25 Jul How financial advisors are paid

Q. If I use a fee-only planner, what’s the difference if they charge a fee for creating a financial plan versus charging a fee based on assets under management? It seems the second option would be way more expensive.
— Considering help

A. There’s a big difference.

It’s a question of buying a one-shot deal versus having someone work with your money on a regular basis.

When you’re charged a fee for a financial plan, you receive a financial plan and that’s all that’s done, said Bill Connington of Connington Wealth Management in Fairfield.

You get a plan, and then you must go and implement it yourself, he said.

“The fee based on assets under management is for the implementation of the plan and active management of your portfolio,” Connington said.

He said most advisors who receive fees based on assets under management also provide a financial plan, follow up on the plan and answer any other financial questions that you have.

For example, if you need advice on buying versus leasing a car or refinancing your mortgage, a planner who receives a fee for assets under management will provide that as part of the service.

If you want that done by a fee-only financial advisor, you will be paying a fee for that work also, he said.

If you’re not sure what’s best for you, why don’t you start with NJMoneyHelp.com’s free money makeovers? It’s basically the same service you would receive when you pay an advisor for a financial plan. Just send us an email.

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This post was first published in July 2017.