Leave a Comment:
How about a compensation model where the financial advisor gets paid a percentage of the profit earned for the client. This will create a win-win for both advisor and client.Reply
That’s called the performance fee model. It’s already in existence.
But it does has its economic bias too as the adviser might be inclined to take on higher risks (in order to generate higher performance fees).Reply
How about including a twist to this model ie the advisor pays the client for capital lost so that the original capital is preserved.Reply
Unfortunately, that doesn’t really work as essentially what you are asking for is an investment where you can get unlimited upside and zero downside.
A product with almost zero downside can be structured, but that also means the upside will be limited.
You can’t have the best of both worlds.Reply
Same as funds, the fee could be evaluated as a performance against a benchmark…Reply
Nothing really complicated, does not need to be linear, or symmetric.