Fee only adviser encouraging buying stocks

jwblue · Sep 9, 2011

Is there any incentive for a fee only adviser to encourage my mother to buy stocks instead of a more conservative TIPS fund?

My mother trusts this woman, yet I feel she is already too heavily invested in stocks for someone her age.

This should be obvious to the adviser. Does her firm earn more money from another place when my mother buys stock instead of more conservative investments?

pele272 · Sep 9, 2011

its hard to say but if they do earn more for it then they are legally required to disclose that to the client. Mutual Fund's sometimes have revenue share agreements with firms which basically would encourage the firm to recommend it but i havent really heard of that happening as far as stocks go as long as the companies arent owned by the same holding company or anything like that. As far as being overweighted in stocks, a general rule is to take 100 and subtract your mothers age and that is the % of the portfolio that typically would be invested in stock. Thats just a general guideline though so it could be slightly different. Just my opinion but hope it helps some

jwblue · Sep 9, 2011

What is doubly frustrating is, she has enough money for her retirement, yet wants to add risk.

It is like she is in a poker match and has a straight flush, but is deciding to draw another card.

I think my mother wants to do what the adviser says because she is a family friend and does not want to offend her.
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LineTamer+ · Sep 12, 2011

Fee only advisor will not make any more on stocks, vs mutual funds, vs bonds etc...

Fees are charged on assets under management. They have an incentive to grow the clients money to make more money.

The yield on the DOW dividend paying stocks may be a better option than most 'safe' fixed income options right now.

jwblue · Sep 12, 2011

Line Tamer said:
Fee only advisor will not make any more on stocks, vs mutual funds, vs bonds etc...

Fees are charged on assets under management. They have an incentive to grow the clients money to make more money.

The yield on the DOW dividend paying stocks may be a better option than most 'safe' fixed income options right now.

Thank you. I was thinking the same thing.

The larger the portfolio, the bigger fee she makes.