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When it comes to hiring a financial advisor, it’s important to know that they don’t all get paid in the same way. So how do financial advisors get paid? Who pays them? Are you getting the most out of your advisory fees?
Alex explains the 4 primary models of how financial advisors are compensated for their services, so you can an ask the right questions, and make informed decisions about who’s managing your investments – and the value they provide.
Hey, it’s Alex McVean, for McVean Wealth.
When it comes to hiring a financial advisor, it’s important to know that they don’t all get paid in the same way. Today we’re going to learn how advisors get paid, so you can ask the right questions, and find an advisor that is right for you.
SALARY
Some advisors are paid a salary by the firm they work for, usually a bank or credit union. Their advice is generally limited by the products that they offer.
COMMISSION/SALES FEE
Some advisors are paid a commission every time they buy or sell an investment product for you. They might also receive an ongoing commission called a “trailing commission” for as long as you own that product. This fee is paid out of your investment, and is meant to cover the cost of your investment advice.
If your advisor charges commissions, be aware that some products charge higher commissions than other products. Ask questions to make sure your advisor is providing the right advice to meet your goals.
FEE-ONLY
Fee only advisors are paid directly by their client. They might charge a flat fee for service, or bill by the hour. Alternatively, fee-only advisors may charge you a flat percentage based on the total value of your investments. With a fee-only advisor, the fee for advice remains transparent.
FEE-BASED
A fee-based advisor is paid by a combination of fee types including a fee paid by the client, in addition to a commission paid by the firm.
How ever your advisor gets paid, make sure you know. That way you can make sure you’re getting the most for your fees. And if you’re not happy with current advisor, don’t be afraid to shop around.
For McVean Wealth, I’m Alex McVean.