The Differences in Costs for Financial Advice

Today, the options available to an investor looking for financial advice can seem endless. With these options also comes an array of different cost models. From fee-based to hourly pay, you need to pay close attention to the fee model being used, so that you don’t end up with an unexpected and costly bill at the end of your appointment. We’ve outlined the most common fee models below.

Fee-only: You pay a percentage of the assets that your adviser is managing. This usually will be on a scale, meaning the more you are investing, the lower the percentage is.

By the hour: You are billed for each hour your adviser spends working on your investments, both in person and outside of meetings.

By engagement: Your adviser will provide a service for a fixed fee. For example, if you ask for a comprehensive financial plan, your adviser will give you a rate to complete that, no matter how many hours it takes.

Monthly retainer: You pay a monthly fee that covers a certain number of hours of work by your adviser. A retainer gives you the freedom to come to your adviser with any financial need without paying an additional fee.

Brokerage platform: When using a brokerage platform, you are paying for the transaction instead of the advice. A broker will give more general advice and may receive compensation for certain investments.

Which model you choose depends on what you are looking for in a financial adviser. If you are unsure, talk to a fiduciary to give you unbiased advice on how you should invest. Ultimately, the most important factor to understand is what services you are receiving for the cost.

Source: Wall Street Journal

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