Fee-only advisors are paid solely by the client and do not accept any fees or compensation based on the product that they sell.What are 12b1 Fees?
A 12b-1 fee is an annual marketing or distribution fee on a mutual fund that includes ongoing commissions that are paid to financial advisors for recommending the fund to clients.How do Blended Rates work?
Advisors typically use a graduated fee structure that provides rate breakpoints as the value of the account increases. For instance, an advisor may charge 1.5% on the first $500,000 invested, 1.0% on the next $500,000, then 0.5% on anything above $1M. In this example, the blended rate for a $2M portfolio would be 0.875%. Each tier has a unique fee that's blended into the total fee charged.
Assets Under Management (AUM) is the total value of assets being managed by a firm.What is a custodian?
A financial institution that provides account administration, facilitates trading, and physically holds investor assets for the firm.
An independent agency of the US government responsible for regulating futures and option markets. This commission regulates derivatives, crude oil, foreign exchange rates, and digital or crypto currencies.Who is the SEC?
A federal government agency that enforces securities laws, protects investors, and regulates capital formation.What is an SRO?
A non-governmental organization that protects consumers by creating and enforcing industry regulations and standards that promote ethics and equality.
A Registered Investment Advisor (RIA) as well as a broker-dealer. While many hybrid firms follow a fiduciary standard that requires them to act in the best interest of their clients, firms that have broker-dealer ties are more likely to have conflicts of interest, meaning they do not always follow a fiduciary standard.What is an Insurance Agent Conflict?
When a firm or their affiliate(s) actively engage in insurance sales, advisors may be incentivized to insure clients with products that generate high sales commissions when lower cost alternatives may exist.What is an Attorney Conflict?
When a firm, or one of their affiliates, also practices as a law firm, advisors may be incentivized to implement plans as an attorney that would drive higher commissions for themselves as investment advisors.What are Performance-Based Fees?
Also known as fulcrum fees, Performance-based fees utilize a compensation structure that pays an advisor an adjustable percentage of capital gains based on their performance relative to a benchmark.What is Side-by-Side management?
When a firm manages accounts that have differing fee structures, investment advisors may be incentivized to favor clients that pay higher fees over others.What are Soft-Dollar Benefits?
Soft dollars are benefits broadly defined as “research” that a broker provides to a financial advisor in exchange for commission-generating trades. These benefits, that include industry reports, expensive data services, and even conference tickets, could incentivize an advisor to push trades through broker-dealers that provide advantages to themselves and their firms instead of through a broker that could provide the best execution for their clients.