Fee Based or Commission?
Most of our clients’ accounts are managed on a fee-basis where we do not receive commissions on transactions. Instead, we charge a percent of the overall assets we manage. Our maximum fee is 1.5% annually, which is charged on the first $100,000 managed. Assets above $100,000 are charged a lower annual fee which declines until it is only 1.0% for assets over $1 million with various breakpoints along the way. We feel this best aligns our interests with those of our clients. There is NO incentive for us to “churn” (make lots of trades) an account since it would not have any effect on our compensation. We only invest in ways that we feel will best benefit our clients. Our managed accounts are mainly comprised of individual stocks, options, closed-end funds, bonds and ETF’s (exchange traded funds).
While we strongly favor fee-based investment management, this does not mean that traditional commissionable products are bad or that advisors that use them are not as good. In fact, there are some commissionable products, such as variable annuities, that have desirable features that are not available in a fee-based environment. Also, for 529 plans (for education savings) and smaller accounts, fee-based management may not be as cost-effective or well-suited. In these cases, we might be more inclined to use traditional, commissionable products such as mutual funds and annuities. Any commissionable products recommended are NOT charged a management fee.