Ask Brad: What Are “Compensable Revenues?”

This is the latest installment of a regular column to answer questions from advisors who are considering transitioning to an RIA model. To see Brad’s previous articles, click here. To submit your question, please email Brad here.

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Next time you walk into a car dealership to buy a car, consider the ways the dealership generates revenue from you.

It’s not the sale price of the car alone.

As anyone moved along to the “finance manager” knows, there are upsells galore: extended warranties, service packages, lending originations, ding and dent repair, key replacement insurance, fabric protection, and undercoating, to name a few.

As for the “undercoating,” remember the Seinfeld reference: David Puddy declaring, “We don’t even know what it is.”

I’m not suggesting it’s unfair for a dealership to generate such revenues. Well, maybe not the undercoating, but you get my point.

Now compare this to the scenario of a financial advisor under a traditional broker/dealer affiliation, whether W2 employee or 1099.