Maybe you have decided to take a big step and hire a financial consultant. Good move! However, there are various arrangements that financial planners use to be compensated. Understanding the choices can help you make a decision about the nature of their advice.
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When interviewing a financial consultant one of your first questions should encompass their investing philosophy and techniques. Of course you want to feel comfortable with how they hope to approach the design of your portfolio. If you have a certain strategy in mind, you also want to be sure they are well versed in that area of investing.
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Once you have this basic information you will want to move on to compensation. There are essentially three ways most financial consultants operate.
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The first is through commissions that are paid to them when they purchase a financial product in your behalf. Obviously this is where you want to understand what their plan is for you and how often they are will be buying and selling investments. Also you want to know WHY they are motivated to purchase one product versus another. The commission structure can work fine, but it pays to be firmly in control of the strategy or have a specific product you want the planner to purchase.
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The next method is to pay a flat fee. This could be for a one time consultation to set up a strategy for you or an ongoing series of fees if you would like maintenance of your portfolio.
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The third way is a growing trend with financial planners. It involves paying a percentage of your portfolios assets. Thus, if you have a bigger portfolio you would pay more. This might work particularly well for you if you have a smaller portfolio and it is a really good advisor.
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As you can see the way your financial planner is compensated can really make a difference in how you work together.
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For more details: www. thepersonalbanker. com