Because of the recent scandal in wall streets, there are now so many investors that are paying attention to the person that is managing their money and the investment methodology that they follow. A lot of investors are taking the time in order to do their due-diligence and are starting to be more aware on choosing the best financial advisor. So it is important for you to know how you should select the best financial advisor. You also need to know how you should choose the best investment management company. You should take note on the factors that will help you choose the best financial advisor. This article will let you know all of those that will help you choose the best financial advisor that can manage your investments and money at the same time.
The first thing that you should do is to know if your financial advisor has a fiduciary responsibility.
You should know that only a small number of financial advisors are RIA or registered investment advisors. State and federal laws require that RIAS should be held to a standard of fiduciary. There are a lot of financial advisors who are known to be broker-dealers and are known to have a lower standard of diligence with their clients. One way for you to know if your financial advisor has a fiduciary responsibility is to know how he or she is compensated.
This article will provide you with the most usual compensation structures in the industry of finance.
Fee-Only Compensation – this will help you minimize the conflict of interests. This type of financial advisor will charge his or her clients directly for his or her ongoing management or advice. There will be no other financial reward that will be provided, indirectly or directly but other institutions. These financial advisors will only sell one thing, their knowledge. There are some financial advisors that will charge an hourly rate while others will charge an annual retainer or a flat fee. There are also some financial advisors that will charge an annual percentage depending on the assets that they will be managing for you. Find more info by clicking here navigationwealthmanagement.net.
Fee-Based Compensation – this is a popular type of compensation that is most of the time confused with free-only but you should know that they are totally different. These financial advisors will be earning some of their compensation from the fees that their client will pay them. But they can also receive compensation in the form of discounts or commissions from financial products that they are selling. Aside from that, they also do not need to inform their clients how their compensation is accrued.
This type of compensation will create a lot of possible conflicts of interest since the income of the financial advisor will be affected by the products that are selected by their clients. You can see more here.
Commissions – a financial advisor that will be compensated only through commissions will face so many conflict of interests. This type of financial advisor will not be paid unless the client will sell or buy a financial product. This type of financial advisor will be earning money for every transaction. That is why they will have a great incentive in encouraging transactions may not be in the interest of their client. Discover more info now : https://money.cnn.com/2016/04/11/investing/how-to-pick-financial-adviser/index.html.
