The first step is to admit you have a problem. And some brokers have done just that. In a recent study, brokers confessed that they are “addicted” to commissions, according to Investment News.
In a Charles Schwab Corp. Survey, brokers were asked if they liked the idea of leaving the brokerage business and entering the fee-only arena as a Registered Investment Advisor (RIA). And 50% said they would like to transition to an RIA. There are plenty of things about working as a fee-only RIA that are appealing. The freedom of not being tied to house-sponsored investment products is a draw. 52% of respondents would like the freedom of running an independent firm. And 51% liked the idea of being able to customize service for their clients.
For all the reasons that brokers would like to enter the fee-only model, they were honest about the reason why they wouldn’t: commissions.
Becoming a fee-only advisor would mean giving up their commission compensation…and that didn’t sit well with most respondents. 20% would not give up any of their commission-based business, while 52% said they would not give up all of it…only 8% said they would be willing to eliminate commissions entirely. Only 8%!
To be fair: If brokers are ‘addicted’ to pocketing a commission, at least they admitted it. Only utilize a Fee-Only Registered Investment Advisor, if you want Money Management that’s in your Best Interest!