The following is my
answer to a Quora question: “Do financial advisory companies like
Edward Jones charge customers a lot of hidden fees and commissions?”
No. In any
financial product, the distribution cost is clearly shown in the benefit illustration,
and a copy of that benefit illustration is given to the client. There are no hidden charges beyond this. If the product is an insurance plan, the
premiums may be level or non-level. If
it is a level premium, then the premium stays the same for the duration of the
policy. If it not level, then the
increase in premium is detailed in that benefit illustration.
What is hidden is how that distribution cost is
parcelled out between the agent, the insurer or product provider and the
regulatory authority, if any. Whilst the
client has access to the overall cost, he does not have access to the details
of that cost for practical reasons. How
an advisory company compensates their staff is their own prerogative, and it
varies according to their seniority, product promotion and other external
costs. With so many variables, the cost
of producing such a detailed and onerous document would be passed on to the
client, and they would pay more for the same service.
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