Have Questions?
We have Answers

Click Here to send us a question
and to receive answers from our Experts

Should Wealth Advisors be Compensated with Commissions or Set Fees?

by Chris Cooper, Financial Planning Expert
May 12, 2017

Question: Is it better to hire a wealth advisor who is compensated by commissions or by set fees?

Answer: There is no legal definition nor license of a “wealth manager”.  It is a euphuism for a registered representative of a broker/dealer, an annuity salesman (which is a licensed life and health insurance agent) and/or, an investment advisor.  All three can receive commissions and other compensation from investment product manufacturers and insurance products.  The fees you see being charged by an investment advisor, or a mutual fund or an annuity are all part of the compensation of the manufacturer, the distributor and the salesman. 

So the question you must ask a “wealth manager”  is: WHAT ARE YOU? Are you a captive sales person for a brokerage firm such as Merrill Lynch, Morgan Stanley or insurance companies such as Mass Mutual, NY Life,  and others?  Or are you a distributor licensed as a registered representative of an independent brokerage firm such as LPL, Royal Alliance, and others?  Or are you a standalone registered investment advisor, meaning the salesman is NOT a registered representative of a brokerage firm?  Or are you a trustee or trust company?  

Only trustees, trust companies and registered investment advisors are held to a fiduciary duty, whereas insurance agents and registered representatives are NOT.  So wouldn’t you want someone who is held to a higher standard and duty of care to manage your wealth?

Chris Cooper is the owner and founder of Chris Cooper & Company, Inc., a fee-only financial planning firm for elderly persons and the owner and founder of ElderCare Advocates, Inc. a private geriatric care management and long term care consulting firm. As a California Licensed Professional Fiduciary, Chris can serve as  Conservator of the Person and Estate under court appointment,  as Agent under a Durable Power of Attorney for Financial matters and Health Care matters.

See more of Chris Cooper's expert answers

Your Answers and Comments

Post your answer or comment
You must be logged in to post a comment

Previous Expert Q & A

More Previous Expert Q&A