Fee Only or Commission What's Best for You

Financial Advisor Tim Hayes Boston & Dartmouth, MA | An Independent Consultant

Many financial advisors are dual-registered—that is, they are a registered representative of a broker-dealer and an investment adviser representative of an investment advisor.

Each registration has its requirements for the level of care. An investment advisor is a fiduciary. That means they owe the client a higher oath of loyalty. They must act in their best interest and disclose any conflicts of interest.

Registered Representatives are not fiduciaries. However, they do have a standard of care required called suitability. The advice they offer must be suitable for a client based on the customer’s particular situation. However, they do not have to show their or their employer or broker-dealer’s conflicts of interest.

Financial Planning Process

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Fee-Only Portfolio Management

Most of my asset management business (90%) is as an investment adviser representative (fiduciary) where I charge the client a level or flat fee only.

  • The fee charged depends on the size of your account and the complexity of your wealth management but it is never greater than 1%.
  • The accounts are primarily invested in mutual funds and exchange-traded-funds (ETFs). All the funds have passed my rigorous due diligence process.
  • It can include just about any account: IRAs, 403bs, joint accounts, personal brokerage accounts, etc.
  • After the account is set up you receive monthly statements and you can follow your account online with CirStatements.
  • We periodically meet to check the portfolio and to discuss performance and re-balancing and to check if you are on track to meet your goals.

Timothy P. Hayes, Earns Accredited Investment Fiduciary Designation from the Center of Fiduciary Studies

Commission-Based Asset Management

If the client has a smaller account such as a Roth IRA, 529 Plan, or a teacher saving in a 403(b) plan at work occasionally, I do receive commissions through my role as a registered representative.

Most of these clients end up paying less with a commission product. Moreover, maybe they do not need the same level of time as clients that pay an annual fee.

  • I use the same due diligence process for building your portfolio. 
  • The custodian for the accounts will be either Pershing, a Bank of New York Mellon company or directly with the fund family.

Diversification and Investment Portfolio Design

Past performance is no guarantee of future results. All investing involves risk. Depending on the types of investments, there may be varying degrees of risk. Investors should be prepared to bear loss, including total loss of principal. Diversification and asset allocation strategies do not assure profit or protect against loss.

Fee-Only

A Uniform Standard of Care

Under the 2010 Dodd-Frank Act, Congress directed the Securities and Exchange Commission (SEC) to study the need for establishing a new, uniform, a federal fiduciary standard of care for brokers and investment advisers.

The SEC recommended after the study that registered representatives adopt the same standard of care as investment advisors.

Having a uniform standard would make it easier for investors. As many are unaware that there are two standards and that the same financial advisor could be wearing both hats.

ERISA

If that is not confusing enough, there is already a third standard.

This is a fiduciary adviser that fall under ERISA. They have the highest standards. Unlike investment advisors who can have conflicts as long as they get disclosed. A fiduciary adviser must cut all conflicts.

Pension Consultant Boston

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