Advisors

Main Menu

313 Blackstone Avenue
Ithaca, New York 14850
607-255-4405

Whose Side is He On?

Perhaps the financial advice you are getting is free. It may be from reading Money, Smart Money or Kiplinger’s Personal Finance. It may be from watching television shows, attending free seminars or talking to someone you know who is experienced at investing. However, if you are led astray by the advice you get without paying, "free" could turn out to be very expensive.

Although it’s an uncomfortable area for many people, compensation is one of the most basic things you must understand when you enter into any professional relationship that involves your money. Whether you’re starting a new relationship or reevaluating a continuing one, you could have more options than you realize. And the choice you make could matter more than you realize.

There are four basic forms of compensation, with many hybrid combinations. If you understand the basics, you’ll be able to recognize them in hybrid plans.

First, your money manager can be paid on commissions generated when you make transactions. One example is the stockbroker, who earns a commission every time you buy or sell a stock or a bond or some other product through the broker.

	Second, in a "fee-only" arrangement, you may pay the advisor strictly by the hour. Here, you are buying only the advisor’s experience and expertise – and of course his or her time.
	Third, your money manager may be paid according to the growth or shrinkage of your assets. For example, some advisors’ fees are a percentage of your portfolio, say one-quarter of 1 percent every calendar quarter. If your portfolio appreciates, so does your advisor’s fee (and vice versa).
	Fourth (a variation on the third we just mentioned), your money manager could be on an incentive program. Incentive programs are legal only for accredited investors, those with assets of $1.5 million or more. One common arrangement is for a money manager to get a straight percentage of any profits on investments, say 10 to 20 percent. A variation is a higher-than-normal advisory fee that only gets in years when the client makes at least some agreed-upon return, say 8 percent.

When Retirement Planning Associates presents, we do so with a completely unbiased agenda. We exist totally and solely to provide you the organization and employee with the best ways of planning, saving and investing for retirement. We're on YOUR side!