Huge Conflicts for Dual Advisers: Northeastern's Boyson.

The video discusses the differences between fee-based advisors and brokers, focusing on payment methods and fiduciary responsibilities. It highlights the shift from brokers to fee-based advisors, driven by regulatory changes in 2007. The impact of this shift on passive investing is explored, emphasizing the appeal of low-cost, tax-advantaged passive funds. The video also examines dual registered advisors and the conflicts arising from their dual roles. Finally, it addresses the competition between active and passive funds, noting the influence of institutional share classes and the financial crisis.

What is a key difference in how fee-based advisors and brokers are compensated?

• Fee-based advisors charge a flat fee, while brokers charge hourly.

• Fee-based advisors are paid a percentage of assets, while brokers earn transaction-based commissions.

• Fee-based advisors earn commissions on sales, while brokers charge a percentage of assets.

• Fee-based advisors and brokers both charge a flat fee.

What regulatory change in 2007 influenced brokers to become fee-based advisors?

• Brokers charging asset-based fees had to move clients to fiduciary accounts.

• Brokers were allowed to charge higher commissions.

• Brokers were banned from selling mutual funds.

• Brokers were required to disclose all fees to clients.

Why are passive funds appealing to fee-based advisors?

• They are easier to sell to clients.

• They offer higher commissions.

• They are more tax-advantaged and cost-effective.

• They require less regulatory compliance.

What is a dual-registered advisor?

• An advisor who charges both flat fees and commissions.

• An advisor who only sells mutual funds.

• An advisor who is both a broker and a fiduciary.

• An advisor who works for two different firms.

What concern did the SEC have about dual-registered advisors?

• They were not selling enough insurance products.

• They were not disclosing cheaper mutual fund options.

• They were not registered with the SEC.

• They were charging too low fees.

How did the shift to passive funds affect active mutual funds?

• Active funds saw a complete outflow of investments.

• Active funds maintained their market share.

• Active funds experienced outflows but retained some investments through institutional classes.

• Active funds increased their fees to compete.

What combination of factors contributed to the shift towards passive funds?

• Advisor interest in passive funds and the financial crisis.

• Increased marketing and advertising of passive funds.

• Higher fees and increased regulation.

• Lack of investor interest and poor performance of active funds.