Home Options

Investment Advisors

Post on: 16 Март, 2015 No Comment

How to Choose an Investment Advisor Like an Expert

Investment advisors are individuals or firms who provide advice on investments in stocks, bonds, mutual funds, and exchange traded funds. Some also manage securities portfolios. Having a good investment advisor can produce returns far superior to what you’d earn when left to your own devices, but it can be difficult to find the right one. Financial professionals have varied levels of experience and different backgrounds, biases, and skill sets. It is therefore imperative to assess the type of investment strategies you prefer and the type of person you would like to work with. When weighing your options, ensure you consider the following factors:

Advisor Fees

The advisor’s fee structure. Advisors earn money in three different ways: fee-only, fee-based, and commission-based.

Fee-only. Some advisors are called fee-only because they don’t receive commissions for any of the products they sell. Instead, these advisors charge a standard hourly fee, a flat fee, or a percentage of the assets fee. Sometimes this type of pay structure will also include an annual fee associated with the types of investments that you and your advisor agree on. In most cases, however, you will just pay a percentage of the assets managed for ongoing advice and support beyond the initial consultation.

Fee-based. This is a hybrid structure where advisors receive most of their income from the fees they charge their clients, but they can also receive payments for some of the investment products they sell from the companies that created them. With this arrangement, clients will have the broadest range of investment options available to them. Just be aware that the degree of those commissions varies greatly between advisors, and some firms will actually work in a manner closer to the category of fee-only than others.

Commission-only. Commission-based advisors might not charge clients for office visits, but they receive compensation from the companies whose products they sell. Use caution with these advisors because there may be a conflict of interest. After all, they are are only paid when you invest in suggestions that they make on stocks, loaded mutual funds, insurance, or annuity products.

The chart above displays the percentage breakdown of advisor fees across all Investment Advisors on Credio.