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How financial planners get paid
When selecting a financial planner you should be aware of how he/she is getting paid. There are various compensation structures for financial advisers, but the following four are what you are most likely to see.
These planners get paid commission on each product you buy. If you buy a stock, a mutual fund, get a loan, or anything else, they get a commission. Examples of these types of commissions:
- One-time sales rewards, such as mutual fund “loads,” or the upfront payments that come from selling cash-value life insurance or annuities
- Ongoing, annual service payments, such as annual commissions paid to insurance agents upon policy renewal
- Commissions paid for transactions, such as buying and selling shares of stock
Fee-based on percentage of assets
Some financial planners charge a straight percentage of your total assets on an annual basis. Expect to pay at least 1%, but some advisors may charge a lot more. This is the most common arrangement for paying an independent financial planner and has been increasing in popularity.
Flat fee for a one-time financial plan
You will likely pay a large upfront fee. Expect it to be many thousands of dollars. They will often provide a very detailed write up about your financial details including recommendations for action.
Fee-based on an hourly rate
This arrangement is similar to that of a personal lawyer. They get paid for each billable hour they work. The more work you do for yourself, the more you save. The more you pass off to them, the more it costs.
“Fee-only” financial planners
Be aware that “fee-only” is not the same as “fee-based”. As the name suggests a “fee only” financial advisor only gets compensated by the fee. Whereas a “fee-based” advisor may also receive other forms of commissions.
Financial Planner and other advisors credentials
As you browse and compare financial planners you will notice that many of them have special designations attached to their names. The designations should aid your search and should not be your sole deciding factor when choosing a financial planner.
- CFP – Certified Financial Planner – awarded by the Certified Financial Planner Board of Standards, Inc.
- CFA – Chartered Financial Analyst – awarded by the Institute of Chartered Financial analysts
- CPA – Certified Public Accountant
- ChFC – Chartered Financial Consultant – awarded by the American College of Bryn Mar, Pennsylvania
- MBA – Master of Business Administration
- RIA – Registered Investment Adviser
- RR – Registered Representative
- AEP – Accredited Estate Planner – awarded by the National Association of Estate Planners and Councils
- AAMS – Accredited Asset Management Specialist – awarded by College for Financial Planning
- CFM – Certified Financial Manager
- CIC – Chartered Investment Counselor – awarded by the Investment Advisor Association
- CIMA – Certified Investment Management Analyst
- CLU – Chartered Life Underwriter
- CPCU – Chartered Property Casualty Underwriter
- PFS – Personal Finance Specialist – awarded by the American Institue of Certified Public Accountants
- CMA – Certified Management Accountant
- CMC – Certified Management Consultant
- CMT – Chartered Market Technician
- REBC – Registered Employee Benefits Consultant
- RHU – Registered Health Underwriter
- AIFA – Accredited Investment Fiduciary Analyst – awarded by Center for Fiduciary Studies
- AWMA – Accredited Wealth Management Advisor – awarded by College for Financial Planning
- CAIA – Chartered Alternative Investment Analyst – awarded by Chartered Alternative Investment Analyst Association
- CAP – Chartered Advisor in Philanthropy awarded by The American College
- CASL – Chatered Advisor for Senior Living – awarded by The American College
- CDFA – Certified Divorce Financial Analyst – awarded by The Institute for Divorce Financial Analysts
- CEP – Certified Equity Professional – awarded by Certified Equity Professional Institue
- CFE – Certified Financial Educator – awarded by Heartland Institue of Financial Education
- CFS – Certified Fund Specialist – awarded by The Institute of Business & Finance
- CIMA – Certified Investment Management Analyst – or Certified Investment Consultant (CIMC) awarded by Investment Management Consultants Association
- CLTC -Certified in Long-Term Care -awarded by the CLTC Board of Standards, Inc.
- ChFEBC – Chartered Federal Employee Benefits Consultant- awarded by the Federal Employee Benefit Specialist, Inc.
- CLU – Chartered Life Underwriter – awarded by The American College
- CMFC – Chartered Mutual Fund Counselor – awarded by the College for Financial Planning
- CPWA – Chartered Private Wealth Advisor – awarded by the Investment Management Consultant Association
- CRC – Certified Retirement Counselor – awarded by the International Foundation for Retirement Education
- CRPS – Chartered Retirement Plans Specialist – awarded by the College for Financial Planning
- CTFA – Certified Trust and financial Advisor – awarded by the Institue of Certified Bankers
- CWS – Certified Wealth Strategist – awarded by Cannon Financial Institute, Inc.
- FIC – Fraternal Insurance Counselor – awarded by the Fraternal Field Manager’s Association
- FICF – Fraternal Insurance Counselor Fellow – awarded by the Fraternal Field Manager’s Association
- FSA - Fellow of the Societ of Actuaries – awarded by the Society of Actuaries
- FSS – Financial Services Specialist – awarded by The American College
- LUTCF – Life Underwriter Training Council Fellow - awarded by The American College
- PRP – Plansponsor Retirement Professional - awarded by The PLANSPONSOR Institute
- REBC – Registered Employee Benefits Consultant – awarded by The American College
- RFC – Registered Financial Consultant - awarded by The International Association of Registered Financial Consultants
- RHU – Registered Health Underwriter – awarded by The American College
- RP – Registered Paraplanner - awarded by the College for Financial Planning
- CRPC – Chartered Retirement Planning Counselor – awarded by the College for Financial Planning
- CFCA – Christian Financial Consultant and Advisor awarded by the National Association of Christian Financial Consultants, Inc.
- CSA – Certified Senior Advisor award by the Society for Certified Senior Advisors, Inc.
- Kingdom Advisor – awarded by the Kingdom Advisors (Ron Blue’s organization)
10 Questions to ask your financial advisor
Use these as a guide for finding the best planner for your particular situation.
- What are your qualifications and background in financial planning?
- What services do you provide?
- How does your faith affect your investment philosophy/strategy and recommendations for clients?
- How are you paid?
- How much do you typically charge?
- What products do/don’t you put clients into?
- What is your average portfolio size and life stage?
- What resources do you have to address issues outside your area of expertise?
- How do you communicate with clients? How often?
- Will I work with anyone else in your office?
Get added to the Christian Financial advisor directory!
Are you a Christian Financial Planner? Would you like to be added to the directory? Find out how here.