How do you get paid? Four words. Most advisors hope you never ask. The answer tells you everything about whose interests they're actually serving.
Most people spend more time researching a car purchase than they do understanding how their financial advisor gets paid. That is a mistake - because how an advisor is compensated determines, in large part, whose interests they are actually serving.
Ask the question directly: how do you get paid? The answer will put your advisor in one of a few categories, and each category comes with a different set of incentives.
The advisor earns a commission when you buy a product - a mutual fund, an annuity, a life insurance policy, a structured note. The commission is paid by the product provider, not by you directly. But it comes out of your return. The advisor's incentive is to recommend products that generate commissions, which may or may not be the best products for your situation.
The advisor charges a fee - typically a percentage of assets under management - but may also earn commissions on certain products. This is the most common model at large wirehouse firms. The AUM fee aligns some interests, but the commission component creates conflicts that can undermine that alignment on specific recommendations.
The advisor charges a fee - and only a fee. No commissions. No product revenue. No referral payments. Their income comes entirely from what you pay them directly. This eliminates the most common conflicts of interest in the industry.
STQ is fee-only and fiduciary. We earn no commissions, receive no referral fees, and sell no products. Our only financial incentive is to manage your portfolio well. That is the standard we hold ourselves to, and it is the standard you should demand from anyone managing your money.
At STQ, we are fee-only and fiduciary. No commissions. No product sales. If you want to understand what that means for how we work, start with the Portfolio Diagnostic.
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