Prudent Consulting, LLC is a fee only firm. Our clients pay us directly.

Let’s understand how the financial planners get paid. It is not impolite to ask an advisor how he gets paid. It is always YOU - the client, who pays your financial planner – either directly or indirectly. Remember, there is NO free lunch!

Direct Payment Of Fees:

Direct payment is easy to understand. It is a straightforward and transparent approach. You know how much you paid. Direct payment can be hourly or asset based. Some financial planners charge an hourly fee for their advice and time. This is the way many attorneys charge their clients. 

Some advisors who manage investments charge an asset based management fee, and offer complimentary advise. Often such arrangements have a minimum fee or minimum assets under management (or assets under advise). The fee charged is either a flat dollar amount or percentage of assets. The percentage typically decreases as the asset amount increases.

Indirect Payment Of Fees:

Indirect payments, on the other hand, are opaque arrangements between the brokerage or mutual fund companies and a financial advisor.

Kickbacks are not illegal in financial industry, as long as they are disclosed to the client. Some companies hide the kickbacks under euphemistic term – “revenue sharing”. Without divulging specifics, a firm may say in its brochure that it may have a financial incentive to buy funds from a specific company. The firm has met the disclosure requirement.

You may hear that the advice is free. In reality, it is not. You still pay for the advice, and dearly. In this kind of an arrangement, the more products sold to you, the more commissions they receive from mutual funds or brokerage firms. Some funds have a 5% front load. That means $5,000 of your $100,000 investment went via backdoor to the guy who sold it to you.

In short, you don’t see the payment, but it comes out of your pocket.