From the course: Financial Planning and Wealth Management Fundamentals

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Financial planning: Compensation structure

Financial planning: Compensation structure

From the course: Financial Planning and Wealth Management Fundamentals

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Financial planning: Compensation structure

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Now, finally, compensation structure. Something that we're all curious about. So how do financial planners earn a living? Well, it's usually from the fees their clients pay for investment management. And in most cases, the total cost of financial planning services is broken down into two key components. The first is the account fee, which is usually an annual percentage of the total assets that the client has under management with the advisor. So for example, if a client has $200,000 under management and is paying a 1.25% fee, the total account fee that the client is gonna pay per year is $2,500. Now, because the value of a client's portfolio can fluctuate frequently, this account fee is usually prorated daily and charged either monthly or quarterly directly to the primary investment account. This annual fee amount is then gonna be split further between the advisor and the firm based on a predetermined ratio. So going back to this example where we calculated $2,500 annual fee, let's…

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