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Definition of 'Fee-Based Investment'
An investment account in which the advisor's compensation is based on a set percentage of the client's assets instead of on commissions. Contrast this to commission-based investment, in which the advisor makes money based on the amount of trades made or the amount of assets sold to the client.
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Investopedia explains 'Fee-Based Investment'
The benefit of this type of account is that the advisor's interests are considered to be more in line with those of the investor. For example, if a client has an account worth $500,000 and the advisor's fee is 8% of the assets, the advisor is initially set to receive $40,000. But if the advisor were able to increase the value of the account to $600,000, he or she would then receive $48,000 - an increase of $8,000. On the other hand, if the account value falls, the advisor gets a lower commission payout.
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Fee-based accounts were banned in 2007, but a on a practical level, this service remains the same for investors.
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The way a professional is compensated can affect quality of service. Learn more here.
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Learn the pros and cons of this type of investing and whether it will work for you.
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Find out why the convenient, customizable UMA should be the next big thing in managed money.
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Meeting more of your clients' needs will help you achieve your financial goals.
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