Fees vs. Commissions

Jonathan Clements

Jonathan is the founder and editor of HumbleDollar. He also sits on the advisory board of Creative Planning, one of the country’s largest independent financial advisors, and is the author of nine personal finance books. Earlier in his career, Jonathan spent almost 20 years at The Wall Street Journal, where he was the newspaper's personal finance columnist, and six years at Citigroup, where he was director of financial education for the bank's U.S. wealth management arm. Born in England and educated at Cambridge University, Jonathan now lives in Philadelphia, just a few blocks from his daughter, son-in-law and grandson.

Fees vs. Commissions

Jonathan Clements  |  Apr 13, 2015

I RECEIVED AN EMAIL yesterday from a broker in Texas with the subject line: “Why do you want to put good honest advisors out of business?” The broker argued that I was being unfair in favoring advisors who charge fees over brokers who charge commissions.
My response: “You’ve convinced me that you do a fine job for your clients. But there’s plenty of evidence that many advisors don’t. Their clients—to use your phrase—need to get ‘a fair shake.’ How can we improve the odds that,

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Breaking Even

Jonathan Clements  |  Mar 17, 2015

IT’S THE NEVER-ENDING debate: When should retirees claim Social Security? This piece, I hope, will at least serve to clarify the basic math involved.
Let’s dispense with a few preliminaries. If you have young children, it may be worth claiming at age 62, so your kids can receive family benefits. Meanwhile, if you’re married and you were the main breadwinner, it’s probably worth delaying benefits to age 70 to get the larger monthly check.

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It Pays to Delay

Jonathan Clements  |  Mar 9, 2015

AMONG EXPERTS on Social Security, there’s a broad consensus that most folks should delay Social Security to get a larger monthly check—and yet roughly half of retirees claim benefits at 62, the earliest possible age.
Many of these retirees, I suspect, take benefits right away because they need the money or they haven’t given the issue much thought. What about those who have wrestled with the topic and still insist that claiming at 62 is the right strategy?

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Farewell, Tom

Jonathan Clements  |  Mar 4, 2015

BESTSELLING AUTHOR Thomas J. Stanley died in a car accident over the weekend at age 71. His death has received scant publicity—which is surprising, given the popularity of his books and his impact on the way we think about money.
With co-author William Danko, Stanley wrote the 1996 blockbuster, The Millionaire Next Door. Who are the rich? It isn’t the folks with the flashy cars and designer clothes. Those aren’t signs of wealth.

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Take the Long View

Jonathan Clements  |  Feb 14, 2015

MOST OF US WILL enjoy wonderfully long lives. For those born in 2000, the average life expectancy at birth was age 80 for men and 84 for women. That’s a vast improvement since 1900, when life expectancy was age 52 for men and 58 for women.
The bad news: While men can now expect to live 28 years longer and women 26 years longer, the bulk of the improvement—20 years—came in the first half of the 20th century.

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Where There’s a Will

Jonathan Clements  |  Feb 11, 2015

ESTATE PLANNING is easy for most folks—but many don’t bother. Surveys regularly find that half of all adults don’t have a will. Yet a will, the right beneficiaries listed on retirement accounts and life insurance, and correct titling on property (such as the house you own jointly with your spouse with right of survivorship) are all most of us need.
Sure, there are other niceties, like drawing up durable powers of attorney for financial and health-care matters,

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Less Nonsense

Jonathan Clements  |  Jan 17, 2015

WALL STREET has changed remarkably during my three decades of writing and thinking about money—mostly for the better. For instance, financial advisors now earn an estimated 64% of their compensation from asset-based fees, rather than from commissions. That eliminates many of the worst conflicts-of-interest, including the incentive to churn a client’s account and sell products that pay the highest commission. Today, you also see many advisors making heavy use of index funds.
Along the way,

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Plus Ca Change

Jonathan Clements  |  Jan 8, 2015

WHAT COUNTS AS GOOD financial advice doesn’t change much from one year to the next. In 2014, you should have owned a globally diversified portfolio, kept investment costs low, avoided credit-card debt, maxed your 401(k) and avoided annuity salesmen. Ditto for 2015.
So why do folks read the business section every day, buy personal-finance books and subscribe to business magazines? There’s an entertainment aspect: We like feeling engaged with the wider world.
But there’s also a practical reason: Even if good financial advice doesn’t change much from one year to the next,

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Don’t Look Now

Jonathan Clements  |  Dec 20, 2014

IN OCTOBER, Lucinda and I spent a week in Venice. We rented an apartment with no wi-fi, so every day for 30 minutes we’d settle into a café with Internet access. While my wife dealt with work issues, I’d catch up on the news, check email, see how the markets were performing and look at the Amazon rankings for my various books.
There was nothing extraordinary about this—except that I was doing it just once a day.

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Going Mainstream

Jonathan Clements  |  Dec 13, 2014

PAST PERFORMANCE is no guarantee of future results—and that’s especially true once an investment goes from backwater to broad acceptance. Take real-estate investment trusts. Over the past 15 years, they have been embraced by investors, leading to great returns as folks loaded up on REITs. But that widespread acceptance was a onetime event—and returns from here will likely be more modest, especially with equity REITs yielding just 3.4%, versus almost 9% at year-end 1999.

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More Abroad?

Jonathan Clements  |  Dec 10, 2014

MY STANDARD ADVICE has always been to keep roughly two-thirds of a stock portfolio in U.S. shares and a third in foreign stocks. As I see it, we invest now so we can spend later. Come retirement, most of us will spend our savings on U.S. goods and services, so it makes sense to have the bulk of our assets in dollar-denominated investments.
But I’m having second thoughts. U.S. and foreign stocks each account for roughly half of global stock-market capitalization,

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All That Glitters

Jonathan Clements  |  Nov 26, 2014

GOLD HAS NEVER been an investment I’ve been comfortable with. The problem: It has no intrinsic value. Unlike a bond, it doesn’t pay interest and, unlike a stock, it doesn’t have earnings or pay a dividend. Instead, gold has value mostly because the supply is limited and because owners have faith that others will also view it as valuable.
And yet, today, I consider myself a fan—though I favor owning gold-mining stocks, rather than the metal itself.

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Career Day

Jonathan Clements  |  Nov 20, 2014

YESTERDAY MORNING, I spoke at career day at the Philadelphia school where my daughter teaches. My two fellow panelists were a city planner and a fundraiser for a local ballet company. What did we tell the 11th grade kids? Interestingly, all three of us focused on the same four themes:

You’re unlikely to have a single career. Instead, you’ll switch direction as you discover what you’re good at, the world changes around you and you grow weary of your current job. 

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