Traditional or Fee-based?
A fee-based account solution may offer a number of advantages over a traditional commission-based arrangement – rather than charging transaction fees each and every time a security is purchased or sold, in a fee-based account setting a pre-determined management fee is levied based upon the sum and type of assets under administration; helping to ensure that the interests of both the client and advisor always remain aligned.
Instead of transaction costs, you pay for ongoing service and advice; including asset allocation, portfolio construction and rebalancing. Financial, retirement and estate planning services may be bundled as part of a more comprehensive Wealth Planning solution.
Fee-based solutions including ScotiaMcLeod's Partnership Plus framework are often best suited to trading-oriented accounts where the costs of initial portfolio construction and on-going management can be held in check. For investors who value the benefits of diversification and professional money management, lower cost F-class mutual funds/ investment pools designed specifically for use within fee-based accounts may be adopted. Advantages of a fee-based arrangement include:
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Objectivity
A fee-based arrangement provides an assurance that on-going investment recommendations are driven from objectives, and not by the prospect of commissions. Further, wider diversification may be achieved when not hamstrung by transaction fees. -
Cost Effectiveness
The scalability of a fee-based account arrangement may serve to support asset consolidation; allowing for a more cost effective overall wealth management solution. Beyond the key benefits of waived transaction fees is access to fixed income securities at wholesale and waived annual administration fees for registered accounts including RRSP, RRIF and LIF accounts. -
Transparency
More than knowing the management cost in advance, investors may choose to focus solely on a fee-based solution or combine both traditional and fee-based accounts. -
Tax-Efficiency
In certain circumstances, management fees may be considered tax-deductible for non-registered accounts. You should always seek professional tax advice to determine the eligibility of management fee deductibility.
