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Advisor Alert: Would you take a fee-based commission?

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With all the regulatory changes being proposed and implemented in the industry, I’ve been talking to advisors, taking their pulse on what’s been happening and if they had any ideas for getting things on track, so you can focus on what you do — advise clients.

Atlanta-based advisor, Arthur Farr, brought up some pretty interesting ideas in a recent discussion we had that I wanted to float to you and get your feedback on.

I asked Farr about the biggest issues facing the industry today. He didn’t hesitate in his answer.

“As I look around, I find that we have too many hunters out there, too many out there looking for the kill,” Farr stated. “I think that product design creates that.”

He said an alternative to that approach is the one he employs: “At our business, we’re farmers. We’re looking at breaking the ground, sowing, reaping. That’s through meeting and working with people.”

Then, turning back to product design, he added that “we need more products that are recurring. We need that long-term relationship with the client. Better product design would help that.

“Also, in the securities world, we’ve already moved from a commission-based structure to a fee-based one. For survival of the industry, I think we need to look at a more fee-based model. I think that will lower litigation and increase relationships.”

In addition, Farr said “it will give us better client retention. By doing that, it would create more profitability for the companies and marketing revenues would go down due to this change in compensation.”

As you move forward in your practice, what are your thoughts on a fee-based commission structure? Do you think that would go over in your line of business? How do you think it would work or not work?


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