The cost of financial advice varies as does how financial advisors get paid. Factors may include a professional’s credentials, level of experience, scope of services, company for whom she or he works, complexity of a particular client’s situation, and net worth or investable asset level.
Some financial advisors charge fees by the hour, year or particular project. Some charge fees based on a percentage of portfolio value. Some charge commissions for products sold, and some charge a combination of fees and commissions.
The general consensus across the industry is that paying fees only and never commissions is preferable and helps ensure that your advisor will always puts your best interests before theirs.
All financial advisors should disclose how they get paid and what you will potentially pay as a client upfront; but, unfortunately, not all do. If you need to specifically ask for the information in your initial consultation with an advisor, you may want to steer clear of working with them.
How much it’s worth paying to relieve yourself of the stress of doing your own financial planning is up to you. For some people it could be no more than $200, for others it could be 2% of their portfolio value.
The bottom line is that if you are comfortable with a particular advisor, trust her (or him), and are clear on the advisor’s process, strategy and compensation structure, the fee structure may not matter as much.
Check out Jocelyn’s responses to four more frequently asked questions:
Should I buy gold?
What’s the best way to save for college?
Should I be worried about another stock market crash?
How do you invest your money?