How Should You Pay for Financial Advice?
MR. ODEAN: With mutual funds, there’s sometimes a compensation structure where a fund company gives money to a broker. This can create a significant conflict of interest, because a fund might be charging a high management fee and paying a significant commission back to the adviser or broker who sold the fund.
.. Every model can have conflicts of interest.
.. I think there is a need for fees to come down. If the market were to return 5% and you were paying an adviser 1% [of assets under management] a year, that’s like giving the adviser 20% of your returns. When you invest in the market, you are taking on a lot of risk, while the adviser gets paid for sure.
.. Many people think the market is moving toward a blended model, robo advice combined with personal advice.