Everyone wants to know how much something is going to cost them. Once you’ve talked to a financial advisor or financial professional, you want to know how much it will cost to retain their services. There are a few different ways things can be broken down.
Here’s a more in-depth look at the different ways to do it.
This is the easiest and most common of arrangements. There is a specific dollar amount that you are entrusting to your financial planner, and they take a percentage fee based on however much money you give them.
For example, say you have $100,000 and are ready to invest it. You would talk to a financial professional, agree on which type of strategies you want to pursue in your investments, and give them the money. They might charge something like 1 percent on that portfolio, and that is the extent of the transaction. This would cover all the research and time put into your account.
Commonly known as the old or traditional way of doing things, having your financial professional working on commission means you’re not charged anything unless there is a transaction. Say you purchase 100 shares of stock at $100 per share; the professional gets part of that. Keep in mind; there are different fees and costs that come with trading that will be passed along to you.
This is one of the most confusing aspects of financial planning because not many people understand it. A mutual fund is when a group of people pool their money into one lump sum and invest it collectively through a financial professional. The issue with mutual funds is there used to be about eight or nine different mutual fund types, but now there are only two.
A-shares will charge you a service fee that is around 3 to 5 percent to go along with an internal percent ratio. C-shares have a deferred service charge that is delayed for a year but has a higher internal percent ratio.
What Works Best For You?
Most people like the straightforwardness of a fee-based arrangement, but it requires you to have a hands-on approach to trading. Because things are at a transactional level, you would need to authorize trades before they happened to agree on the fee upfront. Commission-based transactions and mutual funds are usually more hands-off by comparison for the investor, but are no less effective, if you have the right person handling your finances.
That’s why J. Taylor Private Wealth is committed to showing you we are the best choice for your finances. Building a financial foundation that can withstand bull and bear markets is the best way to ensure your future is solid.