Choosing a financial advisor to help you with your financial planning is not an easy task. It can be daunting and frustrating. Investing is very personal so you need to feel comfortable with your financial advisor. To make sure you make an informed decision, look at every prospective advisor’s experience, education and training. Ask them what types of clients they usually work with.
Interview them like they are applying for a job – because they are!
Most importantly, ask how the advisor will be compensated for working with you.
Understanding how a financial advisor is paid is critical and needs to be completely understood before you engage their services. Besides impacting how much their advice, guidance and planning services will cost, their compensation structure can point out potential conflicts of interest in terms of the advice they provide to you.
Here is a simplified list of the main fee structures of financial advisors:
Asset-based fees. Many financial advisors charge a fee based on a percentage of your investments that they manage on your behalf. This fee is typically anywhere from 0.5% – 2% per year. The more assets you have, the lower the fee usually is.
Hourly rates. A financial advisor may charge an hourly rate to tell you how to allocate your investments. An hourly rate is not tied to the value of investments so you will receive objective advice. Hourly rates vary from advisor to advisor.
Project-based fees. If you need a specific project completed, such as an education plan, it may make sense to pay a flat fee. This can help you get to know an advisor and learn how they work, in case you may want to use them for more projects. Always get a fee quote upfront with a clear description of what project deliverables will be provided for the fee.
Commissions. This is a common way financial planners charge for their services. Commissions can be paid on the sale of various financial and insurance products, can be sales fees on mutual funds, or commissions from the sales of annuities. Sound Advice Financial does not sell products and charge commissions.
Sound Advice Financial offers payment flexibility based on your needs.
Our clients can utilize an asset-based fee structure, project-based investment consulting fees, or an hourly rate, depending entirely on your situation and needs.
We do not accept any fees, commissions or compensation based on product sales. We feel it is very important to point this out because it means fewer conflicts of interest. We do not sell financial products. We provide advice. We believe this allows us to better fulfill the fiduciary responsibility to act in your best interest.
For more information, please read “Advisor vs. Salesman” to learn how working with Sound Advice Financial is a better financial choice.
(Note: The fees discussed here are the fees paid as compensation to the financial advisor and not the fees and expenses contained in different funds, ETFs or programs.)