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Rule #1 - Do not lose money! Rule #2 - Never forget rule number 1! ( by: Warren Buffet )For comments or questions please email: : admin@equityresearch.com |
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Financial Advisor PayFinancial advisors get paid through commission, financial planning, and wealth management. It depends on the firm, the client, and the advisors choice.Trading CommissionsSome advisors make money off of commissions. They get money when you buy into a loaded fund. They get money from account maintenance fees. They also get money when buying or selling your stock. Many firms are guilty of getting you to trade too often to generate fees and selling you products that have high margins for them and low returns for you. The commission approach is faulty because the advisor continually has a conflict of interest over the recommendations shown to you.I have seen front loaded funds that charge 15% and back end funds that charge 5% or more. Some brokers charge a hundred dollars per trade and make recommendations constantly to trade. You must be careful. Financial PlanningA financial planner may get paid a fee to look at your entire financial situation and make recommendations. The fee may range from $500.00 on up. Some firms claim to do the same thing for free, but really it is not the same. A good financial planner will put a lot of thought into their training and into your recommendations. How hard would you work on a financial plan for free or like a couple hundred bucks? You have to pay to get a good one.Some financial planners recommend certain funds. Be careful because a lot of these guys aren't true financial planners. What they really are doing is getting you in the door to sell you a high priced mutual fund or to push some shoddy products. Ask your financial planner if they get a commission off of the investments they recommend. If they do, you need to steer clear. Wealth ManagementThis approach is to take a fee for managing the entire portfolio. The fee is around 1-2%, but can go as high as 10% or as low as .25%. Some managers that think they are really good may charge more. However, most firms will charge around 1% of the assets per year.The good thing about this approach is that the manager has the incentive to make the account grow. The more the account grows the more you make and the more they make. There is not a reason to push poor performing products. For most wealthy individuals, this approach is taken and financial planners are also used in conjunction. If you have serious money, it pays to get good advice because the difference in returns will be huge. Final TipMany firms have a choice. They usually put poor clients on a commission structure so they can get more money. Then, they put wealthier clients into wealth management. My main concern is how are the average guys going to do well when they get put into the wrong things at the start? |
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