“How does a financial advisor work?” It’s such a simple question with no simple answer.
That’s because throughout the industry, advisor compensation varies.
And without knowing a financial advisor’s compensation model, it’s impossible to know how they benefit you and whether you want to work with them.
Some compensation models can have an impact on your overall return. Some advisors are “fee-only.” Some advisors are “fee-based.”
And what kinds of fees are there? They cover an entire range. There are:
For this relationship to work, you have to be comfortable and clear. Trusting your advisor is key. Your advisor helps you make critical financial decisions impacting important areas of your life. For this reason, it’s important that you feel fully comfortable with the cost of your advisor’s services, and be clear about how you are being charged.
Does your advisor earn commissions? What about a sales load when certain products are purchased? Are there trails in the mutual funds you are invested in?
What are the internal expenses of the funds you hold?
What if your advisor not commissioned, but fee-only? This changes the questions about the relationship. I’m a fee-only financial advisor, so I don’t receive compensation by recommending certain investments over others.
I’m also not associated with any broker dealer or firms that offer proprietary funds.
Nor do I accept commissions or compensation from sales loads.
It’s also important to note that I’m considered “independent.” That means I’m not required to sell the products of a particular firm or those favored by an employer.
This makes me a fiduciary, which comes with certain responsibilities. As you probably know, a fiduciary is someone who manages assets on behalf of another person with good faith and trust.
It requires abiding by a fiduciary duty, which is an ethical obligation to act solely in the best interest of the client.
Is there any downside to working with a fee-only financial advisor?
One downside is that we don’t sell insurance products, which are typically commission-based.
That said, I firmly believe insurance is part of a comprehensive plan. That’s why I maintain relationships with a handful of insurance firms that work exclusively with fee-only advisors. They recommend suitable insurance products, provide you a quote, and ultimately write the policy.
It’s important to note that fee-only advisors like mw do not get compensated for engaging in this process.
At the end of the day, my incentive is to deliver advice that’s in your best interest. Period.
That’s how I make my living, and it’s what keeps my clients coming back.
If you’d like to know more about working with SJ Boyle Wealth Management, feel free to visit our website or ask us a question.
Sally J Boyle
Sally Boyle is committed to being high-net worthy. A certified financial planner, she believes the single most important part of any wealth planning process is her conversation with you.