s paying him. This business philosophy eliminates most conflicts of interest — but not all.

It’s not just about investments, however.  CERTIFIED FINANCIAL PLANNER™ professionals give comprehensive advice so, here are a few scenarios to consider:

• If you ask your AUM-based advisor whether you should pay off your home loan by taking money out of your investments, he might be more likely to say no, even if that might be the right thing to do. If he says yes, that means he takes a cut in pay.
• If you ask your investment-oriented advisor whether you should sell an apartment building you own, he’s more likely to say yes, even if it might not be the right thing to do, since the proceeds would end up in your investment account. Thus, his pay increases.

How can situations like these be avoided? To minimize conflicts as much as possible, you should investigate  net worth pricing. It may be the next step in the evolution of the wealth management business.

The concept is quite simple: the fee you pay to your advisor is based on your total net worth, not just your investment accounts. What this means is your advisor has a great incentive to drive up your net worth; he’ll get paid to make you wealthier rather than to funnel all your assets into his managed account.

To make net worth pricing work, your advisor needs to be involved in every aspect of your financial life. He’ll want to weigh in on what kind of loan you should get if you’re buying a home, what your exit strategy is if you own a business, what your charitable intent is, what you should do with your 401(k) if you leave your job and more. Basically, he becomes your personal CFO — your financial quarterback — someone closely aligned with you who’s working as hard as you are to achieve your goals.

This holistic approach is not rocket science, but advisors never had the technology available to do it economically before. Now clients who choose this management option are sent a net worth statement every week in the form of an electronic personal dashboard. As for fees, the percentage is lower than it is for other fee-only clients, but it’s calculated on total net worth instead of assets under management.

Net worth pricing is like paying an attorney on contingency rather than an hourly basis; you’re both after the same thing and his payday only occurs after it’s achieved. Your goals are more closely aligned.

Another way to think of this arrangement is to imagine the CFO of a business. He isn’t paid just to manage the marketable securities the company owns. In fact, he’s paid to help the president of the firm manage debt, raise money, reduce legal and other risks, and strategize all things financial. All those activities have one purpose: to drive up the value of the stock (if it’s a public company). For individuals, driving up net worth is the goal.

In the wealth management world, there are some things beyond advisors’ control; for instance, the markets will do what they’re going to do. By employing net worth pricing, advisors can focus on the things they can control to help build client wealth, such as estate plans, use of debt, insurance, legal asset protection, and human capital. It’s a concept whose time has come, something that’s a game-changer.