How an adviser is compensated is extremely important because it can have a major influence on the advice provided.
Midwest Capital Advisors is a “fee-only” investment advisory firm.
We define a fee-only compensation arrangement as any relationship where the advisor’s compensation is paid only by the client. The fee is generally calculated as a percent of the assets under management, an annual retainer, or an hourly billing rate. Because no commissions are paid to the advisor, fee-only compensation has the least potential for conflict of interest.
Other compensation arrangements:
We define a “fee-based” compensation arrangement as any relationship where the advisor’s compensation is based on receiving compensation from multiple sources.
There may be a fee charged for assets under management. Because there are multiple types of compensation, there is potential for confusion and conflicts.
We define a commission-based compensation arrangement as any relationship where the advisor’s compensation is based on the buying and selling of an investment product or other security. Compensation is generally linked to activity. Commission-based relationships have a high potential for conflict of interest.