Syracuse, NY
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[quote=Spaceman Spiff]I know it may sound hypocritical, but I think you’re both right. I LOVE the fact that Jones has given me another way to get paid for what I do through Advisory Solutions. I have prospects that I couldn’t even have competed for without AS. Met another one yesterday in fact. Another Mutual Fund store client. Said she knows she is paying a high fee. I can now talk with her about both A share mutual funds, fee based mutual funds, fee based ETFs, or commission based ETFs. Or individual stocks or bonds. This time last year I didn’t have two of those choices.
Each of us can argue our own side and make very compelling points. However, at the end of the day, the client has to make the decision about how, or if, they pay an advisor to do what we do. [/quote] Fundamentally, I agree, flexibility is a good thing. You have enough scale to create your own marketing mix of pricing. And the Mutual Fund store pricing can be too expensive, fund chasing can be stupid. But .... if you're completely honest with yourself, and us, .... I'll be we could sit down with some of your clients, and compare notes, and find that your pricing appears to be unfair. Some pay loads, some pay wrap. Some pay less and get more service. Or maybe not you, but let's face it, the way our industry prices service, you end up with a lot of competitive subsidizing, in order to win business. I'm not saying that's morally wrong, I just saying it's confusing. Obviously, the strong can play rougher, too. Wirehouses used to have the upper hand, the tides is turning to lower cost producers (margin compression). More power to you. Where applicable, don't be home office's chump. In many cases, the upfront commissions become the aggregating tools of newer rep's labor which becomes the profit (after fixed costs) for you and the partners. I remember the particular day in my life when I decided I was going to try to stop letting other people profit from my labor ... ironically, that has absolutely nothing to do with unions ... or top heavy corporate structures. The result is a win- win for client, and advisor.And also, is it fair to use the commissions from new clients, to subsidize “old” clients. Is it fair to let “big” clients subsidize little clients? By “fair”, I mean, you are a professional. Your pricing structure should reflect your time allocation, with the exception of pro bono work, to make sure clients get value. And what about fair to you? Some guy pays you a commission, and ten years later you’re his slave for a few hundred bucks a year. That’s unprofessional, and more people see or understand or sense how you’re working than you may realize. And built-in to this is some are some automatic hosing mechanisms, certain products that are purchased probably more as a function of trust or intelligence than economic reality. Commission based, of course, for “leverage”. For example, the market is down, interest rates are down, and fixed annuity sales are way, way up. I’m sure some are appropriate, on the other hand, it’s harvest time for that segment. And here you stand, defending the status quo, while you’re really getting hosed. Kind of Shakespearean, in a tragic sort of way. The huge irony is, the traditional core of the b/d industry has been poisoned, but there’s hope for recovery.
Regardless of your justification, you are not doing what is right for your client. You are overcharging them on fees to fill your pocket. Go find new clients to work with, don't overcharge the ones you have because I steal those clients away everyday by doing what is right for THEM.[/quote] If lower fees are your justification then if you were really doing whats best for the client you'd draw up a good Vanguard allocation for them to go implement w/no loads and .2% annual fees. [/quote] Sure. Instead of charging 1%, charge .5%, plus the .2% internal Vanguard fee. If you can operate at that level. Or, just keep collecting 1/2 of .25 12b1 ( and the client pays .8 internal fund fees on the A share). This is about YOU and the client getting ripped off by other people, if you don't understand all of this, just keep doing what you're doing until you get it.[quote=CreditOnion][quote=Mishigun]I think you’re a little out of touch. By the time the time you run the #s, pay the fixed costs of the business, a provide a quality product, you can’t afford to do it for less than 1%. I don’t know about your situation, but most business people herewould probably agree. It’s fun to say “what a rip off for the client” and provide anecdotal evidence, it’s another to fly solo and provide real value for real clients over a long period of time. If you’re selling A shares you’re obviously hooked in with a b/d, you’re carrying a ton of costs with (hidden) fees. Whatever, I don’t care about your business.
In truth, if I charge an annual fee of 9%, it’s disclosed, shown on the statement as a hard charge and the client agrees to it, that is infinitely better than A share funds that the client has no friggin clue what they pay. Credit Onion, call your top 5 clients Monday and have them tell you what they paid in fees last year, all in (Load, 12b-1, CDSC - if applicable etc.). The right compensation plan for the advisor is the one the client trusts - period!