It’s often said that clients of financial advisers should be allowed to choose for themselves how they pay for advice. The client-choice argument is often advanced in support of asset-based fees. In the current environment, where asset values have plunged, client portfolios have shrunk in value and advisers’ incomes have declined, it’s an issue worth revisiting.

It’s true that advisers whose principle source of revenue is a fee calculated on the value of client funds invested have “skin in the game” and share their client’s interests in generating positive investment returns. It’s also true that asset-based fees are easy to calculate and to collect.

Even so, to say the primary attraction of an asset-based fee is that the adviser shares the client’s interest in generating positive investment returns suggests that advisers who charge in other ways don’t have the same interest. It also suggests these advisers who don’t charge asset-based fees don’t face a risk to revenue if they provide poor investment advice; that argument has been weakened by the fact that it’s never been easier for clients to opt out of receiving advice services if they’re not satisfied.

Asset-based fees place the viability of an adviser’s business at the whim of the markets, and it’s debatable whether exposure to a market event that could wipe out an adviser’s business is actually in the long-term interests of that adviser’s clients. Calculating the price of advice according to the value of a client’s portfolio ignores the intrinsic value of advice itself.

And the financial advice industry desperately needs advice itself to be regarded as valuable if the industry is ever to be regarded as a profession.