Is Your Advisor's Fee Structure Costing You Your Retirement?

There are five different ways a financial advisor charges fees for retirement planning. Each different fee structure can have a significant impact on your retirement plan. That’s why it’s essential to understand the differences between the fee types so you understand where your money goes.

In this article, we’ll dig deeper into each of the fee types as well as explore what you should look for when selecting an advisor.

What Are Performance-based Fees?

In a performance-based fee structure, the advisor charges additional fees when a benchmark is outperformed. While the advisor doesn’t lose anything if a fund doesn’t perform, they have a lot to gain if it does well. This structure isn’t used as often anymore because it encourages high-risk behavior with client money. 

How Do Hourly Charges Work?

Hourly charges are very straightforward. The advisor bills a flat rate per hour, no matter how much gets done or what investments earn in that time. It’s important to understand that an advisor doesn’t have any responsibility after their hours are done.

In specific scenarios, this might work well for your goals, such as if you’re looking for consultant work or an RFP. However, on an ongoing plan management basis, we recommend working with an advisor who uses a percentage of assets managed cost structure.

What’s a Fixed Fee Cost Structure?

In a fixed fee structure, individuals pay a predetermined amount for a service, such as a retirement fund set-up or a retirement plan creation. Similar to the hourly fee structure, in this method, the advisor is no longer responsible once their project is complete.

How Do Commissions Work?

A commission-based fee structure is completely transactional. For each trade or purchase, the advisor makes a commission. Here, advisors are just paid to push an order through. They’re not responsible to discuss the decision or if it’s best for you.

Why is Percentage of Assets Under Management the Best Structure?

At Anew Advisors, we use a percentage of assets under management cost structure. This means that a client’s cost is based on the total amount of assets they have with us. With this cost structure, we manage your accounts and provide advice on an ongoing basis. We ensure we’re doing what’s best for you at all times, taking discretion over assets as a fiduciary.

Find Out Your Advisor’s Fee Structure

At Anew Advisors, we’re transparent about your costs. What you see is what you pay and there are never any surprises. With most other firms, you’ll need to search their website or ask, and we encourage you to do so. It’s important to understand exactly how you’ll be charged before engaging with an advisor.

If you’re interested in learning more about how Anew Advisors can help you work toward your retirement goals, schedule time with our team of experts.

The information contained in this material is intended to provide general information about Anew Advisors and its services. It is not intended to offer investment or tax advice. Investment advice will only be given after a client engages our services by executing the appropriate investment services agreement. Please consult a tax professional for tax advice. Information regarding investment products and services is provided solely to read about our investment philosophy and our strategies. You should not rely on any information provided on our website in making investment decisions.