As Firms Move Toward Fees, Investors Are Resistant

March 16, 2017

As Firms Move Toward Fees, Investors Are Resistant

Some firms are betting big on fees, yet nearly six in 10 commission-based investors say they’ll likely ditch their firm if forced into a fee account.

March 15, 2017 | by Diana Britton | WealthManagement.com

The Department of Labor fiduciary rule, which may or may not go into effect April 10, has caused many broker/dealers to rethink their business models and move away from commissions towards a more fee-based approach. Yet nearly six in 10 (59 percent) investors who pay commissions say they probably won’t or definitely won’t be willing to stay with their current firm if they’re forced into a fee-based structure in their retirement accounts, according to a new study by J.D. Power.

Many b/ds are taking a big bet that investors will prefer to pay an asset-based fee for financial advice over the long term. Late last year, Merrill Lynch said it would stop offering commissions in retirement accounts, but the firm recently said the account conversions may not apply to all of its customers. Commonwealth Financial Network won’t allow commissions in retirement accounts, according to published reports.

As a result, investors will be faced with a choice, writes Michael Foy, director of the wealth management practice at J.D. Power. They will either choose to stay with their firm and switch to a fee-based model, move to another firm that will allow them to continue to pay commissions, move to a self-directed service model with a call center, or move to a robo advisor.

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Gregory De Jong, CFP, Co-Founder of Paragon Advisors, LLC.
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Blue Vault is just what advisors need to size up the different offerings in the nontraded REIT market. Just as importantly, it’s what the industry needs to encourage best practices among REITs.