As my clients know, my philosophy has always been for the client to keep and invest all their money themselves and not pay a percentage of what they have to an advisor to manage their money for them. In the financial industry, this is called AUM or Assets Under Management. History tells us that a professional money manager, over a long time frame, can’t beat a broad-based index fund, which is why I recommend broad-based index funds to my clients. Future blogs will talk more about this.
Advisors who charge fees for assets under management can call themselves fee-only planners, because they aren’t selling you products and making a commission from those sales. When commissions are involved there is an incentive for the advisor to sell you the products that they have available to them and/or make them the most commission. What’s best for you, may not carry as much weight as it should.
For an advisor who charges you a percentage of your investable money (AUM), they have an incentive for you to not do anything else with your money if it reduces the amount of money (assets) they can invest (manage) for you, thereby reducing the amount of money they are charging you.
As you can see from the article at this link, things may be changing …