Ask an Advisor: How do we get paid?
Hi, I’m Deborah Williams. We’re with Puckett & Sturgill Financial Group, and Aaron Puckett is going to talk about our financial advisor series question. How do you get paid?
That’s a good question. You know, every client when they walk in the door it’s lingering in the back of their mind. They want to know how am I going to pay this person? How does that work?
One of the things that surprised me over the last 17 years of doing this, I know, probably the same with you, is how many people we talk to that maybe have been working with an advisor or have used some sort of financial products, and they had no idea, how that person was paid.
And sometimes the fees are high, and they had no idea still.
Yeah, I know. It’s surprising. I mean, I think our industry is trying to do a better job of making compensation more clear.
But every firm and every advisor, I think maybe has a different way of talking about compensation, and so it is confusing to people. I think it’s a great question to ask.
Right, it’s hard to compare apples to apples.
Yeah. So I guess the way I usually talk with people about it in that first meeting is I’ll explain, in our industry generally you’ll find that people are either being paid a commission and that’s where a product has compensation for the advisor already built into it. Or they might be being paid on some sort of fee basis. Maybe it’s an hourly fee or a flat fee, or sometimes they’re being paid a fee that’s based upon the assets under management where there’s some sort of percentage fee that’s built in.
That’s transparent, that they can see on their statement.
Yeah, and I mean, that’s a generalization, but I think that that captures the way most firms work. There isn’t really one type though that’s best for every single client situation. You know? As we do with our clients at our firm, we look at their situation first and then we can see which model makes the most sense.
Right, which is the best fit for their situation.
Yeah. So usually in a second or third meeting, we’re coming back to them and saying, “Okay, here’s what we think works best for you, here’s why,” and make sure that they understand and that it’s clear. At the end of the day, no matter what the fee arrangement or compensation model is, the most important thing is that the clients know this was built specific to their situation and that they’re clear and they understand the engagement.
Then also, we don’t charge for initial consultations or going through those first few meetings, which I think is important for clients to know
That’s right. Yeah, they’re complimentary and then we can define the scope of the engagement.
That’s right. That’s right.
Thanks for listening. Let us know if you have any other questions
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