Can a Registered Investment Adviser (RIA) in good faith receive compensation on insurance sales & loaded funds
How might an RIA, who must act with fiduciary obligation, rationalize compensation for insurance or annuity sales (those products sold as investment vehicles such a VUL policy), when there is compensation for making the sale. Even if the product is objectively in the best interest of the client, doesn’t the commission structure, which has the appearance of impropriety, create a conflict of interest for the RIA?
Also, if the RIA is recommending funds that carry 12B-1 fees, doesn’t this create a similar conflict of interest, even if the fund is the best of the lot (hypothetically)?
Perhaps the ultimate question is whether an Register Adviser must limit their compensation to a certain type, such as a fee base (percent of assets under mgmt), or performance base (% of gain in the portfolio)?
There are RIAs that do receive fees, compensation, commissions, but all incomes must be disclosed to the investor.
However, all your points are well taken, and some of the items are very difficult to defend
Addressing only RIAs and not CFPs which presents a whole other questionable areas.
I have known many RIAs and I have found that the better ones do not sell you insurance and/or mutual funds, they make their money managing your account with general securities or commodity investments.
The better RIAs are preoccupied working on research for better investments for the clients than selling funds or insurance.
RIA should charge their fees based on the assets under management and should NOT participate in the profits of any account. Profit sharing is not held in good view with the regulators.
I have always find it very difficult to accept a RIA trying to justify the sale of funds with 12b1 fees or back end fees or any type of insurance.
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