Question

An investment adviser representative (IAR) is engaged in options trading. The IAR decides that a fair charge for his services would be 7% per month of the assets under management. In order to do so, the IAR will disclose all fees and charges in both the advisory contract, signed by clients, and Form ADV. The IAR thinks that by the dual disclosure, he is acting appropriately. Is the IAR acting appropriately

Answer 1

Answer:

No, because the commission is excessive.

Explanation:

Financial advisers typically charge 0.5% to 1% of total portfolio per year. In this case this financial adviser would be charging 84% per year, and that is extremely excessive.

Commissions that exceed 1% per year are considered high, although if they are slightly above that range they are still considered legal.