Fidelity's Investment Advisers: How Are They Compensated?

Fidelity's investment advisors are paid in a few different ways, depending on the type of service provided and the client's needs. Fidelity offers a range of services, from digital investment management to dedicated financial advisors, each with its own pricing structure. Some common ways that Fidelity's investment advisors are paid include percentage-based fees on assets under management (AUM), hourly rates, flat fees, and subscription or retainer fees. The percentage-based fee is typically around 1% for up to $1 million in AUM, and it may decrease for larger amounts. Hourly rates vary depending on the advisor's experience, while flat fees depend on the level of detail and advisor experience. Subscription or retainer fees are usually charged quarterly or monthly. Fidelity also offers some services with no minimum balance requirements and no fees, such as the Fidelity Go® robo-advisor service.

Fidelity's investment advisors are paid via a percentage based on assets under management (AUM)

Fidelity's investment advisors are paid in a few different ways, depending on the specific service and the client's needs. One common method is a percentage-based fee, which is calculated as a percentage of the assets under management (AUM). This means that the advisor's fee will be a certain percentage of the total value of the financial assets they are managing for the client. The industry median for this type of fee structure is 1% for up to $1 million in AUM, with the fee potentially decreasing for larger amounts.

Fidelity offers a range of advisory services with different fee structures, including:

• Fidelity® Wealth Management: Customized planning and investment management with a dedicated advisor. The gross advisory fee for this service ranges from 0.50% to 1.50% and requires a minimum investment of $250,000.
• Fidelity® Private Wealth Management: Comprehensive planning, advice, and investment management led by a dedicated advisor-led team. The gross advisory fee for this service ranges from 0.20% to 1.04%, with a minimum investment of $2 million and $10 million in total investable assets.
• Fidelity® Personalized Planning & Advice: A hybrid service that combines digital investment management with access to financial advice through 1-on-1 calls with advisors. This service has a gross advisory fee of 0.50% and a minimum balance requirement of $25,000.

It's important to note that the fee structures for these services may vary and can include combinations of different pricing models, such as flat fees, subscription fees, or hourly rates, in addition to the percentage-based fees.

Fee-only financial advisors make money from clients by providing advice, knowledge, and expertise

Fee-only financial advisors are compensated by their clients for their advice, knowledge, and expertise. They do not sell investments or make commissions, and they work only for their clients, not brokers, banks, or insurance companies. They are small business owners, shareholders, or employees who are paid for their time and expertise in comprehensive financial planning and investment management.

Fee-only financial advisors may be paid in a variety of ways, including hourly rates, retainers, a percentage of assets under management (AUM), or a flat fee, depending on the planner. This fee structure can range from $1,000 to $10,000 annually for a retainer fee, $1,000 to $3,000 for a fixed annual fee, $120 to $300 for an hourly fee, and between 0.5% and 2% of AUM.

The benefits of using a fee-only financial advisor include increased transparency, no hidden charges, and reduced conflicts of interest. Fee-only advisors are legally and ethically required to act in their clients' best interests at all times and to disclose any potential conflicts of interest. They are also less likely to recommend certain investments because they enhance their bottom line, as their income is not tied to the sale of financial products.

However, there are some potential downsides to the fee-only model. Fee-only advisors may be more expensive, especially for individuals with limited resources or whose assets are tied up in qualified plans. Additionally, they may have a limited scope of products and services offered, and there is no guarantee that they are competent or appropriate for a client's specific needs.

Fee-based financial advisors are paid via commissions for selling products, brokerage fees, etc

Fee-based financial advisors are paid via a combination of fixed fees and commissions. The fixed fees are charged for providing advice, knowledge, and expertise, while the commissions are earned through the sale of financial products, brokerage services, and referrals to third parties.

Fee-based advisors may charge a flat fee for their services, which can be a one-time payment or a subscription model. They may also charge a percentage of the assets under management (AUM), typically around 1% for up to $1 million in AUM. This percentage can decrease as the amount of AUM increases. Additionally, they may charge hourly fees, with rates varying based on the advisor's experience.

It is important to note that "fee-based" is different from "fee-only," where the advisor only earns money through fixed fees and does not receive any commissions or other sales-related compensation. Consumers often misinterpret "fee-based" as having no commission element, so it is crucial to understand the compensation structure of your financial advisor.

Fidelity, for example, offers a range of fee-based services with different minimum investment requirements and fee structures. These include Fidelity® Wealth Management, Fidelity® Private Wealth Management, and Fidelity® Personalized Planning & Advice. Each service level has its own fees, features, and eligibility requirements, catering to different client needs and preferences.

Fidelity Go® robo-advisor service is available with no minimum balance and at no charge for balances under $10,000

Fidelity Go® is a robo-advisor service that makes investing quick, easy, and affordable. There is no minimum balance required to open a Fidelity Go® account. However, to invest your money according to the investment strategy you've chosen, your account balance must be at least $10. Fidelity Go® offers tiered pricing based on your account balance. You won't pay an advisory fee for a balance under $10,000, and for balances between $10,000 and $25,000, you'll pay an advisory fee of 0.35% per year. There are no trading, transaction, or rebalancing fees.

Fidelity Go® is a digital financial service that uses technology to automate investing based on the information you provide about yourself and your financial situation. After answering a few questions online, Fidelity Go® will build an investment strategy to meet your needs. Once your account balance reaches $10, Fidelity Go® will start investing for you according to the investment strategy you've chosen. You can set up or modify recurring monthly, bi-weekly, or weekly transfers at any time.

Fidelity Go® will handle all day-to-day investing decisions for your account, such as buying and selling investments to maintain your chosen investment strategy, and keeping you informed about how your investments are doing. You'll also be reminded each year to review and update the information you've provided. Once your account reaches a balance of $25,0000, you'll have access to unlimited coaching sessions with trained advisors.

Fidelity Wealth Management requires a minimum balance of $250,000 and the fee runs from 0.5% to 1.5%

Fidelity Wealth Management is an advisory service offered by Fidelity Wealth Services and/or Fidelity Strategic Disciplines for a fee. It requires a minimum balance of $250,000 and the fee ranges from 0.5% to 1.5% of the assets under management (AUM). This service provides customized planning and investment management, designed for your full financial picture, and is led by a dedicated Fidelity advisor with support from a team of specialists.

The dedicated advisor will work with you to create a personalized investment plan that takes into account your financial goals, risk tolerance, and preferences. They will also help you identify opportunities to protect and grow your assets, such as tax-loss harvesting, retirement income planning, and charitable donation strategies.

Fidelity Wealth Management is suitable for high-net-worth individuals or those with a significant amount of investable assets who are looking for comprehensive financial planning and investment management services. The service offers a combination of personalized advice and investment strategies tailored to your specific needs and goals.

It is important to note that the fee structure for Fidelity Wealth Management is based on a percentage of the assets under management, which means that the more assets you have with them, the lower the effective fee rate will be. This fee structure incentivizes the advisors to grow and protect your wealth, as their compensation is directly tied to the performance and size of your investment portfolio.

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