With respect to advisor compensation, I’d simply love it if the compensation was much more obvious. Whether it be an hourly charge for time spent on your portfolio, or a percentage of assets under management. Neither system is perfect, but both of them seem to provide a lot less incentive to act against the investor’s best interests. At least you know what you’re paying for, and these advisors should not sell products with commissions attached. There are advisors who operate under this model, but they are far from the norm.

I suppose the reason the commissioned model is so popular is that it appears to be free. If I was an uneducated investor, and I was told I could pay someone 0.5% or 1% of my assets every year for them to manage my money, or I could go to someone else where there is no up front mention of costs out of my pocket, I suppose I’d go with the commissioned sales guy too. And I’d be willing to bet that for investors that are just starting out, an advisor would have to charge a large percentage annually to make it worth their while. So there’s even more of an incentive to hide the fees involved.

I guess it’s hard to fault advisors for creating the business model that works best on the majority of consumers.