Fee-Based Investment
An investment account in which the advisor's compensation is based on a set percentage of the client's assets instead of on commissions. Contrast this to commission-based investment, in which the advisor makes money based on the amount of trades made or the amount of assets sold to the client.
Investopedia Commentary
The benefit of this type of account is that the advisor's interests are considered to be more in line with those of the investor. For example, if a client has an account worth $500,000 and the advisor's fee is 8% of the assets, the advisor is initially set to receive $40,000. But if the advisor were able to increase the value of the account to $600,000, he/she would then receive $48,000 - an increase of $8,000. On the other hand, if the account value falls, the advisor gets less of a commission.
Related Links
Introduction To Fee-Based Brokerage Accounts
The Rise Of The Fee-Only Financial Advisor
Fee-Based Brokerage: The Latest Target For Regulators
The Quest To Build A Unified Managed Account
See also: Broker, Churning, Commission, Overtrading
Also spelled: Fee Based Investment