How are fees and commissions applied to my holdings:
Information found at: https://www.investopedia.com/articles/basics/04/022704.asp
- A fee-based advisor charged with actively managing a portfolio would likely charge a percentage of the assets under management.
- In contrast, a commission-based advisor’s income is most based on a commission from the products they sell or a recurring payment, called a trail, the investment pays to them. Products for commission-based advisors include financial instruments (such as insurance packages and mutual funds) or stocks, bonds, or ETFs they earn commission on.
- The Bottom Line: There’s no one simple answer. Fee-Only investment advisors will be better for some investors, while commissioned-based products and services may be better for others. This should be determined based on goals, time-horizon, and possibly even account size. The key is to understand the differences of each beforehand and to understand WHY an advisor is recommending a certain investment to ensure that you’re best interests are being represented.