How do investment advisors get paid?

Question

I hear that it's either a 1-2 percent annual fee split into 4 quarters based on current value of portfolio. Then I hear, it's hourly? And if it's hourly how many hours do advisers usually get in with their client per month? What's the best way to get paid that's in for the best interest of both adviser and client.

Answer 1

In addition, you can have an advisor make recommendations and place your trades for commission. In general, in my experience, annual fees are a better deal once accounts reach about $200,000, and commissions are a better deal for smaller accounts. But there are lots of variables to consider. If you are trading frequently, fees may be better.

Answer 2

They usually charge both ways.  If you want continuous management of your funds its a percentage of those funds in the account.  If you just want one-time or occasional advice, and manage your own funds and carry out the advice on your own, you would pay by the hour.  On average they charge couple hundred an hour.

Answer 3

There are many different ways that they can get paid.  Always ask you advisor how he makes his money, as each one is different.

Some do the annual fee, others charge by the hour (the rate and number of hours vary greatly depending on the clients' needs).  A very common form of compensation is investment commission, either on stock trades, or through sales charges in mutual funds.  Some advisors use a mix of these, so it is important to get this information before you agree to work with your advisor.

I hope that helps.