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Vast Majority of Investors Favor Fee-Based Relationships over Commissions

February 25, 2019

Advisors who still want to continue charging commissions for investment advice may soon be in want of clients, as the vast majority favor fee-based structures over commissions, according to a recent report cited by FA-IQ sister publication FundFire.

Eighty-seven percent of investors working with an advisor prefer asset-based, retainer or hourly fees, according to a new Cerulli Associates report cited by FundFire.

In all, 61% prefer asset-based fees, although Cerulli says hourly and retainer fees are becoming more popular, the publication writes.

Only 13% would rather pay commissions, Cerulli found, according to FundFire. What’s more, clients in fee-based arrangements are happier with their advisors, while those who pay commissions are the least happy, the publication writes, citing the report.

“More independent investors will generally favor costs tied directly to specific activity, but the advisor-reliant segment is far more willing to pay a comprehensive fee to outsource the bulk of its responsibilities,” Scott Smith, director at Cerulli, says in statement cited by the publication.

But advisors have much to gain from fee-based relationships themselves, since they create recurring revenue, according to the report cited by FundFire.

Scott Smith

On the other hand, investors also expect far more from such arrangements, the publication writes.

“The vast majority of people who are paying fees expect far more than investment advice,” Bob Matthews, CEO of Fieldpoint Private, tells FundFire.

By Alex Padalka
  • To read the FundFire article cited in this story, click here if you have a paid subscription.