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Great article in the WSJ, featuring Dr. Michael Finke from The American College.
Here's a few great paragraphs:
Still, the fee-based structure can tempt advisers to make recommendations that maximize a portfolio balance, even when doing so isn’t in a client’s best interest, according to academics and researchers.
[...]
“Fee-based compensation is generally considered less prone to abuse than commissions, but we’re seeing some behaviors among fee-only advisers that also represent clear conflicts of interest,” said Michael Finke, a professor at the American College of Financial Services.
[...]
But advisers stand to earn more fees when their clients claim Social Security soon after retiring, because clients don’t take as much from their portfolios.
[...]
If the client withdraws $500,000 from the portfolio to eliminate the mortgage, the account balance and adviser’s pay halve.
[...]
“Whether an adviser chooses to recommend the right thing for the client or not, it would be naive to think their own pay doesn’t enter their mind,” Moore added.
[...]
Advisers don’t generally share in economists’ enthusiasm, said Finke, perhaps because buying an annuity generally means moving money out of an investment account.
Here's a few great paragraphs:
Still, the fee-based structure can tempt advisers to make recommendations that maximize a portfolio balance, even when doing so isn’t in a client’s best interest, according to academics and researchers.
[...]
“Fee-based compensation is generally considered less prone to abuse than commissions, but we’re seeing some behaviors among fee-only advisers that also represent clear conflicts of interest,” said Michael Finke, a professor at the American College of Financial Services.
[...]
But advisers stand to earn more fees when their clients claim Social Security soon after retiring, because clients don’t take as much from their portfolios.
[...]
If the client withdraws $500,000 from the portfolio to eliminate the mortgage, the account balance and adviser’s pay halve.
[...]
“Whether an adviser chooses to recommend the right thing for the client or not, it would be naive to think their own pay doesn’t enter their mind,” Moore added.
[...]
Advisers don’t generally share in economists’ enthusiasm, said Finke, perhaps because buying an annuity generally means moving money out of an investment account.
