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FEE Based

A fee-based investment is a financial product or service offered by a bank or financial company for which the advisor is compensated with a fee plus commission. A fee-based pricing structure is one of several a financial professional may use.

A fee-based investment refers to financial products or services in which the financial professional offering it is compensated with a fee plus commission. The professional selling the product or service is called a “fee-based advisor” and you typically find them through a bank, insurance company, mutual fund company, or some other financial institution. Fee-based investments can include stocks, mutual funds, insurance, and more.

Let’s say you’re discussing fees with an investment advisor for managing your investments. The advisor explains they charge an annual fee based on a percentage of the total value of the assets in your account. Additionally, each trade you or the advisor executes in your account would be subject to a commission fee (1% of the trade value). Since the advisor charges an annual percentage-based fee plus a commission (1%) for each trade executed, you would be making a fee-based investment.

How To Get A Fee-Based Investment

When seeking a financial advisor for fee-based investments, consider asking for referrals from your family, friends, and colleagues. Just be sure your financial goals and values align with theirs. You can ask your tax specialist or attorney for recommendations, too.

Keep in mind that some financial firms have net worth requirements. Others may work with specific groups, such as small businesses or nonprofit organizations. You may need to shop around before settling on a fee-based advisor suitable for your needs.

Key Takeaways

  • A fee-based investment refers to when a financial advisor is compensated by a base fee plus commission.
  • Fee-based investments are available through financial consultants at a bank, investment company, or other financial institution.
  • Fee-based investments can be related to investing, insurance, and more.
  • The commission aspect of the fee-based compensation model presents a potential conflict of interest for investors.
  • Fee-based advisors may charge a flat fee, hourly rate, or a percentage of the market value of assets being managed, but they do not earn a commission.