I appreciate the Mole's responses to your ten questions. They paint a picture of someone that is genuinely concerned about client protection while trying to maintain an open mind.
Though I agree that some financial advisors are more movtivated by personal gain than fudiciary responsibility, the basic premise that "financial advisors are unduly influenced by compensation" is flawed. Any business person must earn a reasonable compensation in order to stay in business. All advisors must weigh any action or inaction against what is in the best interest of the client, the community, and the advisor himself. It is clearly not in the best interest of the client, nor the community, for financial planners to go out of business due to profitability issues.
Increasing consumer awareness surrounding compensation issues is a solution of high importance, and The Mole appears to believe that she is doing her part in this. How compensation is structured is an equally important component. Making one financial solution significantly more profitable to the advisor has to increase the incidence of abuse. Until both of these issues are addressed, the wolves in our industry will flourish at the expense of their clients, and the reputation of our profession.
An earlier post suggests that the fee-only compensation method is best for clients. While it may be best for some clients, how will the majority of consumers, that may not be able to afford $5,000-10,000+ per year ever get to the point where they can afford it? Additionally, I have heard it argued that the fee-only method promotes complacent portfolio oversight because the advisor is not directly rewarded for performance. While outsourcing portfolio management is the easy response, that may add an additional layer of fees, and I haven't come across an outsource solution that has matched our internal results.
I have considered adopting the fee-only method, so don't intend to pick on that strategy here. I only want to point out that there is no pure, conflict-free solution.
Steve Sant