Eaton Income Solutions offers two ways to manage wealth for its valued customers. Either may be right for your unique situation, but we believe there are real advantages to a managed-plan approach.
Option 1: Commission Structure
A commission structure is a traditional arrangement for buying securities. The investment advisor suggests purchases based on his or her knowledge and experience, and collects a fixed commission on the transactions. The charge to the client is a set amount on each purchase or sale.
Option 2: Fee-Based Structure
Alternatively, we can arrange a fee-based structure that’s tied to the amount of assets under management. As the value of investments under management grows, so does the annual fee to the manager. This arrangement offers several important advantages.
One is objectivity. Under a commission deal, there may be a hidden incentive for the investment manager to advise buying and selling more often than the client would prefer – after all, the greater the number of transactions, the more the manager will earn. With a fee-based structure, there’s no advantage to either the client or the manager in buying or selling more often than good advice would dictate.
Another client advantage is greater legal responsibility for the manager. An investment advisor managing a portfolio under a fee-based arrangement operates in a fiduciary capacity. To say it another way, he or she is legally obligated to do what’s in the best interest of the client. Of course, those using a commission structure should always put clients’ interest first, but the legal and ethical standards are higher when fiduciary responsibility is present.
Finally, the fee-based approach makes the investment interests of the client and manager identical. The manager earns more with the growth of the client’s investment, so he or she has a direct incentive to maximize the investment’s growth. That’s why we think of the fee-based method as a strong way to develop “shared prosperity” – and a great way to manage your investments.