Anne Tergesen

speaker

4,485 appearances 83 recordings 1 series first heard Jul 2017 last heard Feb 2025

Anne Tergesen’s voice in public audio — every appearance, attributed to the second.

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WSJ Your Money Briefing · Your Financial Adviser’s Conflicts Could Put Your Money at Risk · 15 Apr 2024 podcast

Now, with a commission... matched

The way it would traditionally work is that a broker would charge you commissions. matched

They would say, hey, I've got a stock tip for you or I've got this great annuity I want to sell you. matched

And they would sell you investments that they would charge a commission on for you to purchase. matched

So that would be a sales-oriented relationship. matched

They would have an interest in selling you products that would earn them money through commissions. matched

But with trends in the marketplace, a lot more advisors have given up commissions, and instead they charge fees. matched

And typically what that involves is they charge, say, about 1% of your portfolio's value annually in order to manage your portfolio and provide you with a financial plan and an ongoing relationship. matched

It's one unified charge, and they will justify that charge by saying they provide a number of services, including financial planning, which is important for people. matched

There's a feeling among both regulators and consumer advocates that the fee-based financial planning better aligns the economic interests, the financial interests of the advisor with the client. matched

So, for example, if I'm your advisor and I'm charging you 1% of your portfolio, I get paid more when your portfolio does well and goes up. matched

So, you know, if I'm making... matched

good investment decisions, then that's going to benefit both you and me in tandem. matched

With the commissions, the incentive is to sell you products, whether you actually need them, whether they're actually in your best interest or not. matched

There's been a lot of attention paid to the conflicts of interest that brokers face, but there's been less attention paid to the fact that fee-only advisors also face conflicts of interest. matched

And their conflicts of interest really involve financial decisions that could potentially cause a client to reduce the size of their portfolio. matched

For example, the big one is interest. matched

The decision about a mortgage, should I carry a mortgage or do I want to, you know, pay it off early? matched

And advisors, a lot of them do recommend paying them off early if that's what the client seems to want to do. matched

But there is a conflict of interest that they face where if you take a big chunk of money out of your portfolio to pay off a mortgage, then you are reducing the size of your portfolio substantially and you're reducing the size of their paycheck. matched

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