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There are basically three ways that a Financial Advisor receives compensation:

  1. Commission – This is a set dollar or percentage amount when purchasing or selling a specific investment. For example, purchasing a stock: for instance, 100 shares of Company A stock at $100/share may be $250 in commission (ie: 100 shares * $100 = $10,000 + $250 commission = $10,250 total). The stock is then held in the clients account without any fee. The commission is incurred again when the position is sold. In the same way, bonds and mutual funds can be purchased through a commission-based fee.
  2. Hourly – This is similar to a CPA or Attorney. The client asks a question or seeks advice and the Financial Advisor bills at an hourly rate. No products are sold nor on-going fees charged.
  3. Assets Under Management (AUM) – This fee is a percentage of AUM. In general, fees can start at 3% for a portfolio under $50,000 and decline to .5% for portfolios which exceed $3,000,000. For example, a Financial Advisor may charge 1.5% of a clients’ $250,000 portfolio (.015 * 250,000 = $3750 per year). This fee is “all inclusive.” There are no commissions on purchases or liquidations and no hourly fee is charged to the client. The account is managed as a whole – all stocks, bonds, mutual funds, REITs (real estate investment trusts), UITs (Unit Investment Trusts), etc. are all “wrapped” together.

In my practice, I allow the client to choose the compensation method with which they are most comfortable. I have the securities licenses to charge commissions (Series 7) as well as AUM and hourly (Series 65). I am licensed with FINRA (Series 7) and with the SEC (Series 65). It is more important to me to explain how fees are charged so that the client has a full understanding than it is for me to earn a certain commission on a particular product.

Additionally, I hold a CERTIFIED FINANCIAL PLANNER™ professional designation. This is important to me as it separates my advice as being more holistic in nature and holds me to a fiduciary standard. More information on this designation can be found at or here.

Regardless of the fee structure a client chooses, the most important part of working together is based on a trusted relationship. If this isn’t the case, then getting a “good deal” on fees really isn’t so good! I am committed to taking the time to work with each client, their goals, their specific situation in order to prepare and implement a personalized plan that works for them. We offer a complementary one-hour initial meeting in order to determine if there is a good fit to start working together.

To schedule your complementary meeting, please  call my office.

By Debbie Craig. CFP®, MBA, CRPS®

The scenarios provided above are hypothetical examples for illustrative purposed only. It is not intended to reflect the actual fee or commissions a client may be charged, but to illustrate how the fees and commission structure work. In a fee-based account, clients pay a quarterly fee, based on the level of assets in the account, for the services of a financial advisor as part of an advisory relationship. In deciding to pay a fee rather than commissions, clients should understand that the fee may be higher than a commission alternative during periods of lower trading. Advisory fees are in addition to the internal expenses charged by mutual funds, and other investment company securities. To the extent that the clients intend to hold these securities, the internal expenses should be included when evaluating the costs of a fee-based account. Clients should periodically re-evaluate whether the use of an asset-based fee continues to be appropriate in servicing their needs. These additional considerations, as well as the fee schedule, are listed more fully in the Client Agreement and Raymond James & Associates Wrap Fee Program Brochure & Brochure Supplement for Ambassador or the Raymond James & Associate’s Form ADV Part 2A & Brochures Supplement for Passport

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