Expert: Steve Hach - 6/25/2011

Question
Do you know if a bank's investment department/advisors find it more profitable or earn more commission on selling things like annuities and CD's than them selling mutual funds?  Thanks

Answer
Hi Lee,

I am not sure of the incentive structure for banks and their sales people but I do know that one exists.

I would be fairly confident that the sales person would be incentivized to sell bank-developed annuities and such rather than an outside mutual fund product.

I am not sure the CDs would be so incentivized.

I would always look for a lower cost Exchange Traded Fund rather than a similar Mutual Fund to take advantage of lower fees.

For index funds and such there is no reason to be in a Mutual Fund these days.

I am not as familiar with the annuities other than thinking that a sale person is going to earn a higher commission on that than the other products you mentioned.

I would also research the annuities very carefully, remember, if it sounds to good to be true, or if you are told it is "risk free" you better hold on to your wallet--nothing is "risk free" other than T-Bills and your FDIC-backed savings account.

I would shop around for ALL of these products and research them via google and such.

You should be able to figure out the commissions and fees for each and then know if your advisor is working with your best interests in mind.

Best,

Steve