What is A Fee-Based Financial Advisor?

When you work with a financial advisor, you will generally pay them through an advisory fee, often based on a percentage of your assets, flat fees, or hourly fees. Fee-only advisors make money only from these advisory fees. However, fee-based financial advisors earn money through other ways in addition to the standard advisory fee. Make sure you know the fees you will pay and any potential conflicts of interest your advisor may have.

How Fee-Based Financial Advisors Work?

When you work with a fee-based financial advisor, you agree to pay a fee in exchange for the services they provided, which is an annual fee corresponding to the assets they manage. And this will be a percentage of your assets under management, and some charge a flat or hourly rate. You may also pay a performance-based fee, a predetermined fee you will pay if your investments are performing very well.

Methods of Payment For Fee-Based Advisors

Some of the most common additional income sources for fee-based advisors include the following:
As a broker-dealer - Advisors can earn brokerage fees for performing trading transactions or selling securities that the firm works, in which case the firm will gain money on the markup.
As an insurance agent - Advisors may also sell insurance policies or insurance products and earn a commission from the insurance company.
From mutual fund companies - Some advisors receive commissions from the mutual fund company for investing your money in that fund.

Fee-only advisors earn money exclusively through their client's fees and have fewer conflicts of interest than fee-based financial advisors. It is always advisable to make sure you know how your advisor earns money and whether they have any potential conflict of interest. If they do, find out how they attempt to alleviate them.

Financial Advisor Tips

With the investment process getting complicated every day, it is necessary to obtain financial advice. Whether you choose a fee-based or fee-only financial advisor for your financial advice needs, both kinds of financial advisors will ultimately help you achieve your goals. However, with everything from free schedules to certifications to consider, finding a financial advisor is not that easy.

When in search of such here in California, let DocuPrep Xpress help you with our world-class financial assistance. We have fully vetted our advisors, and they are always available to make a better choice for your specific needs.

For more information, give us a call now!