Advisory vs Commission |
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Tke530
Rookie Joined: Jan/11/2021 Location: New England Status: Offline Points: 2 |
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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
Member Joined: Jul/05/2018 Status: Offline Points: 174 |
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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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Spaceman Spiff
Gold Member Joined: Mar/11/2010 Status: Online Points: 10546 |
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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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Guests
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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.
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memphis
Senior Member Joined: Apr/20/2020 Status: Offline Points: 718 |
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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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Wet_Blanket
Admin Group Team America (not iMo) Joined: Mar/10/2010 Location: New England Status: Offline Points: 43650 |
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The true 🤡 was the Biden voter all along.
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DucatiSportGT
Gold Member Joined: Jul/16/2013 Status: Offline Points: 18191 |
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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
Senior Member Joined: Oct/26/2010 Status: Offline Points: 1627 |
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Do both.
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"Act as if you are the MF bomb..... even if you are one of those snap pops you throw on the ground."
-gotplanning, 2/9/12 |
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apac
Senior Member Joined: Aug/06/2020 Status: Offline Points: 1551 |
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milk the cow dont kill the cow
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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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