Is a fee-based account better than a commission-based account?
It sure is, if you have enough assets to open one. Here’s the deal: The more traditional financial advisor set-up is commission-based where the broker gets paid each time you make a transaction. When you hire a financial planner who works within the fee-based model, you’re going to get their advice and recommendations all year long on how to manage your portfolio and buy and sell as much as you want without her getting a commission for each trade. It’s especially appealing if you keep up with the market and give your planner lots of direction -- why should they earn money on a trade that was your idea? And you feel more confident knowing any trade they suggest is one they feel will make you money, not just them wanting you to buy so they earn a commission. Their piece of the pie comes from a yearly or quarterly percentage of your assets, 1 percent for example. That’s why people are often required to have at least $50,000 invested; otherwise the planner wouldn’t earn much dough. Your planner is going to be quite motivated to turn your $100,000 account into a $200,000 and that’s good for both of you.
-- Alonna Friedman