Investment Advisor Fees – What Kind of Payment Arrangement Can You Make With an Advisor?

One thing that many new investors are interested in knowing about is investment advisor fees. Some beginner investors even have the misconception that financial advisors provide free services! This is not the slightest bit true-in fact, some investment advisors charge a lot of money. Another misconception is that investment advisors put clients’ best interests before anything else. In actuality, most advisors put their own pockets first, and often do not make the best decisions for their client, but rather for themselves.

So, how can you know which one to trust? First, you need to learn about the different investment advisor fees, and what they entail. Many investors do not put much thought into any potential hidden costs that they may end up having to pay each time their advisor recommends a stock that results in profits. If you are not careful, you could end up unwittingly owing your advisor a whole lot of money!

3 types of fees – There are essentially three types of investment advisor fees.

One-time sales rewards or one-time upfront payment
An ongoing, annual service payment
Commissions from selling shares of stock

Fees based on asset percentages

Some advisors and planners charge a straight percentage of all of your assets on an annual basis. This can be either from ALL your assets, or just the ones that the advisor is helping you manage. These investment advisor fees are the most common type for an independent financial advisor or planner.

Fees based on hourly rates – In this type of arrangement, you will do most of the work yourself, and will pay your advisor for advice and information only when you need it.

Flat fees for a one-time plan

With this type of arrangement, you pay an upfront fee for a report and analysis of your financial situation. Included with the package is a quality recommendation for a variety of different actions.

Needless to say, this can be an excellent choice, since it will be in the advisor’s best interest to put your own needs before his or her own. If you are satisfied with the results, you will probably come back, and the advisor realizes this. The only down-side to these types of investment advisor fees is that even just one can be very expensive!

Warning – Unless you know exactly what you are doing and what you are going after, stay away from any advisor who promises you a “complete financial plan” option. These are usually very expensive-up to four or even five figures! Furthermore, this type of deal may not even include ongoing advice for your continuing needs.

Many experts feel that investment advisor fees based on commissions are probably most suitable for beginning or small-time investors. This especially seems to be the case for individuals who have smaller portfolios for which less active management is needed. In the long term, paying an occasional commission probably will not cost you too much money.

Before working with any investing advisor or financial planner, make sure you have at least some idea what you are doing and what your ultimate goals are. Make sure you understand all of your options and what they will require from both you and an investing advisor.