A financial advisor is proficient and skilled person who provides the services regarding financial management to the regulars. As per the literature of United State Financial Industry Regulatory Authority, abbreviated as FINRA, has named it with the designation of Financial Advisor or also as Financial Planner. Financial Industry Regulatory Authority has depicted the main groups of finance professionals who can be used as; Financial Accountant, Lawyers, Insurance planner agent, Broker, and Investment advisor.
A financial advisor basically provides the services to regulars or customers as per their requirement. It depends upon which type of license they have or which type of training they have. For an instant, an insurance advisor can sell and render services regarding life insurance or annuities according to the qualification and training, similarly a broker can provide services regarding financial investment.
Every financial advisor is commonly remunerated through fees for rendering of services, such as; commission, monthly charges or fee per advice. Following are the six ways through which Financial Advisors charge fees:
1: Percent Of Account Value Way
This is commonly used method through which a financial advisor or financial planner charge the remuneration or fee. When you hire the services of this type of financial advisor, it is pertinent to know about services, for example if they are providing the services of financial management as well as financial planning or only one of these, must keep in mind that you have to pay handsome remuneration, if they are rendering full services in this regard. If the financial advisors are fee-only, you can acquire them for fee charging in this way, as fee-only financial advisors use only low cost money in the account by minimizing the expense, which you have to pay.
2: Commission Based Way
It is the most usual way through which financial advisors or financial salesman charge fees. There are different categories of these advisors, such as; some can guide you regarding financial management and some are trained to selling of goods & services. As much you pay them, better will be the services by them. For example, if they make sales on the front end or meet the sale target then are entitled for the commission as per sales incentive policy.
3: Fees Structure & Commission-Based Way
There are many financial advisors who receive fees from different way as well as commissions. For this purpose, they adopt the fee-based way. I am sure; you are confused about the fee-based & fee-only ways. It has significant worth that should be understood by everyone.
Actually a fee-only advisor cannot receive any remuneration from any of the firm like mutual fund companies, brokerage companies, insurance firms or any else source rather they charge only from you. Whereas, fee-based advisor can charges fee as well as commissions from the mentioned above firms.
4: Hourly Wages Way
Hourly wages method is most commonly known internationally. This is the best way through financial advisors can be paid. There are number of advices, which the advisors recommends you and if you want to implement the same then you have to pay to financial advisor for the time consumed. For example, if a financial advisor recommends you about the investment in particular plan, then it becomes your responsibility to adopt changing according to advice.
5: A Flat Rate Way
If you want to complete some project, for which you are facing hurdles, then you have to hire the financial advisor up to the end of project. For this purpose, you have to pay financial planner through flat rate wages and have to implement changes periodically suggested by the Advisor.
6: Annual Or Semi-Annual Fee Way
If you have ongoing complex project, e.g complexity in small running business, problem in getting returns from investment or issue in long-term project, then you have to hire financial advisor to whom you have to pay yearly or half-yearly fee in order to retain advisor.
If you are going to hire a financial advisor, then you have to make it clear to advisor that what type of services, you want to purchase and what way you have to adopt to pay the remuneration. As financial advisor is acting as a mentor and you will have to act like a mentee for the suggested advices.
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