How We Get Paid
Usually, there's no cost to you. Financial planning costs shouldn't be a barrier to getting a plan. Okay, but how do we get paid?
Well, if for example we end up seeing a need for risk management as part of your plan and end up working with an insurer to deal with that risk, we're compensated directly by the insurance company. If we end up not doing any business together, that's fine. You're welcome to use our recommendations to sort things out on your own. We're confident, though, that by the time we've worked together getting a plan together you'll want to keep working with us to get the show on the road. Also, if you end up cancelling a policy within two years, we have to pay back the insurance company. That gives us an extra motivation to make sure that you're comfortable with the plans we're putting in motion.
Investments are a little different, though many my clients end up not being out of pocket. First, there is a trailer fee from the mutual fund or segregated fund company that is paid to us and our mutual fund dealership for servicing your account. It's between 0.25% and 1.25%, but there's no direct cost to you because it makes up part of the expenses of the fund.
Many of our clients are saving for the long-term with time horizons beyond ten years. For those folks, we usually make use of an option from the mutual or segregated fund company called a deferred sales charge or DSC. With a DSC, there's no cost to you up front, only if you withdraw your deposits early. Those charges usually start at around 6% and gradually decline annually until they zero out after six or seven years. To say thanks for bringing along an investor who's in for the long haul, we receive a fee from the mutual fund or segregated fund company.
The second most common option for those clients who have a shorter horizon or prefer to have no strings attached is a front-end charge or FE. With FE, a percent of each of their deposits (usually between 2% to 3%) are held back. Let's say you deposit $100. Of that $97 or $98 will be invested. The remainder is sent to our mutual fund dealership and we receive a portion of it. There are a few other options with investments that we'd be happy to discuss.
There are a few other little bonuses that sometimes come our way, such as productivity bonuses, conferences, and other incentives. We may also receive a renewal commission if you keep an insurance policy in force.