Having someone help you manage your wealth is a good idea. These highly trained managers know how to read the market and where to invest to make your money work for you instead of the other way around. When it comes time to select an asset management service you have a few choices. Do you go with the commission-only service, the fee-only service, or a hybrid of the two?
With commission-only, you will pay a fee for every service that your broker sells you. These costs may also be associated with specific transactions that your agent completes on your behalf. Most of these brokers are working hard to help their clients and do try to meet their needs. However, as they are only paid for certain products and transactions, these are the areas they are going to sell their clients on the hardest.
In some cases, their working model may miss your needs entirely. Should you choose to go with this type of asset management service, check to make sure their method lines up with your needs.
A fee-only service does not receive a commission on services or transactions they sell to you. Instead, you pay a flat fee for their services. These brokers tend to listen more closely to their customers because they are not driven by sales. While the fees will vary from broker to broker, it tends to be based on a percentage of the assets under their control. Larger accounts are charged a higher fee. However, some companies may charge a flat retainer fee or an hourly rate either in addition to or instead of the percentage rate. Some do charge for certain tasks or transactions, but they are not commission based.
Hybrid of Fee Based and Commission Services
While not as popular as the straight commission-based or fee-only services, some asset management services offer a combination of the two. They may require a flat fee or percentage of the assets to manage your account. They also make a commission off of some of the products and services they sell.
Unlike traditional commission-based providers, these managers tend to think and act more like a fee-only provider. They work hard to make sure their offerings line up with what you need. However, they will push a particular service to meet those needs over another if they are receiving a commission off it. There are some benefits to going this route. The fee to retain is generally lower because the commissions made later offset it. You also learn about newer products that meet your needs earlier if they can earn money off it.
Choosing an asset management service to handle your wealth takes time and research. You should ask specific questions about products and services provided, in addition to fees they charge. Even after you select someone, you should continue to question how their service is benefiting you.