To fee or not to fee, that is the question.

It means you earn a percentage of the assets you manage (usually around 1%) instead of receiving a commission for every trade you make.

I would say most advisors do a combination of the two in their practice.  Some clients are fee-based, and some are transactional depending on their needs.

So…why don’t you call it “asset” based fees? The term “fee-based” sounds illogical to logical people. When I take an upfront commission on an annuity, aren’t I getting paid based on a percentage of the assets?

Fee Based means an advisor charges some combination of Fees and Commissions.  This opposed to Fee Only.

[quote=OhioAdvisor]Fee Based means an advisor charges some combination of Fees and Commissions.  This opposed to Fee Only.[/quote]

Then why don't they call it "commission based"? Isn't a commission a fee?

[quote=OhioAdvisor]Fee Based means an advisor charges some combination
of Fees and Commissions.  This opposed to Fee Only.[/quote]



Are you saying that it is possible for me to be charged a fee for
giving me advice and also a commission for obtaining what is
recommended?

[quote=Jones Concerns][quote=OhioAdvisor]Fee Based means an advisor charges some combination of Fees and Commissions.  This opposed to Fee Only.[/quote]

Are you saying that it is possible for me to be charged a fee for giving me advice and also a commission for obtaining what is recommended?
[/quote]

Don't ask her what she's saying...she doesn't even know what she's saying.

I’ve never collected a commission in a fee-based account.  I always thought of it as fee-based vs. commission-based, as in you get one or the other…not both.

[quote=Jones Concerns][quote=OhioAdvisor]Fee Based means an advisor charges some combination
of Fees and Commissions.  This opposed to Fee Only.[/quote]



Are you saying that it is possible for me to be charged a fee for
giving me advice and also a commission for obtaining what is
recommended?

[/quote]

No.  The fee covers virtually all investment transactions in a given account.  You won’t see any transactional income unless you cross sell something not covered by the fee (such as insurance or business services).

What makes “fee based business”  attractive I believe is the recurring nature of the revenue stream. Win, Win, Win for employer, employee and mr. client we hope.

If Mr. or Ms. Client doesn't trade a lot and his/her account is passively managed and fairly large, it's not in his or her best interests to have a fee based account.

[quote=ymh_ymh_ymh]

If Mr. or Ms. Client doesn’t trade a lot and
his/her account is passively managed and fairly large, it’s not in his
or her best interests to have a fee based account.

There’s always performance based accounts which mean Mr. and/or Ms. Broker don’t get paid a BONUS unless Mr. and/or Ms. Client’s returns exceed an agreed upon benchmark.

There is a major issue with commissioned business in "A" shares that can't be overlooked.

Let's take a buy and hold type investor.  The cheapest way for them to invest is obviously to buy "A" shares.  However, with "A" share investors, advisors can't afford to give them the same level of service that they give to "C" shares or fee based accounts.  Often, advisors can't afford to give them any service.

[quote=ymh_ymh_ymh]There’s always performance based accounts which mean Mr. and/or Ms. Broker don’t get paid a BONUS unless Mr. and/or Ms. Client’s returns exceed an agreed upon benchmark.[/quote]

I’m aware this comp structure is common, even the rule, in the hedge fund arena.  I’ve never heard of a retail advisor being compensated in such a fashion.

[quote=anonymous]

There is a major issue with commissioned business in “A” shares that can’t be overlooked.

Let's take a buy and hold type investor.  The cheapest way for them to invest is obviously to buy "A" shares.  However, with "A" share investors, advisors can't afford to give them the same level of service that they give to "C" shares or fee based accounts.  Often, advisors can't afford to give them any service.

Why can't you ask a question without throwing in a dig?   Let's assume that we're dealing with an honest, hardworking, ethical, knowledgeable broker who wants to do what is in the client's best interest.  Without the dig, you're asking a legitimate question.

Small clients are very worthy of service.  They deserve the same level of service as a wealthy client.  The question is how can the advisor afford to serve small clients and stay in business. 

An advisor, early in his career, may be very happy to help a client invest $10,000 into an "A" share mutual fund.  A few years later that account pays the B/D $25 a year.  Maybe, the advisor is making $2.50 a quarter.  The advisor can't afford to service these types of accounts and support his family.  This is a lose/lose for everybody involved. 

I think it would be possible to offer a retail investor a hedge fund like structure if it was spelled out in writing though no wirehouse in the world would want an advisor to do it as wirehouses don't believe in giving a retail investor or a broker/advisor what they deserve.

I don't see why some of you independent guys/gals haven't considered this before.

[quote=ymh_ymh_ymh]....though no wirehouse in the world would want an advisor to do it as wirehouses don't believe in giving a retail investor or a broker/advisor what they deserve.[/quote]