High net worth individuals (HNWIs) often prefer fee-based investment accounts for reasons that include reduced conflicts of interest, transparency, efficient portfolio management, and savings on commissions and other fees. There are different interpretations as to what "high-net-worth individual" actually means, but one common figure given is an investor with more than $1 million in liquid financial assets. HNWIs may believe that commission-based financial advisers have inherent conflicts of interest and are more interested in earning commissions for themselves than in providing solid investment advice to their clients.

Many HNWIs think that fee-only financial advisers have fewer inherent conflicts of interest and therefore provide better and more comprehensive financial guidance. Most fee-based advisers have a fiduciary relationship with their clients, meaning they have an ethical duty to act in the best interests of their clients. Commission-based brokers do not necessarily have a similar fiduciary duty. Many fee-based advisers have professional designations that require education and passing exams. As such, these fee-based advisers may be able to provide more holistic financial advice to clients on a wider range of issues. Thus, fee-based advisers may consider the overall financial picture of their clients. A commission-based adviser is more likely to be focused on the amount of commissions that can be earned from investments made by the HNWI.

Fee-based advisers vary in how they charge their management fees to clients. Some advisers charge a percentage of the assets under management. Typical fees can range from 0.5 to 2%. Other advisers may charge for financial advice on an hourly basis. These fee structures can simplify what HNWIs are paying for, rather than commission-based advisers who charge many different types of fees and expenses. HNWIs may be able to deduct management fees for tax purposes, as opposed to commission-based accounts, where the commission is figured into the cost basis for the investment.

Commission-based financial advisers have a number of inherent conflicts of interest with their clients, especially HNWIs with substantial assets. The more often clients trade, the more commissions those advisers earn. In addition, those financial advisers often push funds with front-end loads or rear-loaded fees. These investment vehicles may not be in their clients' best interests. The loads are paid to the investment advisers as commissions. The explanation provided for the commission is that the investor is receiving the adviser's guidance in selecting an appropriate fund to invest in.

However, these loads are deducted from the investment amount and cut into the possible returns for the investment. With the wide availability of no-load funds and no evidence of increased performance from load funds, there is often very little benefit to a HNWI to invest in funds that have loads.

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