Are you curious how financial advisors get paid? Do they receive a salary from the company they work for, or do they earn commissions on the products they sell? In this post, we'll break down the different ways financial advisors are compensated, and we'll explore the pros and cons of each payment method. By understanding how advisors are paid, you can make more informed decisions about who to work with and what products to invest in.

How Does a Financial Advisor Get Paid

Most people are not aware of how financial advisors get paid. It is important to be informed so that you can choose the right type of advisor for you. There are five main ways that advisors get paid: commission only, hourly fee, flat fee, retainer fee, or asset-based fee.

Commission Only

Commission-based financial advisors make money by selling products, such as insurance policies and investment products. They may also earn commissions on the trades they make on your behalf. Fee-based advisors charge a percentage of the assets they manage for you. Commission-based advisors may be more likely to sell you products that may not be in your best interest, since they make more money when they sell products.

Hourly Fee

For many of us, the thought of working with a financial advisor conjures up images of stuffy suits and exorbitant fees. And while it's true some advisors do charge high fees, there is another option: hourly fees. Hourly fees are just what they sound like – you pay the advisor by the hour for their time. This can be a great option if you only need occasional advice or if you're on a tight budget. The downside is that hourly fees can add up quickly if you need a lot of help. But if you're careful with your finances, hourly fees can be a great way to get the advice you need without breaking the bank.

Flat-Fee

Flat fees are a one-time charge typically based on the services provided, such as creating a financial plan. Flat fees may be a good option if you need limited services and want to know exactly how much you will pay upfront. However, it's important to note that flat fees may not be the best option if you need ongoing financial advice, since you will have to pay a new fee each time you need service. Ultimately, the decision of whether or not to pay a flat fee for financial advice depends on your individual needs and budget.

Retainer Fee

Retainer fees are an annual or monthly fee that you pay for the advisor to be available to you as needed. Retainer fees offer you access to an advisor as needed but can be expensive if you do not use them often.

The type of fee that is right for you depends on your individual circumstances and needs. Be sure to ask any potential advisor how they are paid so that you can make an informed decision before hiring anyone.

Which Type of Fee is the Most Common Among Advisors?

There are a few different types of fees that advisors may charge, but the most common is the asset-based fee. This fee is based on a percentage of the assets under management, and it is usually charged as an annual rate. For example, if an advisor charges a 1% asset-based fee, then they would charge $1,000 for every $100,000 in assets under management. Many investors are comfortable with this type of fee, because it aligns the advisor's interests with the investor's goals. The advisor only gets paid when the value of the account goes up, so they have an incentive to make sure that happens.

However, asset-based fees can become expensive if an account grows large enough. For example, if an investor has $10 million under management, then the advisor would charge $100,000 per year in fees. Some investors prefer to pay a flat fee instead, which can save money if the account value is high. Others may opt for a commission-based fee structure, where the advisor only gets paid when trades are made.

How Do I Know if the Fee is 'Worth It'?

A good way to see if the fee you’re paying is the going rate, is to find out what the average is in your area. You can do this by contacting a few different financial advisors and asking them what they would charge for someone in your situation. Once you have a few numbers, you can compare them to see if you’re being charged more or less than average.

Another way to tell if the fee is fair, is by looking at how much money you have invested. Generally, the larger the investment, the lower the fee will be as a percentage of the total. This is because there are economies of scale involved – it costs the advisor less to manage a large portfolio than a small one.

Lastly, the complexity of your financial plan can impact the fee. If you have a simple investment plan, you shouldn’t be paying as much as someone with a more complicated financial life. Make sure to ask your advisor how they calculate their fees so you can be sure you’re not overpaying.

By taking these factors into account, you can get a good sense of whether or not the fee you’re paying is fair. While there is no magic number that will tell you if you’re being charged too much, using these guidelines should help you feel confident that you’re not overpaying for your financial advice.

How Can a Fiduciary Advisor Help Me?

As anyone who has ever dealt with financial matters knows, there is a lot of information out there - and it can be difficult to sort through it all. That's where a fiduciary advisor can come in handy. A fiduciary advisor is a professional who is legally obligated to act in your best interests. This means that they are required to provide you with unbiased advice, even if it goes against their own interests. While there are some financial advisors who are not legally required to act in your best interests, working with a fiduciary advisor can help to give you peace of mind that you're getting the best possible advice. In addition, a fiduciary advisor can also help to save you time and money by doing the research for you and sorting through the vast amount of information out there.

If you’re looking for someone to help you make financial decisions, working with a fiduciary advisor may be worth considering.

— Fiat Wealth Management

Do I Really Need an Advisor?

When it comes to making major life decisions, it can be helpful to have an advisor to provide guidance and support. Advisors can offer objective perspectives, help to identify potential risks and opportunities, and provide a sounding board for exploring different options. In addition, they can offer expert insights and advice based on their knowledge and experience. As a result, an advisor can be a valuable asset when making decisions about things like careers, investments, and other major life commitments. While it is ultimately up to the individual to make their own decisions, an advisor can help to make the process easier and more efficient.

Where Can I Find an Advisor Near Me?

If you're looking for a fiduciary advisor in the twin cities, you're in luck. There are plenty of fiduciary advisors near you, and all of them are ready and willing to help you grow your wealth. Not sure how to find a fiduciary advisor near you? Here are some tips:

1. Try searching online. There are many websites that can help you find fiduciary advisors in your area. Just enter your zip code into the search bar and see what comes up. You can also narrow your results by type of advisor, such as financial planner or investment manager.
2. Ask your friends and family if they know of any good fiduciary advisors near you. If they don't, they may know someone who does. Ask around until you find someone who can give you a personal recommendation.
3. Don't be afraid to contact a few fiduciary advisors near you and set up an initial consultation. This will give you a chance to meet with the advisor, ask questions, and get a feel for their services. And who knows, maybe one of them will be the perfect fit for you and your needs.

There are a few key things to understand about how financial advisors get paid, the most common types of fees, and what you should expect from an advisor. It's important to know if the fee is 'worth it' and if you are getting value for the services provided. A fiduciary advisor may be worth it for some people but not others. Ultimately, the decision comes down to what you are looking for in an advisor and what type of relationship you want to have.  If you're interested in learning more or finding out if we might be a good fit for you, please contact us today.

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