How Are Financial Planners Paid? Which Type Of Financial Advisor Is Perfect For Me?



There are many different types of financial planners. Not only are financial advisors paid differently, but also the services they offer vary quite a bit also. Here is a quick summary of the different types of financial advisors and how they can help you.

Commission Based Brokers: These financial advisors focus on investments and generally sell a product for a commission. Standard brokers are Edward Jones and Ameriprise. Whenever you work with a commissioned broker you could expect to receive advice on asset allocation and investing your portfolio. Your broker may call you periodically to recommend brand-new investments for your portfolio. In exchange, the advisor would invest your funds and monitor your portfolio on a periodic basis (typically quarterly, but could be more frequent).

Investment Managers: Investment managers or investment advisors manage your investments for you, usually for a portion of the assets managed. The typical payment can vary from 0.5% up to 2.5% of the assets under management. While some investment managers can also provide financial planning, the focus is on investments.

Fee Only Financial Planners: With a particular fee only financial planner, you'll pay out an hourly fee for the recommendation you receive. Fee only financial planners provide much more than just investment advice. With a fee only financial planner you will normally get a complete financial plan, including budgeting, investment recommendation, retirement planning, insurance reviews, tax planning and estate planning.

Everyone has different requirements, so the kind of advisor that is right for you would depend on your financial needs and goals. Do you just need someone to propose a suitable mutual fund, or do you want hands on investment management, or do you want a comprehensive financial plan to help you make sure you're on track to retire?

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