Fee-based accountscharge clients a fixed percentage of assets under management rather than commissions on individual trades. While these accounts offer benefits like cost transparency and reduced incentive for excessive trading, they may also impose restrictions on the number of trades allowed without incurring additional fees.
* Disadvantages of Fee-Based Accounts:
* Trade Limits: Some fee-based accounts cap the number of trades to ensure trading costs remain within the agreed fee structure.
* Higher Fixed Costs: These accounts can be more expensive for clients who trade infrequently or have smaller portfolios.
* Why Other Options Are Incorrect:
* B: Fee-based accounts reduce the advisor's incentive for frequent trading as they are not commission-based.
* C: Fee-based accounts typically allow access to a broad range of advisory services.
* D: Investment opportunities are not restricted in fee-based accounts.
References:
* CSC Volume 2, Chapter 25: Advantages and Disadvantages of Fee-Based Accounts.