- Fee-Based Investment
- An investment account in which the advisor's compensation is based on a set percentage of the client's assets instead of on commissions. Contrast this to commission-based investment, in which the advisor makes money based on the amount of trades made or the amount of assets sold to the client.
The benefit of this type of account is that the advisor's interests are considered to be more in line with those of the investor. For example, if a client has an account worth $500,000 and the advisor's fee is 8% of the assets, the advisor is initially set to receive $40,000. But if the advisor were able to increase the value of the account to $600,000, he or she would then receive $48,000 - an increase of $8,000. On the other hand, if the account value falls, the advisor gets a lower commission payout.
Investment dictionary. Academic. 2012.
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