Why aren't there advisor fee structures that are more fair to the client?

Is there a financial advisor that has a fee based on the percentage of profit made from the investments that they recommend and make with a client's money? This seems like a fair way to structure client fees. For example, if a client's portfolio sees a gain of $10,000 at the end of the year, the financial advisor takes a pre-negotiated percentage of the profit. If the portfolio has no growth or a loss for that year, than there should be no fee. Right now, my advisor is the only one making money off of our investments, and I am suffering losses from fees on top of losses from investments. Why isn't there a more fair fee structure implemented by financial advisors?

Investing, Asset Allocation, Choosing an Advisor
Answers
Sort By:
Most Helpful
August 2017
100% of people found this answer helpful

It boils down to his or her role as a fiduciary. If his fee is based on a percentage of profit each year, it may lead the advisor to recommend riskier or more aggressive investments throughout the year. These investments will have the potential for larger returns (good for the advisor) but also have the potential for larger loss (bad for the client). If you make a good profit he will take a cut, but if you lose in this scenario there isn't much of a downside for the advisor.

If you are aren't seeing the profit you are happy with, it may be time to look for a new financial advisor.

August 2017
August 2017
August 2017
August 2017