The Truth About Fees: Understanding How Financial Professionals Get Paid

Today we're pulling back the curtain on a topic that's often shrouded in mystery: how financial professionals get paid. Buckle up, because we're about to get real about fees!

P.S. I answer all emails, if you have questions I am here for you.

Why This Matters

Now, you might be thinking, "Stoy, why should I care about how you get paid?" Well, let me tell you - understanding fees is crucial because it directly impacts your bottom line and can influence the advice you receive. So let's dive in and demystify this stuff!

The Three Main Fee Models

In the financial world, there are three primary ways advisors and planners get paid:

1. AUM (Assets Under Management)

2. Commission

3. Flat Fee / Subscription Model

Let's break these down:

1. AUM (Assets Under Management)

This is the traditional model that most people are familiar with. Here's how it works:

• You pay a percentage (usually around 1%) of your invested assets each year

• The fee comes directly out of your investment accounts

• As your investments grow, so does the advisor's compensation

Pros:

• Easy for clients - you don't see the fee coming out of your pocket

• Aligns the advisor's interests with growing your assets

Cons:

• Only works if you have significant assets to invest

• Can create conflicts of interest when it comes to using your money for other purposes (like buying a house)

2. Commission

This is the old-school model, but it's still around. Here's the deal:

• Advisors get paid when they sell you certain products (like mutual funds or insurance)

• Fees can be upfront (like 5-6% of your investment) or ongoing

Pros:

• Can be cheaper if you don't trade often

• No out-of-pocket costs for advice

Cons:

• Major conflicts of interest - advisors might recommend products that pay them more

• Can be more expensive in the long run

3. Flat Fee / Subscription Model

This is the new kid on the block, and it's my personal favorite. Here's how it works:

• You pay a set fee (monthly, quarterly, or annually) for financial planning services

• Fee is based on the complexity of your situation, not the size of your portfolio

Pros:

• Transparent - you know exactly what you're paying

• Reduces conflicts of interest

• Accessible to people at all wealth levels

Cons:

• You see the fee coming out of your bank account (which can be good for accountability!)

• May be more expensive for people with very simple financial situations

The Black Mammoth Approach

At Black Mammoth, we believe in transparency. That's why we primarily use a flat fee model. We want our interests aligned with yours, focused on growing your overall wealth, not just your investment accounts.

Want to dive deeper into how fees work? Check out my No BS Wealth podcast where we break this stuff down even further.

Why This Matters to You

Understanding fees is crucial because:

1. It impacts your returns - every dollar you pay in fees is a dollar that's not growing for your future

2. It influences the advice you receive - different fee models can create different incentives for advisors

3. It affects accessibility - some fee models exclude people who don't have large investment portfolios

Questions to Ask Your Financial Professional

Next time you're talking to a financial advisor or planner, ask these questions:

1. How do you get paid?

2. Are there any conflicts of interest I should be aware of?

3. What's your philosophy on fees?

4. How will your fee structure change as my wealth grows?

The Bottom Line

Here's the truth: there's no one-size-fits-all when it comes to fee models. What matters is finding a model that aligns with your goals and values, and working with a professional who is transparent about how they're compensated.

At Black Mammoth, we believe in cutting through the BS and giving you the straight facts about money. That includes being upfront about how we get paid.

Want to learn more about our fee structure and how we can help you build real wealth? Check out our website at blackmammoth.com or hit me up on YouTube.

Remember, understanding fees is just one piece of the puzzle. What really matters is finding a financial professional who can help you achieve your goals and live your best life.

Until next time, keep building that wealth - and don't be afraid to ask the tough questions!

Stoy Hall, CFP® Founder, Black Mammoth

P.S. Got questions about fees or financial planning? Hit us up at nobswealth.com. We're all about transparency and helping you understand the financial world!