Is the professional help from a financial advisor worth the money you pay for their services? In this video, Financial Educator Jason Thomas, CFP® explains how financial advisors are paid and what questions to ask to determine if you’re getting value for money.
Many individuals want to know if it is worth it for them to hire a financial advisor. One of the first things that you would need to know in order to come to a conclusion about that topic is how your advisor is getting paid – and there are a few different ways that that can happen.
Some advisors work for a brokerage firm which means they receive a commission for the sale of products. Now sometimes that’s easy to understand and is a separate line item on a statement. And sometimes it can be a little difficult to see how the advisor is getting compensated because it might be built into a particular type of product.
There are other financial advisors that work for registered investment advisory firms that receive a fee for their services. Now, this fee can be per plan or per assets under management or an hourly or retainer rate. But the bottom line is that you are paying the firm directly. They are not getting compensated by the sale of financial products.
It is possible for advisors to be registered in both of these ways at the same time, to further confuse matters.
You should ask any advisor who you are considering working with how they are compensated on an ongoing basis as well as on any specific transactions of those are applicable. As an example, Pure Financial Advisors is a fee-only registered investment advisory firm, which again means that we do not receive commissions from the sale of any financial products.
Once you understand what it is that you are paying and how that is determined, then you can make a judgment on your own of whether you think you’re getting appropriate value for that cost.
Now, as with any other profession, there are people that are providing high levels of services and are really good at what they do, people that aren’t so much, and every grey area in between. So if you’re meeting with an advisor that simply markets a product and never contacts you again, or only does so when they have something additional to offer, you’re probably not getting a lot of value for what you’re paying.
However, if you’re dealing with someone that is a CERTIFIED FINANCIAL PLANNER™, at an institution that is feet only, that has a fiduciary responsibility to you and is engaged in comprehensive financial planning – which includes a number of different areas of your financial life, as well as how they affect one another – then you might find that that person is extremely valuable, and any interaction in one of those areas because it easily be worth the cost that you are paying.
The best way to find out what your situation would be is to interview an advisor that you are considering working with, having an initial consultation, and asking them what services are provided? How often do you meet? What levels of experience, education, and expertise that they have? And what the costs are and how they are calculated?
If you’d like a free assessment with Pure Financial Advisors, please contact us at PureFinancial.com. Thanks and have a great day.