No matter what stage you are at in life, a wealth management professional can be an invaluable asset to your financial well-being. While some believe these professionals are only available to the financially affluent this is not always the case. Furthermore, a talented wealth advisor can help make sense of your finances even if poor financial choices have been made in the past. With all of the benefits, it is hard to imagine not enlisting the help of a professional.

Benefits of Enlisting the Help of a Pro

Wealth management professionals come with a multitude of benefits for their clients’ financial security and well-being. Perhaps the most obvious advantage is having an advocate that is skilled and educated in complex financial matters. Financial matters and markets can often be confusing and complex topics for the average consumer to adequately understand. A skilled advisor will be able to make sense of these markets and put your money in the most beneficial position. Next, a skilled wealth professional will be able to craft several financial solutions for your particular situation. For example, not only will the advisor be well-versed in the market, but the advisor will also know how to prepare for retirement, taxes, leaving a legacy for future generations, and also for planning for unexpected life events. While their services and expertise may be invaluable, all wealth managers do require compensation for their diligence and work.

How are Wealth Managers Compensated?

Different wealth advisors operate on different compensation models. However, there are generally 3 ways in which a professional in this field is compensated: fee-based, fee-only, or commission-based. It is important to understand these three different models of compensation as each model may reveal underlying motives for a financial professional. Dependent upon your particular financial situation you may find it more comforting to work with a wealth manager that utilizes one compensation model (such as fee-only) as opposed to another (such as commission-based).

Commission-Based

A commission-based wealth manager receives payment for their services by charging a commission fee for each service provided to the client. Typically, each trade or financial product purchased will result in the wealth manager collecting a commission fee. Some services are typically performed for free by these types of wealth managers such as re-balancing a portfolio. However, many clients find this compensation model to be concerning. Some feel that wealth managers may knowingly advise products that may not be a good fit for the client simply to generate more commission revenue. However, others feel this is a legitimate revenue model and continue to work with these types of wealth professionals. After weighing the pros and cons it is important to base this decision upon your best interests.

Fee-Only

Fee-only wealth advisers operate based upon one flat fee. This fee could be based upon many factors such as how many financial projects your situation requires or the number of hours an advisor spends on managing your funds and meeting with you. More often than not, wealth advisors who operate under this commission model are more expensive compared to others. However, many people feel as though this revenue model inhibits faulty financial advice as it is not dependent upon what or how many financial products the client purchases. Because of this fact, many people are willing to spend a little more for the trust element and piece of mind.

Fee-Based

Fee-based wealth advisors work for a combination of fees from the client and commission. It is important to understand from the beginning, when choosing your wealth manager, as to what services are fee dependent and what products and services are commission-based. Without this integral information, it is nearly impossible to make an informed decision about selecting a qualified and trustworthy advisor.

All in all, wealth managers can be the key to your financial success. With competitive rates and industry knowledge, a wealth management professional is often a beneficial choice no matter how “late in the game.”

Paul Petersen