Tuesday, October 6, 2009

Citigroup Catches Up to Us

Citigroup discovered yesterday what many of us in the financial services industry have known for years: The best and most honest way to serve your clients is through a fee-only structure. We here at Echelon Wealth Strategies have always been fee-only, meaning we charge our clients a small percentage of the assets we manage for them. Until yesterday, Citigroup's financial advisers worked for commissions, but now they're switching to fee-only.

Why is that important? A fee-only adviser has no incentive other than to increase his clients' assets. On the other hand, a commission-based adviser has other incentives. A client who wants to pursue a buy-and-hold strategy, for instance, may get pushed into stock trades he or she doesn't want, because there's no commission to be earned on money that simply holds on to a stock for ten years. To earn commissions on asset management, there must be transactions.

We do earn commissions on such things as insurance sales, but when it comes to managing assets, we are purely fee-only. That frees us up to serve our clients' interests and only our clients' interests. It's an attitude that has served us well, and we wish Citigroup all the best now that they've seen the light.

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