Comprehensive Financial Solutions, Inc.

440-343-4223

Investment Read Time: 5 min

How Financial Professionals Are Compensated

The fees that investors pay to financial professionals for their advice and services come in two basic forms: transaction fees and ongoing fees. While professionals may differ in what fees they charge, they are required to fully disclose them.

Transaction Fees

These fees are generally one-time fees assessed at the time a transaction is made. Examples of transaction fees include:

Commissions

Paid on the purchase and sale of a stock.1

Mark Ups / Mark Downs

Occur when a broker-dealer sells or buys an investor a position that it owns. FINRA guidelines ensure the prices paid by investors are reasonably related to the market for the security.2

Sales Loads

The sales charge for buying a mutual fund. They may either be front-end (charged when you buy the fund) or back-end (charged when you sell the fund). Mutual funds are sold only by prospectus. Please consider the charges, risks, expenses, and investment objectives carefully before investing. A prospectus containing this and other information about the investment company can be obtained from your financial professional. Read it carefully before you invest or send money.

Surrender Charges

This fee is assessed when an investor sells an annuity prematurely. Generally, it is a percentage of the amount withdrawn.3

Redemption Charge

A charge some mutual funds assess if a fund position is not held for a prescribed period of time.

Ongoing Fees

These fees are levied for as long as an investor remains in a particular investment or investment platform. They typically are calculated as a percentage of assets. Examples of ongoing fees include:

Fees for Professional Investment Services

These are the fees an investment professional charges to manage assets.

Annual Operating Expenses

Mutual funds and exchange traded funds (ETFs) have ongoing fees that pay for the management of assets and any administrative and service (or distribution) fees. ETFs also are sold only by prospectus. Please consider the charges, risks, expenses, and investment objectives carefully before investing. A prospectus containing this and other information about the investment company can be obtained from your financial professional. Read it carefully before you invest or send money.

Annual Variable Annuity Fees

In addition to the annual operating expenses of the funds contained in an annuity, an annuity may have additional service fees, administrative charges, and insurance costs. Variable annuities are sold by prospectus, which contains detailed information about investment objectives and risks, as well as charges and expenses. You are encouraged to read the prospectus carefully before you invest or send money to buy a variable annuity contract. The prospectus is available from the insurance company or from your financial professional. Variable annuity subaccounts will fluctuate in value based on market conditions, and may be worth more or less than the original amount invested if the annuity is surrendered.

Combined Fees

Some products or investment platforms may charge a combination of transaction fees and ongoing asset-based fees. Examples include:

ETFs

When you invest in an ETF, there is a transaction fee at the time of purchase and when it is sold, as well as an ongoing fee to manage the fund.

Mutual Funds

Funds may be sold with a sales load and also assessed ongoing fees.

Investment Programs

While most programs offer an inclusive ongoing fee for advice and transactions, some programs may charge both forms of fees.

Don't Be Afraid to Ask Questions

Investors should be aware of what they are paying for a professional's services and advice. Don't hesitate to ask questions like “How do you get paid?” or “Do I have a choice of how I pay you?”

1. The return and principal value of stock prices will fluctuate as market conditions change. And shares, when sold, may be worth more or less than their original cost. Past performance does not guarantee future results.
2. FINRA is an acronym for Financial Industry Regulatory Authority, which is dedicated to investor protection and market integrity through effective and efficient regulation of the securities industry.
3. The guarantees of an annuity contract depend on the issuing company's claims-paying ability. Annuities have contract limitations, fees, and charges, including account and administrative fees, underlying investment management fees, mortality and expense fees, and charges for optional benefits. Most annuities have surrender fees that are usually highest if you take out the money in the initial years of the annuity contact. Withdrawals and income payments are taxed as ordinary income. If a withdrawal is made prior to age 59 1/2, a 10% federal income tax penalty may apply (unless an exception applies).

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG, LLC, is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright FMG Suite.

Share |
 

Related Content

Don’t Get Trapped by These Retirement Myths

Don’t Get Trapped by These Retirement Myths

Have you been making correct assumptions about financial planning for retirement? Here are some popular retirement myths.

Saving Early & Letting Time Work For You

Saving Early & Letting Time Work For You

The earlier you start pursuing financial goals, the better your outcome may be.

How to Jump-Start Your Financial Strategy for Retirement

How to Jump-Start Your Financial Strategy for Retirement

Get on track to creating the retirement you want. Here are seven financial strategies to take now to help you.

 

Have A Question About This Topic?







Thank you! Oops!

When to Self-Insure

Choosing to bear the financial burden of an adverse event is called self-insuring. Do you know what that entails?

The 12 Steps to Living Confidently: Retire With Confidence

There are good ways to retire and bad ways to retire. Retire the right way by better understanding Social Security.

Immediate vs. Deferred Annuities

Looking forward to retirement? It's critical to understand the difference between immediate and deferred annuities.

View all articles

What Is My Risk Tolerance?

This questionnaire will help determine your tolerance for investment risk.

Federal Income Tax

Use this calculator to estimate your income tax liability along with average and marginal tax rates.

Potential Income from an IRA

Estimate your monthly and annual income from various IRA types.

View all calculators

Managing Your Lifestyle

Using smart management to get more of what you want and free up assets to invest.

Long-Term-Care Protection Strategies

The chances of needing long-term care, its cost, and strategies for covering that cost.

Protecting Those Who Matter Most

The importance of life insurance, how it works, and how much coverage you need.

View all presentations

Video: The Independence of Financial and Emotional

Greater financial and emotional confidence brings greater independence. Isn’t that what it’s all about?

The Other Sure Thing

Though we don’t like to think about it, all of us will make an exit sometime. Are you prepared?

Encore Careers: Push Your Boundaries

Ready for retirement? Find out why many are considering encore careers and push your boundaries into something more, here.

View all videos