Why a Good Financial Professional Is Worth It
Finances aren’t easy. You probably know that already. From trying to put together a reasonable home budget to figuring out where to invest to deciding how much life insurance you really need, it takes a lot of knowledge to make the right choice in every situation.
A good financial professional has that knowledge. And they can help improve your decision-making and guide you toward the future you want. So…how are they compensated for this expertise? It’s quite straight-forward. Financial professionals make their money in one of four ways, which include:
- Direct fees. You pay your financial professional on a flat or hourly basis or you pay them a percentage of the assets they’re managing for you. Fees for asset management average around 1% a year, but may be higher or lower depending on the total worth of your assets and how active you want the management to be. This fee can be very worthwhile if your professional is good at choosing investments or if you don’t want to handle investing yourself.
- Commissions. Your financial professional makes a commission on selling you a financial product, such as insurance or mutual funds. Assuming it’s a product you want or need — which it will be if you’ve found a good financial professional — the commission model means there’s no direct cost to you for the advice you receive.
- Fees and Commissions. Many financial professionals earn money through a combination of fees they charge for advice or collect from asset management and commissions they make on providing financial products. A financial professional may also include performance fees in their fee schedule.
- Salary. Some professionals work on salary for a financial institution and charge no fees and earn no commissions, although they may earn bonuses for bringing in commissions.
A good financial professional will disclose how they make their money and will be happy to answer any questions you may have about the nature of their work. Feel free to ask! And know, when you have a good financial professional, they’re worth it.