Investing is truly about imagining your future self — when you are older, functioning less or not at all, earning considerably less cash. Paying for our retirement or your little ones (or latter generations) educations.
So, what will come about? If BD firms do not move to fee offsets, or (preferably) AUM platforms with low-cost investment merchandise (with no solution provider compensation to the BD firm), then in all likelihod individual brokers will be conflicted – and worried about their reputation. And these individual brokers will speak with their feet – by departing the firm.
Fact 1: The first bailout temporarily returned the flow of credit markets, stopped banks from failing, and seems to have stabilized the markets, which have rallied nicely so far this year. Unfortunately, unemployment continues to skyrocket as companies have observed earnings plummet and are cutting head count, reducing production, and curtailing or eliminating new hires to ride items out until items get greater.
In essence, the way I study the DOL’s Ideal Interests Contract Exemption, most firms and advisers must embrace AUM charges. However, for the very small customers (maybe with accounts of $25,000 or significantly less) a commission-based platform could be used – provided the commissions for all products on the platform are the exact same (at least for comparable goods) (otherwise, a conflict of interest exists that cannot be appropriately managed).