When You Do Better, We Do Better — How Financial Advisors are Paid.
Cary Stamp, CFP®, Jupiter, Florida-based financial advisor, addresses a question that you should ask any financial professional that you consider working with: How is your financial advisor paid?
In the case of Cary Stamp & Co., when you do better, we do better. Our transparent fee structure mutually aligns our interests with yours. Always make sure that your financial advisor’s best interests align with your best interests.
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Hi, I’m Cary Stamp with Cary Stamp & Company. I want to address a question that you should ask any financial professional that you consider doing business with, and that is, “how do you get paid?”
There’s really two types. There’s a traditional commission type financial adviser. This is somebody that sells you a financial product, receives a commission from some third party company for selling that product to you and afterwards, you often have little, if any engagement with that individual because they have no incentive to provide you with any ongoing servicing or support. They’ve already made their money and many times they’re in the wind shortly after the sale.
The second type of advisor is what I consider to be a more professional relationship, and that’s an adviser that accepts fees only from their clients, not from a third party investment firm. It costs you, in most cases, less than dealing with somebody that sells products for a commission. If you’re paying a good top quality financial adviser by paying them a fee, you’ve just aligned their interest with yours. It’s kind of the old adage, when you do better, we do better as financial advisers.
So what I would like you to give some thought to is when you’re talking to somebody that you’re considering hiring as an adviser, is how are they compensated? In our case, it’s simply a percentage of the investments that we hold for our clients. In most cases, it’s a very small percentage. If we have an engagement where there’s extensive planning on the front end and we need to do a significant amount of discovery, we’ll also charge a planning fee. If there are special assignments or special engagements that our clients would like us to do, we simply tell them exactly how much that would cost them for our services.
We’re professionals just like any other professionals. We have no problem telling you exactly how much we charge. I will tell you that’s not generally true with a lot of financial services firms. If you think you’re not paying them anything, you’re just missing it because they found a way to hide it into the costs that they’ve associated with your investments or with your brokerage accounts.
So give some thought and ask every financial adviser how they charge and see if it aligns with what’s in your best interest. We’re happy to answer any of those questions. I’m Cary Stamp with Cary Stamp & Company.