all about How To : The Truth About Finding and Working With a Financial Advisor

The Truth About Finding and Working With a Financial Advisor How, why, and when to work with a financial advisor is a question that comes up frequently from Money Girl readers and podcast listeners. For instance, Allison C. says:

“Aloha Laura! I am writing to you from the beautiful island of Maui! I am currently on my honeymoon with the most amazing man and I am so excited to start this new chapter in our lives together. I have been listening to your podcast over the past year and have learned so much!! I appreciate your quick tips and insight into the financial world as it is not easy to navigate.

I currently have a financial advisor and realized that I have no idea how they are making money and what fees they charge. Could you talk about important questions to talk about with your financial advisor before you decide who is best for you?”

Thanks for your question, Allison, and congrats on your marriage! I’ve done a few shows about finding the right advisor, but thought you might like to hear from an actual insider today.

So I interviewed Tom Meyer, who is the CEO of Meyer Capital Group located in Marlton, NJ. MCG is an independent fee-only investment management and financial planning firm dedicated to helping their clients build wealth through a consistent and disciplined process.

Before Tom took a leadership role in the company, he started out in 1982 working with clients and managing investment portfolios. The firm was founded in 1963 by his grandfather and they manage hundreds of millions of dollars for clients all over the U.S. and even in other countries.

[Listen to the interview using the audio player in the upper right sidebar of this page or on iTunes, SoundCloud, Stitcher, and Spotify]

I think you’ll enjoy our conversation and come away with a better understanding of what working with an advisor is like. We cover:

Do you have to be wealthy to work with an advisor—how much you need
Whether you should work with an advisor if you already have a retirement account
How your goals determine who you should work with
Balancing investing with paying down debt
How financial advisors get paid
What questions you must ask a potential advisor
Where to find and vet an advisor in the first place

How Do Financial Advisors Get Paid?

Keep reading for three ways financial advisors and investment brokers get paid for their advice.

Way #1: Commissions

When a commissioned broker recommends a certain investment product, it includes a "load" or fee that comes out of your account. Or sometimes the product company pays the broker directly for the sale.

Either way, commissions can create conflicts of interest for advisor because they have an incentive to recommend products that pay the most, even if they're not the best for your situation. This is why if you do use a commission-based financial advisor, be sure to hire one that is legally bound to put your interests first, (above their own) which is known as an investment fiduciary.

Way #2: Fee-Only

Fee-only registered investment advisors (RIAs) don’t sell products, don’t accept commissions, and they operate as fiduciaries. They're paid an hourly rate, a fixed annual retainer, or a percentage of the investment assets they manage for clients so there is no conflict of interest.

Fees may range between 1-3% of the total value of the investments managed. If you have a $100,000 portfolio, a 1% fee means that you pay $1,000 a year for the advisor's guidance. The downside is that you pay the fee even if the market or your portfolio is down. Check out feeonlynetwork.com to find a fee-only advisor where you live.

Way #3: Fee-Based

Fee-based advisors blend the commission-only and fee-only models. They may sell investment products for a commission, charge a fee calculated as a percentage of assets to manage your portfolio, or both. So this can open you up to the same conflicts of interest as a commission-only fee structure.

Make sure you understand how your advisor is paid by getting it clearly stated in writing. Also be sure to check the background of potential investment professional using FINRA's Broker Check.

The biggest detriment to a well-balanced and well-allocated portfolio is cocktail talk about who's getting the highest returns. We instill in our clients that investing is about your goals.

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all about How To

Rabu, 26 Oktober 2016

The Truth About Finding and Working With a Financial Advisor