Posted on Tuesday, June 21, 2011
Financial Planners are paid based on a variety of compensation models;
• An hourly rate
• A flat fee to complete a specified project
• A quarterly or annual retainer fee
• A fee charged as a percentage of assets that they manage on your behalf (Typically anywhere from 2.0% per year to .50% per year. The more assets you have, the lower the fee usually is. Be wary of an adviser who charges more than 2%) If advisers take a percentage of assets as a fee, remember that they may be inclined to advise you to avoid moves that may reduce those assets, including charitable giving or buying a new house.
• Commissions paid to them from financial or insurance products you buy through them
• A combination of fees and commission
• You can get free or lower-cost financial advice through discount brokers like Charles Schwab – depends on what you need
Ask advisers to Ask about conflicts of interest - spell out who else stands to gain from your relationship -- such as affiliated broker-dealers and insurance agencies.
Ask exactly how much the adviser, the adviser's firm and all those other parties will earn from your business - the total compensation picture for managing your portfolio.