No. of Recommendations: 0
"This doesn't make much sense to me, at least from someone who was just defending commission-based situations. What's the difference for paying a 1% commission from a commission-based broker that averages to $500 on any given year, and paying a $500 annual fee for advice... answer: nothing. Except you know the annual fee guy won't try to trade you in and out of stocks to make himself money. "

Then I will try to clarify:

If a person buys 10K in a fund family as an IRA Rollover, they could pay a few hundred dollars for an hourly rate ever year for advice. They would pay about 1.0%+ for a wrap account but generally those require around 50K or more, or they could pay around $500 once and forget about it.

Now if I was sleezy, I could see that the best way to make money in the long run would be to "annuitize" my business by pushing the client into a wrap account or simply paying an annual fee for advice. If I make 1% a year off their money in a wrap, I would make $1000 by year ten. If I get paid based on advice, I would charge around $135 or more for advice would have made $1350 by year ten. If I simply sold them a fund, I would have made a little over $500. I would have to do something sneaky -- and risky, if I wanted to get more money out of that same bucket.

The FA that gets paid based on advice is not impact by what fees the client may have to pay. I have worked with a FA for life insurance and certainly respect what they do but I would not use him again as it is simply too expensive for on-going visits -- and I still paid the same fees as if I would have went direct to the life insurance company in the first place.
Print the post  


The Retirement Investing Board
This is the board for all discussions related to Investing for and during retirement. To keep the board relevant and Foolish to everyone, please avoid making any posts pertaining to political partisanship. Fool on and Retire on!
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.