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Wayne DeMeester earned his MBA from Brigham Young University as well as the professional designation Certified Investment Management Analyst (CIMA) from the University of Pennsylvania’s Wharton School. He has worked for more than 25 years in the financial services industry, serving such industry leaders as Wachovia, KBR Capital Partners, and the Arizona-based RRS & Company, a real estate finance and investment company. Wayne DeMeester currently serves as managing director for Definitive Advisors LLC, a fee-only investment advisor headquartered in the state of Washington.
Relative newcomers to the investment services industry, fee-only investment firms charge a flat rate for their services. This is unlike the traditional compensation arrangement in that industry, where brokers and other agents earn commissions based on the size of transactions they recommend for their clients.
Fee-only planners calculate their fees in different ways. If the planner actively manages the client’s portfolio, it is common to charge a percentage of the portfolio’s value. Some fee-only planners charge an hourly rate for their services, while others charge an annual retainer.
The advantage of this approach to compensating financial service professionals is profound: The advisor may accept compensation only from the client, which means that, aside from the value of the investment itself, there is no incentive to try to sell a particular investment. By contrast, commissioned professionals have a clear conflict of interest when they earn commissions on the financial products they sell. These conflicts are particularly problematic when some products generate a greater commission than others.