If you have a large sum of money to be managed and you do not feel that you should be paying more simply because you have more money you can go for fee based adviser.Absolutely. So, why should the adviser get paid a different amount depending on how much money the client has under management?
If someone has $20M under management and someone else has $21M under management, do you give better advice to the person with $21M under management?
Obviously, if you spend more time advising a client you should be getting paid more, but more $$$ under management doesn't necessarily equate to more time spent on that client or more complex advice.
If someone with $100M is seeking preservation, that may require a whole lot less time, knowledge and effort on your part than someone with $10M seeking high-risk growth. Yet you're necessarily charging the $100M client 10 times as much.
So, not only are you getting paid regardless of results, but you're also getting paid regardless of how much time, knowledge and effort is specifically required for that client.
Again, long story short, your interests are not well-aligned with your clients' interests in the short-term.
They charge hourly like lawyers and doctors.
I am based in Singapore. This fee model is not poplar because people wanted free advice. Most adviser here are tied to a product distributor company. So they will recommend products that are affiliated to the distributor. So the client will be paying management fee to the funds recommend by the adviser. In return the distributer and adviser are paid sales commission.
There is always conflict of interest. And it is not limited to the finance industry. It really depends on how you vet the adviser and speak to someone whom you can trust and not for a quick buck.
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