Does your financial advisor make more money the more trades they make? Is your financial advisor’s payment structure working in your best interest? It’s important to understand the differences when choosing a financial advisor.
Fee-Based vs. Commission-Based Financial Advisors: What You Need to Know
When managing your finances, working with a financial advisor can provide valuable guidance and support. However, it is important to understand the difference between fee-based and commission-based financial advisors.
Fee-Based vs. Commission-Based Advisors
Fee-based financial advisors charge a fee based on a percentage of assets under management or a flat fee for their services. This fee is typically disclosed upfront, and the advisor has a fiduciary duty to act in the best interest of their clients. The fee-based model is considered more transparent and typically avoids any potential conflicts of interest.
Commission-based financial advisors, on the other hand, earn a commission for selling financial products like mutual funds and annuities. The commission can vary based on the financial product and create potential conflicts of interest as the advisor is incentivized to sell certain financial products over others.
Benefits of Working with a Fee-Based Advisor
No Conflicts of Interest
With a fee-based advisor, there are no potential conflicts of interest. Advisors are paid to provide advice and recommendations that align with their clients’ financial goals, not to sell a particular financial product.
Transparent Fees
Fee-based advisors are upfront about their fees, providing transparency for clients. You know exactly what you are paying for and what services you can expect.
Customized Advice
Fee-based advisors tailor their advice to each client’s individual needs and preferences. They work with their clients to develop a customized financial plan and investment strategy that aligns with their clients’ goals.
Long-Term Relationships
Fee-based advisors often work with clients over the long term, providing ongoing advice and support. This allows clients to establish long-term relationships with their advisors and build trust and confidence in their financial plans.
Aligns with Your Interests
The fee-based model aligns with your best interests because the advisor is incentivized to help you achieve your financial objectives. This can provide peace of mind and a higher level of trust in your financial advisor.
We have seen the benefits of a fee-based model at SBS Retirement Consultants. We value ongoing, growing relationships with our clients, and a fee-based model allows us to prioritize those relationships and always be on the same team.
