Our “Off The Wall” Blog
is now Monument #Unfiltered

Subscribe below to receive our unique, straight-forward, unfiltered wealth advice delivered straight to your inbox.

When Advisor Commissions Are Better Than Annual Fees

U.S. News and World Report Smarter Investor

Fee-only isn’t the only way to go.

Commissions have become a dirty word in the advisory world, but I’m not sure they are as evil as everyone makes them out to be. There are several ways financial advisors can charge for the advice they give or the recommendations they make.

One method is to charge an investor a fee based on the percentage of assets under management. This fee can and should be adjusted up or down depending on the services that the advisor provides. The benefit to an investor is that as his or her assets grow, the advisor makes more money. If the account goes down in value, the advisor makes less money. There is obviously an incentive for the advisor to grow the assets under management and minimize losses.

This is a pretty good deal for everyone, and a lot of investors and advisors prefer this fee structure.


Another common compensation method is the commission model, which is generally clear-cut. Advisors are compensated by collecting a fee (commission) from the client to conduct a transaction. When an investor decides to buy or sell a security, the advisor receives a commission regardless of whether the client profits or not. This is a good deal when you are planning to buy and hold an investment for a long time.

Different assets can be best served by different types of advisors. For example, a lot of advisors like to recommend investment strategies that include a municipal bond portfolio. This is fine, except when it is not. However, for wealthy individual investors, I don’t think it’s ever appropriate to hire a bond manager and pay them (and the advisor) a fee to manage something that should be bought and held to maturity.

If an investor’s financial plan calls for a portfolio of municipal bonds, it makes sense to pay an advisor a commission to build a portfolio of municipal bonds. It costs less to buy a complete portfolio of laddered bonds and replace them as they mature through a commission structure than to pay a manager an annual fee to simply babysit the bonds.

This is the same reason you pay a commission when you buy a house. Would you ever pay an annual fee to a real estate agent who has nothing to do with your home for the 10 years you live in it?

David B. Armstrong CFA, is a Managing Director and co-founder of Monument Wealth Management in Alexandria VA, a full service Private Wealth Planning and wealth management firm. Monument Wealth Management is backed by LPL Financial, the independent broker-dealer and Registered Investment Advisor. He has been named one of America’s Top 100 Financial Advisors for two straight years byRegistered Rep magazine (2009 & 2010) based on asset under management. David and Monument Wealth Management can be followed on their blog at “Off The Wall”, their Twitter account@MonumentWealth, and on their Facebook page. Member FINRA/SIPC.

*The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendation for individual. To determine which investment is appropriate please consult your financial advisor prior to investing. All performance references is historical and is not guarantee of future results. Municipal bonds are subject to market and interest rate risk if sold prior to maturity. Bond value will decline as interest rate rises. Interest income may be subject to the Alternative Minimum tax. Municipal bonds are federally tax free but other state and local taxes may apply. Securities and financial planning offered through LPL Financial, Member FINRA/SIPC.

Read this article on U.S. News & World Report >>


Please remember that past performance is no guarantee of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Monument Capital Management, LLC [“Monument”]), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.  Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Monument. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. No amount of prior experience or success should be construed that a certain level of results or satisfaction will be achieved if Monument is engaged, or continues to be engaged, to provide investment advisory services. Monument is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice.

A copy of Monument’s current written disclosure Brochure discussing our advisory services and fees is available for review upon request or at www.monumentwealthmanagement.com/disclosures. Please Note: Monument does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to Monument’s website or blog or incorporated herein, and takes no responsibility for any such content. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly.

Historical performance results for investment indices, benchmarks, and/or categories have been provided for general informational/comparison purposes only, and generally do not reflect the deduction of transaction and/or custodial charges, the deduction of an investment management fee, nor the impact of taxes, the incurrence of which would have the effect of decreasing historical performance results.  It should not be assumed that your Monument account holdings correspond directly to any comparative indices or categories. Please Also Note: (1) performance results do not reflect the impact of taxes; (2) comparative benchmarks/indices may be more or less volatile than your Monument accounts; and, (3) a description of each comparative benchmark/index is available upon request.

Please Remember: If you are a Monument client, please contact Monument, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services.  Unless, and until, you notify us, in writing, to the contrary, we shall continue to provide services as we do currently. Please Also Remember to advise us if you have not been receiving account statements (at least quarterly) from the account custodian.

Get Monument #Unfiltered: Our Free Private Wealth Newsletter

Our no B.S. wealth advice delivered 2x per month, max. Tuned specifically for busy, high-net-worth business professionals and investors who want straightforward advice without the fluff.