Financial help comes in many flavors, whether your advisor calls himself a broker, financial planner, advisor or something else. Some distinctions are purely marketing but there are important differences to note.
Brokers, financial advisors and financial planners are largely the same thing and can offer similar advice as your retirement manager. Individuals vary and may offer additional add-ons such as tax planning, but the easiest way to understand financial advisor fees is to examine how they get paid. They can be paid a fee for managing your money as well as commissions whenever you buy one of their products or make a trade. Their advice may be spot on, but this compensation structure can also create strong conflicts of interest. Whether it’s your local advisor you’ve been with for years or a broker at a large firm, they’re likely compensated the same way. When choosing the right retirement money manager it's important to know the key differences and similarities between how they earn money management fees.
Investment advisors provide personalized portfolio services to private clients and institutions. They usually operate on a fee-only or fee-based schedule, which reduces conflicts of interest. You pay a flat rate based on the amount of money you invest with them. They generally don’t sell you products or earn commissions on trades.
Hedge funds are generally limited to very high net worth investors and operate as pooled, professionally managed investment vehicles that often use complicated strategies. They typically have a high account minimum (which can be upwards of $1 million) and lock up your funds for a minimum period of time (can be as long as 7 or more years). For most private investors who aren’t capable of locking up millions of dollars (you can always lose), hedge funds aren’t an option. The fee structure in hedge funds can favor the managers as they may get 1-2% in annual management fees as wells as 10-20% or more of the profits.
Takeaway: A lot of differences in investment money management fees are more marketing puffery than how they actually manage your money. Take a look at how managers get paid, and financial advisor fees, to see where their interests are.
*Fisher Investments’ (FI) clients will incur fees in addition to the management fee paid to FI, as stated above. Such fees can include brokerage commissions, other custodian fees and expenses for investing in exchange-traded funds. FI does not earn such fees.