As a financial professional, the broker you partner with can significantly affect your long-term success. And let’s be honest—when it comes to selecting a firm, money is one of the first topics on the table. But before that conversation even starts, it’s helpful to understand the differences between a fee-based and a commission-based partnership.
Fee-Based vs. Commission-Based
At the most basic level, fee-based financial professionals charge their clients a flat fee. In contrast, commission-based financial professionals receive compensation through one-time commissions earned from financial transactions. Beyond that, there are some key differences and similarities to understand:
Transactions
A fee-based financial professional usually charges clients a flat fee or rate of approximately one to two percent per year. Commission-based financial professionals will earn a one-time commission from financial transactions, typically from one to six percent, depending on the type of transaction.
Investments
Fee-based representatives will likely pay the equivalent (or more) than a commission on investments held for over six years. However, it’s possible that the bulk of your investment may mature in the beginning.
For long-term investments, commission-based representatives will pay an up-front fee that can be more economical. However, that charge will be deducted from the amount of the investment.
Asset Management
And finally, there are differences between how a broker will help each type of advisor take care of assets in the long term:
- Fee-based: If an asset is illiquid, it may not receive active, long-term management to justify an annual fee—often called the “fee and forget” approach. These investments can be hard to value, making it difficult to determine if the fee is fair. Clients who pay a flat fee for financial consulting may also have to forgo ongoing servicing for that investment.
- Commission-based: There is much less ambiguity about the investment and subsequent fee with an up-front commission. Fees are generally higher for more complex investments, requiring additional consultations before making decisions. Further, the financial professional and broker-dealer will typically continue to service (not necessarily monitor) the asset throughout its life for no additional fee.
Responsibility to the Client
Fee-based financial professionals are actually considered fiduciaries—and that title comes with a significant responsibility to the client. This title means these representatives have a duty of care, loyalty, good faith, confidentiality, prudence, and disclosure to their clients. The client’s best interests must come first, and no conflicts of interest can exist.
Similarly, Concorde’s commission-based financial professionals must meet a “best interest” standard. They must also put a client’s interests before their own and exercise reasonable care, diligence, and skill in their recommendations.
But to meet that client-first responsibility, an advisor shouldn’t feel limited in their options to help. Some of Concorde’s advisors work with legal and tax experts to find the best solution possible, even if it requires thinking outside the box. In fact, many of our representatives are investment advisors who assist with financial planning and wealth management needs. We also have team members who are commercial real estate brokers or obtained their securities licenses to better market and sell investments.
Working with Concorde
Now that we’ve covered the basics, if you want to keep the conversation going or learn more about how we support our advisors, don’t hesitate to contact our team.
Concorde operates as a full-service broker-dealer offering various services to our clients, from asset management to investment and insurance services. Our senior executive leadership has a combined 26 years of experience in alternative investments, but they’re not the only talent leading our team. Our representatives also bring an average of 18 years of industry and alternative investment experience that drives our organization forward.
We have a nationwide presence and do business in all 50 states, with representatives in registered branches across 23 states. We look forward to helping you grow your business and expanding your skillset as a financial professional.