Should commission-based compensation stay?

Should commission-based compensation stay?

Should commission-based compensation stay? Three industry insiders give their views on this contentious issue. 


Jason McIntyre, Head of distribution, Vanguard:

“A value proposition based on performance alone puts an advisor at a disadvantage. Not only does success depend on factors outside the advisor’s control, such as the returns from individual securities or professionally managed funds, but the strategy also can promote a horse-race mentality among clients, leading them to depart if the promised outperformance does not materialize.

On the other hand, fee-based guidance changes the conversation, creating an incentive for advisors to demonstrate how they add value beyond performance. Because compensation is more transparent, advisors can show how they add value.”


Allan Johnson, Financial advisor, Allan L. Johnson Financial Group:

“A 1% trailer or 1% fee on a $50,000 account is only $500 for the year. Most everyone has to split this with their dealer. We must send four quarterly statements per year. We provide everyone 24/7 web access to their accounts. We provide everyone with a monthly newsletter. We have a staff of five. Nobody asked us what the costs are to provide the levels of service we offer. If the focus is only on making money, like they seem to suggest, then the prudent thing to do will be to fire 60% of my clients. Many of my friends and their families just don’t have a minimum of $250,000 to invest. Who is supposed to provide these folks with advice?”


Robert Roby,  Senior wealth advisor, The Roby Retirement and Wealth Team:

“Moving to a brokerage account to save commissions is typical of the mentality of the powers that be. They fail to understand the value of utilizing a professional, [even though it’s been] proven that after fees, investors with professional advisors have substantially more assets than those who don’t. The focus on fees is very prejudicial to advisors and to investors who fail to see any value. It’s been proven in Britain and Australia. If an advisor can keep the emotion out of his/her decision-making, that would be a marvel.

It’s this kind of mentality that is hurting the general investing public rather than helping them.”