disciplinedIQ Investment Advisory Process


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Unrestrictive Fee-based Compensation

Investors have specific expectations of the role this compensation plays in the management of their portfolios. Investors are generally willing to compensate advisors for their services. Unfortunately, many investors find themselves in commission-based investments where their expectations have very little chance of being fulfilled. For example, when an up-front commission is paid the advisor is compensated for the sale, not the ongoing management of the portfolio. The duty of the advisor to continually manage the account becomes a moral obligation, not a fiduciary obligation to the investor. Time, account size, investor temperment, and other factors will eventually erode the advisor's moral obligation to appropriately manage the investor's portfolio.

The disciplinedIQ Answer:

Fee-based compensation (through LPL Financial) is the final foundational Key Management Principle of disciplinedIQ. This compensation arrangement provides for the following benefits to investors:

  • Singularity of investor and advisor objectives - When investors' investments appreciate advisors receive more revenue. Likewise, advisors receive less compensation when investments depreciate. This creates a direct and ongoing motivation for advisors to make decisions in the best interest of the investor.
  • Avoidance of conflicts of interest and maintains independence - Advisors' compensation is not contingent on the selection of specific investment options allowing for freedom to select investments using appropriate criteria.
  • Investment flexibility with the avoidance of restrictive commissions and investment aggregation requirements - Advisors are not bound by restrictive commission rules and can select investments from a broad array of available investment options.

Consider the idea of an investor desired to maintain a portfolio incorporating all of the following asset classes:

Allocation Example

A fee-based investment platform provides the flexibility for the advisor to search out the most appropriate investment option individually for each asset class across all investment options available. Also, because commissions are not charged on the purchase and sale of investments, advisors are able to make portfolio changes due to performance or other fiduciary criteria as needed and on a timely basis.

The disciplined IQ investment advisory process takes full advantage of the flexibility provided for in fee-based arrangements to provide the level of management desired of by investors. The first part of this investment-level management is referred to as "disciplined" investment selection and monitoring.

Next>> Continue to Key Management Principle: Disciplined Monitoring

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