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The sad part is that much of the current business model in the retail financial 'services' industry is built on obscuring what is in the end customer's best in
by not_that_noob 12y ago
The sad part is that much of the current business model in the retail financial 'services' industry is built on obscuring what is in the end customer's best interest. This is why Vanguard has so much money fleeing towards them. What gets me is how otherwise very intelligent and successful people (engineers, execs, doctors - you name it) get suckered into bad investments because of a slick person in a suit.
I really hope they push this rule through - it's in the best interests of so many hard-working Americans. Who cares if a few sharks have to starve? Maybe they can go sell used cars.
- JumpCrisscross 12y agoMaybe moving from a % of assets under management scheme is necessary. I would want an investment advisor to earn a fixed dollar amount per quarter, regardless of assets under management. A generous bonus would be given for a fraction of returns above a benchmark. A stiff penalty would be assessed for exceeding loss (e.g. you shouldn't lose more than 10% in any given year) or liquidity (e.g. you should be able to withdraw $50 000 with 2 weeks' notice without impairing your assets' values by more than 2%). Half of any commissions paid to third parties would be deducted from the advisor's fees. Any incentive payments offered by fund managers would be split, 50/50, between the advisor and the client (e.g. as fee waiver).
- gress 12y agoWhy would any advisor choose to work under such a scheme?
- tormeh 12y agoEveryone, if it was enforced by law as the only available conditions.
- db48x 12y agoIf it becomes unprofitable (or less profitable than the alternatives) they'll just get out of the business altogether. I dunno if that's a bad thing or not, but you can't say that everyone would go along with it, just everyone who was left.
- JumpCrisscross 12y agoBecause a good performer will make more with performance incentives than under a flat compensation model. That is why hedge funds are structured with performance bonuses - managers believe in themselves.
- gress 12y agoBut good performers today don't have a flat compensation model they have no downside risk and merely need to increase their assets under management.
- syedkarim 12y agoAgreed, so this would reduce the number of advisors in the market. They really don't provide much value anyway.