Understanding Financial Advisor Fees

by Scott Sery on June 1, 2012

There is no doubt that accumulating money for retirement and other big expenses is important.  Unfortunately the accounts used often involve fees.  While there is often no way around paying for all financial advisor fees, there are ways a person can minimize the amount they will be paying out of pocket.  By choosing a method of investing they are most comfortable with, they will be able to get the most for their buck.

There are two basic ways a person can pay the fee for their investments.  They can pay up front in the form of commissions, or sales charges.  Or they can open a fee based account, and pay an ongoing advisor fee.  With either account they will still be required to pay internal expenses.


Paying the sales charges up front is often referred to as paying commissions.  Often as high as 5.75% of the amount coming in, many investors balk when they see them.   The rates are high, but the important thing for the investor to remember is that mutual funds that have a sales charge often perform better than those which do not.  For those who do not like the idea of paying a commission, there are other options.

Advisory Accounts

Some accounts will waive the sales charges, but then charge for ongoing advisory services.   Often as much as 1% per year (on top of those internal expenses), these account strive to significantly beat their commission counterparts.  By actively managing the funds within the account, the advisor is aiming to offset the fee he or she charges.  Unfortunately, it is often hit or miss if the advisor can make up for the fee they charge.

There are ways to get around both fees.  The investor could use what are called C shares.  This class of share does not have a front-end sales charge, but rather charges higher internal expenses.  Usually these shares are for accounts that will be in existence 5 years or less.  After that point the investor is not saving any money.  The other way to avoid the sales charge is to invest in no load funds.  These are mutual funds that have no active management so they are able to provide them to the investor at a much cheaper rate.  Many people find that these funds do not perform nearly as well as those with a load.

For those who are unable to meet the mutual fund break points there are ways to pay reduced fees.  But what it basically boils down to is choosing a method where you are most comfortable.  If paying the advisor fee to get more close attention to the account is what you desire, then it is worthwhile to pay the advisor fee.  In the end everyone needs to save up for retirement.  By talking with a trusted advisor and working out a plan that suits your needs and style, you can make sure you will have adequate retirement investments.

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Scott Sery

Scott Sery is a native to Billings, Montana. Within an hour in nearly any direction he can be found fishing, hunting, backpacking, caving, and rock or ice climbing. With an extensive knowledge of the finance and insurance world, Scott loves to write personal finance articles. When not talking money, he enjoys passing on his knowledge of the back country, or how to live sustainably. You can learn more about Scott on his website Sery Content Development
  • I’ve never used a financial advisor beyond the incompetent ones at my bank. I’d be tempted to use one that works off of commission though. That way I would feel more confident that he would be motivated to make me the most money possible. I guess if that commission percentage is too high, it becomes no longer worthwhile. Anyways, it’s something I’m going to have to think about soon since I’m back working again.

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