"Of course."

So it became apparent to them that the issue isn't compensation, but whether you have the ability to put the client first no matter what.

Is there a question of integrity at all, then? Only if you're twisting the competition's legal, legitimate compensation into something sinister just to make yourself look good. You shouldn't use your method of payment as a marketing tactic or preach that everyone else lacks integrity because they operate with a different model.

Although it's not an ethical issue, it is true that the fee-based business model is usually superior to commission and fee-only, because advisors in such a business have a finite number of clients who generate a predictable minimum annual recurring revenue (PMARR). These advisors can earn fees for planning, advice and managing assets, as well as commissions on products. My point: Fee-based businesses are not superior because they prevent advisors from impropriety. It's because they help advisors limit the client list to a reasonable number, so everyone gets better service.

The higher the amount of predictable recurring revenue, the fewer clients the advisor needs. He or she can work toward what I call Being Done, which means that the marketing machine stops when the advisor has established relationships with enough people to provide sufficient PMARR to meet the advisor's business goals. Once an advisor is "done," clients get even more personal attention because the advisor has no more prospecting to do, and the advisor has more time for continuing education and growth, which benefits clients again when the advisor applies increased knowledge to managing their money. Fees are not necessarily the moral high road, yet they might support a better business model, one that ensures clients get the best from their advisors. It's also likely that the fee-based model is easier for clients to understand.

The challenge with the commission-based business model is that it doesn't work long term because you have to continue adding clients until serving them all becomes difficult or impossible. Earning commissions may be a less-than-optimal business model for financial advisors, but it does not intrinsically lack integrity.

To me, ethics and integrity are about client-first service, not compensation. If someone lacks ethics or integrity, changing the way that person gets compensated isn't going to fix them.

The most important aspect of being an advisor is taking care of the client. A lot of advisors out there, in all business models, are doing this. And advisors are out there, in all business models, who should not be in the business. Your job is to be in the former category: Put the client first, and your ethics will never be called into question, regardless of how you choose to be paid.

© 2003 by Bill Bachrach, Bachrach & Associates Inc. All Rights Reserved. Bill Bachrach is the author of four industry-specific books, including his newest, It's All About Them; How Trusted Advisors Listen for Success. For more information about his services or to order his books, contact Bachrach & Associates at (800) 347-3707 or visit the Web site, www.bachrachvbs.com.