Quote:
Originally Posted by Boomer
I have never bought a mutual fund through an advisor. (I buy them but without an advisor in the middle.)
I know that financial advisors often get paid a 1% annual fee of assets under management, which may vary to a lesser percentage on AUM over a certain amount. This part of advisory fees is clear to me…..
But here’s my question: On top of that fee for AUM, do financial advisors also get paid by the mutual funds they sell? Loads seem obvious to me, but what about those other costs and fees that show up inside mutual funds? Does the advisor get a piece of that action, too?
(I tried to learn about this on the FINRA site which has a section that is supposed to help, but I did not get very far.)
If the advisor is being paid by the funds in addition to being paid by the client, should the advisor report that amount to the client to give a clearer picture of the client’s cost of doing business?
I hope someone knowledgeable here will take pity on me and give me the Cliffs Notes answer to my confusion on this. (So far, no advisor for me, but I am thinking, “What if?”)
In other words, in the world of financial advisors, is there icing on that cake that is the fee quoted for AUM? And, if so, where is it in the mutual funds and/or ETFs?
Boomer
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OP:
‘Financial advisor’ is an ambiguous (generic) term so you are getting a variety of comments that may not answer you question. You said that you read the FINRA website. You may have read this FINRA page about advisors:
Investment Advisers | FINRA.org
If you are wanting to find an advisor with no undisclosed agenda to upsell you investments, you might consider a ‘fee-only’ financial planner (e.g., fee-only Certified Financial Planner) who charges customers for their time or a financial planner at a larger organization such as Fidelity (office in Lake Sumter Landing or remote) and Vanguard (remote). If you have enough investments for someone to manage, you might consider a regulated Trust Company. A local one is Sable Trust (office in Lake Sumter Landing and based in the Tampa Bay Area I believe). If you go with the local lot who offer free lunch seminars, caveat emptor (can you say ‘annuities’?).
By the way, the proportion of mutual funds with ‘loads’ is very small compared to 30+ years ago because of competition (lead mainly by Jack Bogle of Vanguard) and the launch of ETFs. Also, there is no evidence that mutual funds with ‘loads’ outperform funds without loads over the long run. There is not a good reason to pay fund loads now.