Stockbrokers usually earn sales commissions every time you
buy or sell securities. If you work with a broker who gets
compensated this way, make sure that he’s not urging you to
buy and sell, over and over, for no reason other than
creating more commissions.
Today, many brokers and other financial advisors are charging
fees rather than commissions. Fees might be:
- By the hour. Professionals such as attorneys and accountants
often bill this way.
- By retainer. You might pay so much per year, or for a specific
project.
- By assets under management. If your advisor handles $250,000
for you, for example, and charges a 2 percent fee, you’d pay
$5,000 per year.
Be sure you understand how these fees work, how much you wind
up paying, and whether you’re getting your money’s worth. If
you pay by the hour, for example, every phone call might wind
up costing you money. On the other hand, if you’re paying an
annual fee you can call your advisor at any time, to get
answers to your financial questions as they arise.
