- Aug 24, 2007
I've never understood why financial advisers charge as a percentage of AUM, as opposed to a percentage of profit/growth relative to some baseline index that represents public equity market returns?If you have a trusted investment adviser it is not a difficult thing. He charges you a fee as a percentage of the AUM, for instance one percent.
Well, obviously I understand WHY they do it -- they do it so that they don't have to invest successfully to earn a paycheck.
But, I don't understand why the general public accepts this structure for financial management. Why should someone get paid to manage money if they can't beat the S&P or some other index that is simple for the general public to invest in.
Long story short, I'd never take investor money where my returns weren't directly tied to theirs; and I'd never invest money with someone who didn't have their financial interests aligned with my own.
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