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Advisory vs Commission

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Tke530 View Drop Down
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    Posted: Jan/11/2021 at 9:45am
Hi folks.  I joined today to get some anonymous feedback from my peers.  So tell me what you think.

My branch manager/sales manager is encouraging the advisors here to favor commissionbased transactional business over fee based advisory business.  Is this ethical or even legal?  

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DRCap View Drop Down
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Post Options Post Options   Thanks (0) Thanks(0)   Quote DRCap Quote  Post ReplyReply Direct Link To This Post Posted: Jan/11/2021 at 10:15am
Yes it can be ethical. Yes, it is certainly legal if it is what's in the best interest of the client and all of this is a bit subjective.

That being said you are stupid not to prioritize recurring revenue. If that means annuities with a trail or advisory accounts with ongoing revenue&service then you really are shooting yourself in the foot if you do not prioritize this. You just have to eat shit for a couple years until your recurring turns into a healthy 'salary' and eventually you'll get over the peak of the hill.
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Post Options Post Options   Thanks (0) Thanks(0)   Quote Spaceman Spiff Quote  Post ReplyReply Direct Link To This Post Posted: Jan/11/2021 at 12:07pm
As a guy who spent the first 15 years in the business doing 90% commission business and then switched to fee based for most clients, I can tell you which one I prefer.  

But, it’s up to your client to decide.  

I guess the bigger question is why does your guy recommend commission vs fees?   Does he have a good rationale for it?   And what do you think about it?
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helado View Drop Down
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Post Options Post Options   Thanks (0) Thanks(0)   Quote helado Quote  Post ReplyReply Direct Link To This Post Posted: Jan/11/2021 at 12:14pm
The other posts are spot on.  Your manager is most likely a dirtbag and has ulterior motives (possibly that he doesn't expect you to survive and wants you to generate revenue while you're employed).

Sure, commission business CAN be cheaper for the client sometimes, but in practice, it rarely is unless they are very long term focused (don't change fund families, don't change advisors, etc.).  

Do yourself a favor and work on a fee-basis if you can (and take trails on annuities if you do that business) and your clients.  

The regulatory tide is trending towards fees as well.  Commissions have been illegal in the UK for about 10 years now.  I wouldn't be surprised to see us there someday too.
My posts are for abrasive entertainment only. Nothing posted is investment, legal, tax or any type of advice, nor is anything mentioned true or even based on real events. Posts are complete fiction.
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Post Options Post Options   Thanks (0) Thanks(0)   Quote memphis Quote  Post ReplyReply Direct Link To This Post Posted: Jan/11/2021 at 12:16pm
I'm not going to comment on the best interest stuff; there's some room for nuance there.

But commission means eating what you kill, and it can be feast or famine.
Fee based means actually growing a real business with recurring revenue that can support a service model.
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Post Options Post Options   Thanks (0) Thanks(0)   Quote Wet_Blanket Quote  Post ReplyReply Direct Link To This Post Posted: Jan/11/2021 at 12:22pm
Originally posted by helado helado wrote:

The other posts are spot on.  Your manager is most likely a dirtbag and has ulterior motives (possibly that he doesn't expect you to survive and wants you to generate revenue while you're employed).

Sure, commission business CAN be cheaper for the client sometimes, but in practice, it rarely is unless they are very long term focused (don't change fund families, don't change advisors, etc.).  

Do yourself a favor and work on a fee-basis if you can (and take trails on annuities if you do that business) and your clients.  

The regulatory tide is trending towards fees as well.  Commissions have been illegal in the UK for about 10 years now.  I wouldn't be surprised to see us there someday too.
I recall years ago a pretty good thread from one of the members here (when they were new) when they were pressured to build commission but they did slow and steady and built a fee based business from the ground up.  Don't recall who that was.
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DucatiSportGT View Drop Down
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Post Options Post Options   Thanks (0) Thanks(0)   Quote DucatiSportGT Quote  Post ReplyReply Direct Link To This Post Posted: Jan/11/2021 at 12:43pm
I'll be the one to ask it. What firm are you with? 
Either this manager doesn't expect you to make it or doesn't expect his office to make it.
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RickRoss View Drop Down
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Post Options Post Options   Thanks (0) Thanks(0)   Quote RickRoss Quote  Post ReplyReply Direct Link To This Post Posted: Jan/11/2021 at 3:20pm
Do both.
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apac View Drop Down
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Post Options Post Options   Thanks (0) Thanks(0)   Quote apac Quote  Post ReplyReply Direct Link To This Post Posted: Jan/11/2021 at 8:37pm
milk the cow dont kill the cow
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HCCWManager View Drop Down
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Post Options Post Options   Thanks (0) Thanks(0)   Quote HCCWManager Quote  Post ReplyReply Direct Link To This Post Posted: Jul/14/2021 at 1:55pm
Not sure how much longer commissions will be here at this point. Mutual funds are going to NAV faster and faster. Stocks and ETFs are $0 trades almost everywhere now. Right or wrong, that's the reality.
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