You may have wondered how your investment professional makes money for helping you make decisions about what to do with your money.
There are three methods of compensation:
1. Commission-based
Some investment professionals are paid a commission. They earn money when you buy a product or service from them.
2. Fee-based
Others provide fee-based services, so they’re paid for the time they spend with you, not the products they sell.
Some charge a flat fee for a certain service, such as $300 to create a retirement plan.
Others are paid based on the amount of money they manage. If an investment professional is managing $50,000 of your money and may charge 2% of accounts under management, you would pay $1,000 per year – either in a lump sum or spread out over several payments.
3. Fee plus commission
Some investment professionals charge a fee to meet with you, and they also charge a commission if you buy the products they recommend.
Ask how much it will cost
When you interview investment professionals, be sure to ask how they charge for their services. It’s important to be comfortable with what you'll be paying before you commit to using their services.