So how should you choose?
Each category caters to a different investor need, and it is important to understand which proposition would serve your underlying investment objectives best before you embark on selecting the wealth advisor that you are comfortable with.
The decision, however, must not be based on whether you have to pay an advisory fee. In the end, irrespective of which proposition you choose, you will be paying a fee. The only difference is that you know how much fees you are paying under the advisory-led model. The fees that you pay in the transaction-led model are usually wrapped within the transaction charges, and/or a higher fee is charged at the product entry level, by the product manufacturer, in order to pay the advisor a commission for the “sale”.
Platforms like WEALTH go a long way towards helping you filter through the list of wealth advisory providers to come up with a shortlist that will best suit your investment needs.
Catering to changing needs
There is a clear and present need for both models as each caters to different preferences. For example, if you are satisfied with being “sold” investment products from time to time, and trade on ideas generated each day, or if you are satisfied with being sold the merits of leverage or investing in insurance-linked products, and have multiple advisors providing you access to investment ideas, then the execution and transaction only model would suit best. The amount of fees you pay (and therefore the corresponding revenue for the wealth advisor) depends on the number of investment transactions you execute.
On the other hand, if you prefer an advisory relationship, where your independent advisor understands your investment objectives, risk appetite and has a complete line of sight of your underlying wealth (allowing the advisor to design, manage and monitor a diversified investment portfolio), then the advisory-led model is the most appropriate fit. There is typically an advisory fee attached to this service (similar to what you would likely pay your accountant or tax advisor). The level of fee is linked to the total assets being managed by the advisor.
Currently, there are an increasing number of clients in Asia who are recognising the need for a robust, holistic and independent investment advice. Asian investors are now more likely than ever to seek out an independent wealth manager, like Crossinvest, to cater to their investment requirements.
How this impacts you
If you are looking for a wealth advisor, you need to clearly understand your investment needs first. Only then can you ask the right questions when reviewing your options, in order to find out which wealth advisor can offer you the best value preposition. Whether you are paying an advisory or transaction fee should not be a factor in your decision-making process. In the end, you will have to pay fees anyway.