How do investment advisers get paid?

Before you hire any financial professional—whether it's a stockbroker, a financial planner, or an investment adviser—you should always find out and make sure you understand how that person gets paid. Investment advisers generally are paid in any of the following ways:

• A percentage of the value of the assets they manage for you;
• An hourly fee for the time they spend working for you;
• A fixed fee;
• A commission on the securities they sell (if the adviser is also a broker-dealer); or
• Some combination of the above.

Each compensation method has potential benefits and possible drawbacks, depending on your individual needs. Ask the investment advisers you interview to explain the differences to you before you do business with them, and get several opinions before making your decision. Also ask if the fee is negotiable.