Is Your Financial Advisor’s Money Invested the Same Way as Yours?
If you have a financial advisor, make sure you ask them how they are investing their own money. Is it invested similarly to their clients? Many investment advisors steer clients towards commission-based products that they themselves wouldn’t touch!
What better way to know that your money is being invested as prudently as possible than to hear your wealth advisor say, “I’m personally invested in the same strategies as you, because I believe our methods lead to the greatest chance of success.” Sure, we all have different retirement plans and risk tolerances, and may hold different levels of stocks, bonds, etc., but we are of the belief that a wealth advisor should be invested alongside their clients using similar funds and strategies.
Below is a list of common products a financial advisor may receive commission on.
Some financial advisors can receive financial incentives in return for selling insurance products. For example, an advisor or agent can receive compensation from insurance companies when clients enroll in new insurance policies or other insurance products Financial advisors can receive up to 70% of the first year’s premium and an additional 3% to 5% per year the policy is active. While this can be a big win for the advisor, the same can’t be said for the client if they are sold an inappropriate product.
Some mutual funds pay distributions to financial advisors through 12b-1 and/or trailing fees. 12b-1 fees are a portion of the amount invested, typically 0.25% – 1%, that is allocated to the financial advisor as an incentive for the advisor to keep client assets invested in the mutual fund. The problem is that these mutual funds typically then have high management fees to cover the costs of the 12b-1 fees. The fees can eat into your returns, increasing the likelihood of these types of mutual funds underperforming their benchmark.
If you are unsure, ask your financial advisor if they are being paid 12b-1 or trailing fees, and if they are a full-time fiduciary. Morgan Rosel’s investment advisors are full-time fiduciaries and CERTIFIED FINANCIAL PLANNERSTM, and we are legally bound to always do what is in the best interest of our clients.
Most annuities typically pay commissions to the financial advisor or insurance agent that is selling the contract to a client. This commission can be either a set dollar amount, or a percentage that can range anywhere from 1% – 6% of the amount invested. And this isn’t just a one-time fee; it can be an annual, recurring fee! Annuities work best for clients that prefer fixed, consistent payments in retirement, and don’t mind sacrificing part of their investment returns for guaranteed payments. If your financial advisor is suggesting an annuity or you already own an annuity, please reach out to a Morgan Rosel financial advisor for a free annuity review. We’ll give you honest information on whether an annuity is right for you.
Do your research and discuss all options with your financial advisor to determine the optimal investing strategy for you, while also understanding how your advisor is paid. Make sure they are fiduciaries, which adds an extra layer of responsibility to the financial advisor as they are required by law to do what is in the best interest of their clients. If you are looking for a trusted partner that delivers confidence and clarity to your financial wellbeing, contact a Morgan Rosel fiduciary advisor today to get started.
This commentary reflects the personal opinions, viewpoints and analyses of the MorganRosel Wealth Management, LLC (“MRWM”) employees and guests providing such comments, and should not be regarded as a description of advisory services provided by MRWM or performance returns of any MRWM Investments client. The views reflected in the commentary are subject to change at any time without notice. Nothing on this website constitutes investment advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. MRWM manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Investments in securities involve the risk of loss. Past performance is no guarantee of future results. MRWM may recommend the services of a third-party attorney, accountant, tax professional, insurance agent, or other specialist to clients. MRWM is not compensated for these referrals.