Pig Butchering Scam

In recent times, the percentage of online fraud has increased. Therefore, it becomes crucial to understand the Pig Butchering Scam. From the idea of fattening a pig before slaughter the name of this scam has come. Hence, scammers convince people to invest more money in cryptocurrency. They try to act like it is a genuine chance for people. While such scams are spread throughout the world, these can result in big financial losses for victims. Once people invest their money, scammers will disappear after collecting it. Let's dig into the article to learn more about Pig-butchering Scam.

What is a Pig-butchering Scam?

A pig butchering scam is an investment fraud where scammers ask people to invest their money in profitable ventures. Usually, they give promises to provide high investment returns within a few months or a short period. They use fake images along with investment portfolios that are false. With the help of these, scammers try to convince victims to prove that their scheme is legal. As soon as victims believe this and invest a huge amount of money, after taking the money, scammers will disappear. As a victim, you were incapable of recovering your invested money.

This term comes from the idea that victims are fattened up with the promise of huge returns before "slaughtering" them for their money.

In this scam, a random person starts a normal conversation. Scammers could get a number of victims from a mutual friend. Sometimes, they act like they are unsure if they have the correct number. In this way, scammers try to engage the targeted person in conversation. In order to lure people, they use pictures of attractive women. In this way, scammers try to showcase their desire for romance to create trust so that they can set up a connection.

How the Pig-butchering Scam Works:

Like other investment frauds, this type of scan follows some steps using which scammers manipulate and deceive victims. They talk with victims about getting huge returns on their investments within a short period. Now, let's see how the pig butchering scam works.

• Gaining a Victim’s Trust:

Scammers first try to act like seasoned investors or experienced professionals. Their aim is to gain the victim's trust. Scammers use online forums or social media platforms through which they keep themselves engaged with potential victims. Thus, they create trust in the people to achieve financial success. Besides, they add a layer of companionship to this scam. In this way, they are able to exploit victims' need for companionship for financial success.

• Pitching the Investment:

As soon as scammers are able to gain the trust of people, they promise a great opportunity to get successful returns and reliable investments. It includes stocks, cryptocurrencies, or other financial instruments. While they use persuasive language, sometimes they ask people and try to convince them by saying that they need to invest money very urgently.

• Collecting Money:

Once scammers succeed in persuading the victim, they will collect the invested money of those people. In order to make tracking harder for victims and other people, scammers often use cryptocurrencies or digital payment platforms.

• Disappearing Completely:

When scammers have got the target amount from the victims, they will disappear. Therefore, people do not find them when they try to withdraw their money. Scammers generate new identities or delete the online existence. Therefore, it becomes challenging for victims to recover the amount they have invested.

Every step takes the victims into the web of lies of the scammers. Victims cannot identify the scam as they are emotionally invested also. So, they also could not be able to remove themselves from the situation.

How was the Pig Butchering Scam Carried Out?

• In this scan, the “host" attempts to make contact with people via social media, dating apps, or deceptive messages.
• After finding the target, called the “pig," the host tries to set up a friendship with the people so that they can encourage victims to explore cryptocurrency trading.
• The host uses a fraudulent trading application to deceive the victim so that they believe they could gain profits from fabricated trades.
• The more the trust of the victim grows, the host tries to persuade them to invest more money. This idea is called “fattening the pig" before the reveal of the scam.
• As soon as victims try to withdraw their money, substantial fees are imposed by the fake platform. Because of the nature of blockchain transactions, it is quite impossible to retrieve lost funds.

Warning Signs of Pig Butchering Scams:

These are some warning signs of these scams:

• You get “wrong number” texts
• Someone asks you to download a "special" crypto trading
• A match starts “love bombing” you on a dating platform
• A friend asks you to invest money in exchange for a crypto
• An online friend suddenly starts talking about crypto
• Investment sites give tiers with at least investment amounts
• The scammer begins trading with you
• In order to gain trust, scammers use emotional manipulation
• You get a quick and small return on your initial investment

Emerging Tactics— Group Chats And Social Engineering:

Nowadays, the emergence of modern tactics becomes more apparent because pig butchering scammers are adapting as well as refining their ideas continuously. They engaged victims earlier via one-on-one chat messaging. But currently, scammers are seen using group chats, which let them, cast a broader net. Also, in this way, scammers are capable of identifying potential victims with greater efficiency.

Creating Authenticity through Group Chat Interactions:

Scammers are often found sharing photos within the group chat as proof of their regular activities. It helps them to increase their credibility. Images highlighting their alleged earnings are also shared with the members of the group. They want to prove their success from their investments. Thus, they are capable of creating an illusion that everything happening in the group chat is real. So, it becomes challenging for potential victims to guess whether the investment is legal or not. It preys on the psychological phenomenon called social proof. Hence, people trust others' actions and follow them also when they see other people getting success in the group.

The Group Chat Strategy:

Scammers add many people to the groups centred around investment discussions. Thus, they can get the attention of the targets.  When the remaining people take an interest in investment, scammers make those people prime candidates for the scam. If someone leaves the group, they might know about the scam or are not taking any interest in investing. It prevents those people from being persuaded by the strategies of the scammers.

In the group, there are several people with different roles. Scammers have generated fake profiles of the chat group members in order to make this group more authentic. In this way, scammers can especially focus on those people who are likely to be more susceptible to their fraudulent schemes. Besides, it creates a situation where social validation is promoted. The reason is that potential victims watch others in the group discussing investment and not calling it out as a scam.

Suspect a Scammer is Luring You in— What To Do?

• Break Off All Contact With The Scammer:

If you are the victim, you need to instantly stop every communication you have made previously across apps, social media, text and email. Ensure that you are not saying goodbye or sending any explanation. You definitely do not want to arouse their suspicions.

• Block And Report Their Account:

In order to add credibility to such a type of scheme, scammers often use many digital "friends" of the host. Ensure that you are reporting each profile that is involved in the scam.

• Change All Your Passwords And Login Credentials:

Suppose you have shared your account number or access codes for cryptocurrency accounts or online platforms. In that case, you have to generate new passwords which are not simple to hack.

• File A Complaint With The FBI’s Internet Crime Complaint Center (IC3):

It lets you add particular details. Also, you can add supporting documents such as screenshots of email, text, and WhatsApp conversations.

• File A Police Report:

You should give all details of the fraud to inform the law enforcement office in your local area. Also you are able to ask them in order to contact the crypto exchange.

• Monitor Your Online And Financial Accounts For Signs Of Fraud:

In order to spot any unknown transaction, you must look into all the credit reports, bank accounts, and credit card statements.

How To Protect Yourself From Pig Butchering Scams:

These are a few things you need to do to stay safe:

• You must not provide your private information to those you have met online only. Ensure that you are not giving your bank credentials or Social Security number (SSN).

• If you haven't seen the person in real life or do not know them personally, you should not send cryptocurrency or money.

• You should not add yourself to any investment site. Besides, you should not download an app because of someone whom you have met online. Remember that this app may deceive you despite seeming real. Scammers may control the app to impress you by saying that you are gaining profits.

• Nothing is like "guaranteed returns." So, you should not believe any site or someone who promises you to give returns. Or don't trust any site that requests you to invest minimum amounts.

• If you are unaware of the working process of crypto currency properly, you should not invest. Hence, it is better to take guidance from a person so that you can use the platform.

• You need to be aware of the popular scams that are related to any app, exchange, or investment platform before being involved.

The Bottom Line:

The most effective thing you should now do is to remain proactive about your digital security. In addition, it is essential to be updated on the latest scams. Also, you need to monitor your credit. When many people get to know about these scams, scammers will succeed less.

Frequently Asked Questions

1. What is the pig-fattening romance scam?

In this type of scam, scammers flirt with victims to gain their trust.

2. What is pig butchering in AML?

Social engineering tactics are used by fraudsters in order to trick people in a way that they invest most of their money before knowing that the investment is a fraud.

3. How do you protect yourself from pig butchering?

These are the tips you should follow to protect yourself:

• You must not send money to someone you have met online only.
• Ensure that you are not talking about your investment or financial position to anyone.

Business Email Compromise (BEC) Scams

As long as email addresses exist, we will get to see email scams. Usually, security vendors & organizations are working to protect against the common phishing scam types. But cyber attackers always remain one step ahead, adapting their tactics to get around the established security controls. Let's learn about the Business Email Compromise, the short form of which is BEC.

 What Is Business Email Compromise (BEC)?

Business email compromise refers to a kind of cyber attack where emails are used by scammers to trick people into sharing confidential information or sending money. Hence, the cybercriminals act as a trusted figure. After that, they ask for a fake bill to be paid or some information that they can use in another scam. These scams are increasing continuously because of the increased remote work. According to the reports, about 20,000 BEC complaints were made to the FBI last year.

 How Does a Typical BEC Attack Work?

In the Business Email Compromise (BEC) Scams, an attacker can be seen acting like someone whom the receipt believes — mainly a vendor, boss or colleague. You should know that these attacks are hard to detect as they never use malware or malicious URLs, which can be analyzed with standard cyber defenses. These attacks depend on impersonation & other social engineering techniques for tricking people into interacting on the behalf of the attacker.

 The use of social engineering, along with the targeted nature, is responsible for making the manual investigation & remediation of the attacks difficult & time-consuming. These scams use different impersonation techniques like domain spoofing & lookalike domains. As domain misuse is a complex issue, the attacks are effective. It is difficult to stop domain spoofing, but more challenges can be faced when you try to anticipate each potential lookalike domain. You should know that these attacks do not require any tradecraft or any advanced tool for execution. Hence, we have given the process through which a typical BEC attack runs:

 Phase 1) Research & Identify Targets:

These attacks are mainly focused on the employees or executives authorized for making payments on behalf of the companies. Cybercriminals perform reconnaissance continuously over days or weeks. Generally, the BEC targets are CEOs, lawyers, & accounts payable personnel.

 Phase 2) Set Up the Attack:

While mass phishing emails follow a "spray and pray" approach, these BEC attacks come across as legitimate. Scammers perform different activities like spoofing email addresses or creating lookalike domains, impersonating reliable vendors, etc., to prepare for the attack.

 Phase 3) Execute the Attack:

The BEC attack may occur in an email or an entire thread based on the thoroughness of the adversary. Often, the communication uses urgency, persuasion, and authority to get a victim's trust. The perpetrator can offer wire instructions to the victim to make payment to a fraudulent account easier.

 Phase 4) Disperse Payments:

As soon as attackers get the money, they collect it quickly and disseminate it across many accounts. Thus, they can decrease traceability & retrieval chances. For cybersecurity incidents, rapid response times are very important. If any organization can't detect a successful BEC attack quickly, it's unlikely that the money is going to be recovered.

 Common Types of Business Email Compromise (BEC) Scams:

Five types of BEC attacks are there:

 CEO Fraud: Cybercriminals act as the company's CEO or executive and they send an email to a person or employee who works within the finance department. The email asks the individual to transfer money to an account that the attacker controls.

 Account Compromise: In this case, attackers hack an employee's email account to request payments to vendors. After that, they use the account to send payments to fake Bank accounts that they own.

 False Invoice Scheme: This tactic is used to attack foreign suppliers. Scammers act as the suppliers and request foreign suppliers to transfer money to the fake accounts.

 Attorney Impersonation:

It happens if a cybercriminal impersonates a lawyer or legal representative. In these kinds of attacks, mainly lower-level employees are targeted.

 Data Theft: HR employees are attacked in this case with the intention of getting sensitive information about someone who works within the organization, like CEOs and executives. After that, data is possible to be leveraged for future attacks like CEO Fraud.

 Common BEC Attack Techniques:

Five common attack techniques are as follows:

 Exploiting Trusted Relationships:

In order to exploit an existing trusted relationship, cybercriminals make a concerted effort. Exploitation might take multiple forms, like a vendor who requests invoice payments, an executive who requests iTunes gift cards, and many more.

 Replicating Common Workflows:

Countless number of business workflows are executed every day by a company and its employees. While multiple workflows depend on automation, many workflows are conducted over email. These workflows are replicated by the BEC attacks to fulfill their targets before victims get any idea.

 Suspicious Attachments:

These are linked to malware in email attacks. However, attachments which are used in these attacks can forego malware in exchange for fake invoices.

 Socially Engineered Content & Subject Lines:

BEC emails depend on subject lines that want to induce quick action. These are a few terms used in subject lines:

• Request
• Overdue
• Hello FirstName
• Payments
• Immediate Action

Leverage Free Software:

In order to lend these scams, hackers use the software that is available for free. It assists emails in sneaking past security technologies that can block bad domains. For instance, SendGrid is used for making spoofed email addresses, whereas Google Sites are used to stand up phishing pages. Attackers use Google Forms & Docs to extract sensitive data from victims. Hosting fake invoices along with 0-day phishing links is possible by attackers in Google Drive and Box.

Things to know:

• You must be aware of every information you share online or on social media. When you share your pet name, the school you attended, identity like profile links of your family members, and your birthday online, a scammer gets all the information they require to guess the password.

• Ensure that you are not clicking on anything in a text message or an unsolicited email that wants you to update or verify your account details. Hence, you need to find the phone number of the company yourself instead of believing and using the phone number given by the scammer. After finding the number yourself, you should call the company to ask whether the request you have received is legitimate or not.

• You must examine the URL, email address, and spelling used in any correspondence. Scammers trick you with little differences because they intend to gain your trust.

• You have to be careful about what you download. There is no need to open an email attachment from those whom you do not know.

• Try to set up two-factor authentication or multi-factor authentication on such accounts that permit it and never disable this.

• You should verify the payment & purchase requests, or you can call the person to ensure that it is legitimate.

Protect Against BEC Attacks— How to do it:

You should know that a successful BEC attack is very costly and can damage an organization. But defeating these attacks is possible by taking some easy email security precautions, such as:-

Anti-Phishing Protections:

You should know that BEC email is a kind of phishing. Therefore, you have to deploy anti-phishing solutions to protect against them. This solution must be able to identify red flags of BEC emails, such as reply-to addresses that are not similar to the sender addresses. Also, it should be able to use machine learning to identify the email language to indicate an attack.

Employee Education:

These attacks generally target employees of a company. So, employees need to be trained properly so that they can learn how to detect a BEC attack and respond to it. Thus, it is possible to minimize the threat of this kind of phishing.

 Separation of Duties:

The attacks aim to trick employees so that they get involved in high-risk activities such as sharing sensitive information or sending money without verifying the request. Try to implement policies for these actions that need independent verification from a second employee. In this way, it is possible to reduce the risk of these attacks.

Labelling External Emails:

These attacks  want to impersonate internal email addresses with the help of domain spoofing or lookalike domains. You can try to configure email programs with the intention of labelling emails (that comes from the outside of the company) to defeat the tactic.

Conclusion:

Impostor emails are created for the purpose of impersonating a person whom your users trust and trick them into sending personal information or money to the cyber criminals.

Frequently Asked Questions

• What are the different types of BEC?

Usually, there are two types of buckets under which the attacks fall: spear-phishing & social engineering attacks.

• What is the most common type of BEC?

An invoice or urgent payment required scam is the most common type of BEC attack.

• What is the biggest BEC attack?

The biggest Business Email Compromise (BEC) Scams to date is "Facebook & Google: $121m BEC scam".

 

Money Mule Scam

Scammers basically try to use you for stealing money. So, it is essential that you are not helping them. If you do so, you will be called a money mule.

Money Mule Scam can happen in different ways. It can be related to online dating, work-at-home jobs, or prizes. Scammers sometimes pay people by check. After that, scammers ask them to send some of this to another person. They want people to use gift cards or wire transfers. Obviously, they will not tell you that the money is stolen. They will lie about the reason for sending it. Remember that it is only a scam, not a relationship, job, or prize.

What is a money mule?

A money mule indicates a person who is responsible for receiving and moving money that is coming from victims. While a few money mules know that they are assisting in criminal activity, a few money mules don't know that their activities are helping fraudsters. Suppose, a person whom you don't know sends you money. Then he or she asks you to forward or transfer the money. Then you are fueling the fraud and serving as a money mule.

How does money mule scam work?

Money mules come from online job sites, dating sites, social networking sites, online classifieds, and Dark Web Forums. Once a criminal recruiter gains your trust or the victim whose money is acquired, they entice you by offering jobs or setting up a fake relationship. Their task is to convince you to open a new bank account or any existing personal account to receive money sent by criminals. After that, criminals send money to the account where the money will be deposited. They give exact details related to the fund transfer. Sometimes they tell you to withdraw money as cash, use it to purchase a gift card, or convert it to virtual currency, such as Bitcoin.

What Are the Consequences?

Money mule scams can affect your financial future, resulting in incarceration. Money mules can charge the following:

• Mail fraud 
• Wire fraud 
• Bank fraud 
• Money laundering 
• Aggravated identity theft

Engaging in these activities can allow criminals to steal your personal information and use these illegally. If someone is caught acting as a money mule, they must repay the acquired money. It can also result in frozen assets, damage to the credit score, etc.

Who is at Risk?

Usually, the target of criminals is students who are searching for work or those who are on dating websites.

What Are the Signs?

These are the signs:

Work-from-Home Job Opportunities:

• You receive an unsolicited email that offers easy money without any effort. 
• Unknown people tell you to open a bank account online in your name. 
• Being an employee, you are said to get the money in your bank account. 
• There is no particular job description for your duties.

Dating & Social Media Sites:-

• Online contacts or someone you never met tells you to receive money & forward the funds to others.

Protect Yourself:-

• Search on the web to check if the job offering company is legal. 
• Never go with any job offer asking you to transfer money from your bank account. Legitimate companies never tell you to do this. 
• Be aware if someone on the internet wants to use your bank account to receive money. 
• Ensure that you don't give your financial details to those people who are unknown (mainly to online strangers).

How to avoid it?

These are some tips that you need to follow to prevent yourself from being a money mule:

• You must not agree to send money to someone whom you don't know or receive it. 
• Never take those jobs offering money easily. 
• Never open a bank account or cryptocurrency account based on another's direction. 
• Despite receiving money first, you should not send money to any online love interest. 
• Never spend money on getting a prize. 
• You must not open any links in emails sent from an untrusted source. 
• Banks don't call people or send SMS to get personal details such as Account Details, Passwords, or OTP. 
• Never share the Net Banking credentials with others.

What to do if you find yourself involved in a money mule scam?

When you transfer money on behalf of others, criminals can get huge advantages, even you can lose money or be put in Jail. If you find yourself involved in a money mule scam, you can do these things following:

• You should not communicate with those asking you to move money or property. 
• Inform your financial institution and ask them to change accounts. 
• You need to report it to local law enforcement and at reportfraud.ftc.gov. 
• International crime networks use money mules to steal money from businesses. That's why people like you must stay alert and notice the warning signs.

Conclusion:

During the COVID pandemic, the online bank scams increased in the United States. So, you need to be informed and protect your personal information. You should not share your bank accounts with online acquaintances.

Frequently Asked Questions:

Q. How does a money mule scam work?

When a money mule transfers acquired money illegally on behalf of others, it is called a money mule scam.

Q. What is a money mule romance scam?

It is a scam where vulnerable adults receive money from unknown people or those who have gained their trust.

Q. Can a money mule go to jail?

If any money mule is caught moving stolen funds, they will be put into jail, even for this crime, they can get a 14 years prison sentence.

Stock Parking

Do you know what stock parking is? It is a practice where a group of people lends their accounts to a person for purchasing and holding the shares. Market manipulators use this tactic to cloak their manipulative works. You will be called "figureheads" if you lend your account to market manipulators.

It is common for banks and companies as these hold custody of their client's assets. But, market manipulators usually abuse this practice to circumvent regulatory requirements or commit illegal acts. Manipulators compensate the figureheads and give them money to control accounts like stock trading and give instructions for voting corporate actions. Let's dig into the article to know about stock parking in detail.

What is Stock Parking?

Stock parking is an illegal practice where people sell their shares to other people by letting them know that the actual owner of the share will purchase them back after a short time. Its target is concealing a stock's real ownership & maintaining the appearance of regulatory compliance.

It occurs when someone buys a share, but it is held by the 3rd party temporarily before being placed in the account of the final client. Brokers can obviate regulatory disclosures of specific positions & transactions because stock parking is not legal.

Stock Parking Explained:

As we have told before, it is an illegal measure where brokers sell shares to a party, and later the party will sell it to the original broker with a profit to the receiving broker. Hence, the target is to decrease the position for disclosure deadlines. Parking stocks are mainly done by brokerages for keeping holdings clean under Securities and Exchange Commission (SEC) guidelines during disclosure periods. Otherwise, they do so to appear as if they fulfilled all the obligations by the settlement date for a specific trade.

A stock broker can park stocks without the knowledge of the employers. Hence, they can shift their shares to the brokerage's internal regulations to conform instead of avoiding an SEC violation. It can sometimes happen that two stockbrokers collude for their profits without knowing about each other's companies with this arrangement. To avoid the disclosure of long-term holdings is one of the intentions of brokers also. In this case, the reason may be that the whole holdings can not withstand federal scrutiny when all long-term holdings are retained by them. Otherwise, the reason is that the brokerage firms are holding penalties for aged stocks.

Common Illegal Acts:

We have given here some common illegal acts which are related to stock parking.

Market Rigging:

Market manipulators usually buy stocks & sell them with figurehead accounts, just like the "ping pong" game. They also give instructions to the figureheads with different brokers when or what stocks they have to buy and sell. After that, they dump the stock at an expensive rate.

Vote Planting:

The market manipulators can arrange for the figureheads to vote in a shareholder meeting so that they can secure approval for corporate actions like rights problems with high subscription ratio and price discount.

Circumventing Regulatory Requirements:

They conceal their original shareholding with the help of this practice to evade specific regulatory requirements. For instance, they may need to make a general offer to purchase shares that are left in a company by holding shares of 30% or more.

Cornering Of Placing Shares In GEM Listing Activities:

Several placement-only GEM listings viewed placing agents for allocating a small share to many retail investors to fulfil the minimum number of shareholders. This move is called as cornering of shares. As a result, shareholding is concentrated highly in the arms of market manipulators.

They can use the figurehead accounts to manipulate share rates upon listing. As a result, they experience a price surge of 10 times or more for luring retail investors into taking up these stocks.

Trading practice via figurehead accounts undermines the market's transparency. It can cover up the company's "true" shareholding distribution to prevent investors from getting a complete picture for making informed decisions. But those in the dark are capable of making erroneous investment decisions. Recently, a few small-cap stocks were available to have several shareholders. But they were highly concentrated among some shareholders.

Parking vs. Kiting:

The term "Parking" mainly refers to a form of share kiting. Hence, brokerage firms intend to cover undeclared short positions, the stock of which wasn't given by the settlement date. Instead of performing a buy-in transaction, firms are colluding with one another. In this case, these delay the settlement procedure and, later, inflate several shares for trade in the secondary market.

It also represents the market's collusion and artificial manipulation. In this case, you should know that when it comes to talk about the SEC regulations, the punishment severity to collude the park shares basically relies upon the infraction severity, the shares traded numbers, taxable income's unregistered amount, and the conspiracy scale. There are a few tiny violations that incur more than a small fine. In 1989, bigger cases were prosecuted more severely where Paul Bilzerian, a corporate raider, was convicted on nine counts of tax fraud connected with this scheme. Therefore, he was prisoned for four years and fined $1.5 million.

The Bottom Line:

It is a digital wallet for all the Web3 requirements. Remember that it is easy to access a wealth of DeFi platforms from crypto to NFTs and beyond. You should know that OKX is a leading digital asset financial service provider. With the help of this, it is possible to access world-class security, as you continue trading & storing assets. Besides, it is possible to connect existing wallets and win up to $10,000 once you deposit over $50 via a crypto purchase or top-up within 30 days of registration. In this article, we have covered all the details regarding stock parking. If you still have any queries, do ask us via comments.

Is Financial Planning Expensive?

Nowadays, financial planning has become a very important factor when you want to achieve any financial goal. No matter whether it is a short-term or long-term goal, financial planning enables people to meet their financial goals by planning. It does so by taking savings and allowing them to invest in several financial instruments. You should know that investors don't have enough resources that will allow them to get deep financial knowledge so that the securities can be analyzed. Besides, they don't have enough time to analyze securities. 

So, what you can do is consult a financial advisor. The advisors generally charge fees for their advisory services. Therefore, it is essential to have a deep knowledge regarding financial advisor fees. Now, dig into the article to know whether financial planning is expensive or not.

Who is a Financial Advisor?

Financial advisors are those specialists who usually offer financial advice to investors so that they can achieve their goals in life. Hence, they need to conduct financial preparation, a process that allows the people to achieve the target via proper financial management.

They can have different types of goals like purchasing a home, investing money for child education, estate or retirement planning. The major role of an advisor is to make customers feel relaxed and give them some confidence. The advisors must keep up with the current events of business. Besides, they need to offer the customers impartial advice.

What Is The Cost of a Financial Advisor?

The service type you want, the portfolio size, and the compensation structure are the factors that need to be considered while determining the cost of a financial advisor. However, you will not find any standard cost that is applicable to financial advisors. A few advisors charge depending on the credentials and certifications. For instance, a financial coach can charge less than a CFP or certified financial planner.

Try to find such an advisor who can fulfil your requirements, such as making a suitable financial plan at a budget-friendly price range. But it never indicates that you need to choose the cheapest advisor. However, if you want, you can go with ones who charge higher fees and can provide an in-depth and detailed look at your finances.

You should ask the advisor about their fee structure, how to give their payments, what is included in their price range, before settling on an advisor.

How Are Financial Advisors Paid?

You should know that all advisors aren't paid in the same way. However, the payment structures depend on a few factors, including flat fees, commissions, or percentage of assets.

Fee-only:

This type of advisor can earn money when you give them payment for their services, and the fees may be hourly or flat. However, they can take the charges as a percentage of assets they are managing for you. But there are advantages when you work with this kind of advisor, i.e., the advisors are fiduciaries. In this case, you should know that a financial advisor who is working under fiduciary duty is needed by law for putting the best interest of the clients above their own. When you hire advisors, they may recommend some financial plans and products. Advisors should recommend such plans to the clients that suit their clients best instead of pushing them by those plans which can allow the advisors to earn them a commission.

Commissions:

There are some advisors working on commission. They earn money through sales commissions from third parties. But there are a few advisors who advertise themselves that they are "free" advisors. It indicates that they are not charging any money for their advice. But the money is earned actually through the commission.

Therefore, if you are going with a commission-based financial advisor, it's vital to proceed with cautions. Remember that these kinds of advisors are not fiduciary like the fee-only type. These advisors are salespeople with whom you should consult mainly for insurance brokerages & investment. They will not recommend their clients the best product as per the customers' needs.

But you should know that all commission-based financial advisors are not reliable. A few products are sold under a commission model, like life insurance. So, you must remember that they aren't held to the same care level as fee-only financial advisors.

Percentage of Assets:

Advisors can also charge their payments based on a percentage of the assets which they are managing. The average percentage is around 1% per year. For Robo-advisors, the charge is near about 0.25% to 0.5%. You will get more benefits if you have a large amount of assets as they need to pay less percentage rates compared to those who have a small amount of assets.

Should You Use a Robo-advisor?

These automated software platforms help to simplify investing. You can get these services at a much lower cost than in-person advisors. If you are going to use the robo-advisor due to the reasonable fees, you need to remember these have caveats.

These programs help to manage the money. But these software programs will not tailor a financial plan that is specific to the requirements of the clients. If someone is going to use this platform, he Or she will be asked several questions such as the present state of the finances, overall risk tolerance of the client, their financial goal, and so on. Based on the answer of the questions, the platform will give a pre-made portfolio.

There are a few robo-advisors that give an option that allows the users to add personalized financial services. But it charges extra fees for that.

How to Find a Financial Advisor:

When you start working with a financial advisor, it may happen that you have no idea from where you should start your search. Several professional financial planning associations give free databases. Here, we are going to mention a few professional financial planning association names. Let's check it.

• NAPFA (National Association of Personal Financial Advisors) 
• Garrett Planning Network 
• XY Planning Network ACP (Alliance of Comprehensive Planners)
• Ensure that you understand the services, the fees, and the costs charged by the financial advisor, before you settle on a particular advisor.

The bottom line:

Sometimes, you may find that hiring a financial advisor is an unnecessary expense. But you should remember that they can save money in the long run. Therefore, when you hire a financial advisor, before you sign, ensure that the advisors have transparent fees. You should generally go with such an advisor whose fee is less compared to the amount of money they save for you. You can verify any financial advisor via the government website before you sign documents or hand over the money. Is Financial Planning Expensive? What Is the Average Cost of a Financial Advisor? Is this question bothering you? Then you should know that In the year 2021, as per the Research of an Advisory HQ News Corp, the average fee of a financial advisor was 1.02% of AUM annually for a $1 million account.