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Rekenthaler Report

Asset-Based Fees Are Not Intrinsically Better

They exist because of customer demand, not moral superiority.

The Pitch
The money-management firm Fisher Investments is running television advertisements that plug how the firm charges its clients. “Our fees are structured so we do better when you do better.”

The rationale: Fisher charges an asset-based fee, so that if its customers’ portfolios increase in value, it collects more revenue. That math works both ways, so if those portfolios lose money, then Fisher’s revenues will shrink. Clearly, Fisher executives expect that investors will be attracted to that proposition, as it is one of four company attributes mentioned by the ad (the other three being that Fisher customizes its advice, doesn’t accept sales commissions, and is a fiduciary).