- 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.
Look at other dictionaries:
fee-based compensation — Payment to a financial adviser of a set hourly rate, or an agreed upon percentage of assets under management, for a financial plan. When the plan is implemented, the adviser may also receive commission on some or all of the investment products… … Financial and business terms
Fee-Only financial advisor — Fee Only financial advisors in the USA, as defined by the review materials for the Certified Financial Planner exam and the National Association of Personal Financial Advisors, are compensated solely by the client, typically achieved through a… … Wikipedia
Investment Advisor — As defined by the Investment Advisors Act of 1940, any person or group that makes investment recommendations or conducts securities analysis in return for a fee, whether through direct management of client assets or via written publications. An… … Investment dictionary
fee — A fixed amount or a percentage of an underwriting or principal. Bloomberg Financial Dictionary * * * fee fee [fiː] noun 1. [countable] COMMERCE an amount of money paid to a professional person or organization for their services: • If you want… … Financial and business terms
Investment Advisor (magazine) — Infobox Magazine title = Investment Advisor image size = 110px image caption = editor = [http://www.investmentadvisor.com/author.php?topic=1 James J. Green] editor title = Editor in Chief staff writer = Robert F. Keane Melanie Waddell Liana… … Wikipedia
Fulcrum Fee — An additional, performance based fee an advisor charges a client. The advisor charges the fee when he or she achieves a return above a specified benchmark. This is one of the only performance based fees that advisors are allowed to charge clients … Investment dictionary
Management Fee — A charge levied by an investment manager for managing an investment fund. The management fee is intended to compensate the managers for their time and expertise. It can also include other items such as investor relations expenses and the… … Investment dictionary
Advisor Fee — The fee that is paid to a financial advisor for recommending a load mutual fund based on the needs and time frame of an investor. Fees differ according to the class of mutual fund shares, and are paid to the advisor for recommending a fund that… … Investment dictionary
Utilization Fee — An annual fee assessed by a lender against a borrower. The fee is based on the amount of credit actually used by a borrower in a revolving line of credit or term loan. The fee is based on the actual amount of funds that is used from a line of… … Investment dictionary
Brokerage Fee — A fee charged by an agent, or agent s company to facilitate transactions between buyers and sellers. The brokerage fee is charged for services such as negotiations, sales, purchases, delivery or advice on the transaction. There are many types of… … Investment dictionary