Here’s my not-so-bold prediction for challenging times:
In less than 5 years, AUM fees will no longer be the main compensation mechanism for independent registered investment advisory firms.
I’m not alone in my prediction (I wish I had published this post months ago when I intended!), as Andrew Gluck of Advisor Products, Inc. wrote the following in a recent October article in Financial Advisor magazine titled Fixing AUM Fees:
The mode of compensation that most advisors use is broken. The system of charging clients based on the amount of assets they place under your management is fatally flawed. The AUM compensation often forces clients with simple financial lives to pay you more, while those clients with highly complex financial arrangements can demand more and get away with paying you less.
The AUM Dilemma
