Frank Revy · How are financial planners compensated?

April 8th, 2009

There are three ways a financial planner can be compensated.

1. Commissions: The financial planner makes a commission off the buying and selling of your investment portfolio.

2. Fee-Based: The financial planner charges a fee for bringing your assets under management. The fee is usually charged quarterly.
For example: You have $100,000 that can be brought under management. The financial planner might propose charging you a 1% fee payable quarterly. This would total a $1,000 for the year at $250 per quarter.
The 1% is charged whether your portfolio gains or loses.
The financial planner is motivated to grow the portfolio presumably because he grows his fee simultaneously.

3. Fee-Only: The financial planner charges either hourly or through a retainer for their time and advice.
A fee-only financial planner operates similarly to an attorney or accountant.

Look for my next blog: Top 5 reasons why you should choose a Fee-Only Financial Planner.

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