In addition, my financial planner charged me both commissions and holding the remainder of my investments in his program, called assets under management. Buyer beware when your financial planner touts the advantages of assets under management. S/he may state that his fee will only be based on one percent of assets under management (AUM). That’s sounds low, doesn’t it? The problem(s) mount as your account grows. If you’ve invested one million in AUM, the planner’s fee will cost you ten thousand dollars. That’s not a onetime payment; it is the fee your planner will deduct from your account annually. When your account rises to two million, his fee rises to twenty thousand. Is s/he providing twice as many services for you? Is s/he investing twice as much time on your behalf? I think not. There are other options, such as flat-fees. The AUM model is rife with conflict of interest and if you don’t pay attention, you’ll pay dearly. I’ve recently read many articles criticizing the AUM model and a caution that once your portfolio surpasses one million, it is time to switch to a different planner and management model.
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