Non-Managed Fee-Based Accounts

Non-managed fee-based accounts keep the ongoing fee model but do not give the advisor discretionary trading authority. The client pays for ongoing advice, service, research access, and account review, but the client still authorizes trades.

This structure is often the middle ground in Chapter 25. It sits between a fully managed discretionary relationship and a pure order-execution-only or self-directed account. The client wants guidance, but not delegation.

    flowchart LR
	    A[Client goals and KYC] --> B[Advisor recommendations]
	    B --> C[Client approves or rejects trades]
	    C --> D[Execution]
	    D --> E[Ongoing fee charged]
	    E --> F[Periodic review and updated recommendations]

What the Client Is Buying

In a non-managed fee-based account, the client usually pays a recurring asset-based or flat fee in exchange for an ongoing advisory relationship. The advisor may provide:

• portfolio review
• planning support
• research
• asset-allocation guidance
• rebalancing recommendations

But the client still decides whether to implement a trade. That is the key distinction from a managed account.

Why Clients Choose This Structure

The strongest use case is a client who wants advice without giving up control.

Such a client may want:

• a professional second opinion
• regular contact and planning support
• one bundled fee instead of per-trade commissions
• ongoing monitoring without discretionary authority

This can be attractive for engaged investors who still want to be the final decision maker.

How It Differs from Other Account Types

Versus Managed Fee-Based Accounts

The difference is authority:

• managed: advisor or portfolio manager implements within mandate
• non-managed: client authorizes each trade

Versus Commission-Based Full-Service Brokerage

A traditional full-service brokerage account may still involve recommendations and service, but compensation is often driven mainly by commissions. A non-managed fee-based account charges an ongoing fee instead, which changes the cost structure and conflict profile.

Versus Order-Execution-Only or Self-Directed Accounts

Order-execution-only accounts are designed for clients who make their own decisions and receive little or no personalized advice. That is not the same as a non-managed fee-based account. In a non-managed fee-based relationship, the client is still receiving advisory support and suitability-related interaction.

When the Structure Works Well

This account type can work well when the client:

• wants ongoing advice
• is willing to stay engaged and approve decisions
• values planning or portfolio-review support
• trades often enough, or uses enough service, that the ongoing fee is defensible

The final point is critical. If the client uses little advice and trades rarely, the ongoing fee may not be justified.

Main Advantages

Retained Control

The client keeps final authority over trades. This often appeals to investors who want advice but do not want delegation.

Predictable Cost Structure

The ongoing fee can make billing more predictable than variable commission charges.

Ongoing Advisory Relationship

The client may get broader service than in a self-directed relationship, including regular check-ins and planning support.

Main Drawbacks

Cost for Low-Activity Clients

A major drawback is that the client can pay a substantial ongoing fee even in a quiet year with few trades or little service usage.

Execution Delays

Because the client must approve trades, the portfolio may react more slowly than a managed account in fast-moving conditions.

Potential Confusion About Responsibility

The advisor provides recommendations, but the client makes the final call. If this is not explained clearly, clients may wrongly assume the advisor is actively managing the account.

Current Suitability Focus

Current Canadian account-appropriateness guidance requires dealers to explain the account types they offer and recommend the one that puts the client’s interest first. For non-managed fee-based accounts, that means the advisor should be able to justify:

• why the ongoing fee is appropriate
• what services the client will actually use
• why a commission account or order-execution-only account is not a better fit

That makes service scope a real exam issue, not marketing detail.

Practical Variants

The legacy materials usefully distinguish several non-managed settings:

• full-service brokerage accounts with ongoing advice but no discretion
• advisory fee platforms where the client approves recommendations
• self-directed arrangements that may include limited educational or platform support but not true personalized management

For CSC purposes, the critical distinction is not the brand name. It is whether the client is receiving ongoing personalized recommendations and still retaining decision authority.

Key Terms

• Non-managed fee-based account: ongoing fee account in which the client retains final trade approval
• Non-discretionary relationship: advisory relationship without discretionary trading authority
• Order-execution-only account: account focused on execution rather than personalized advice
• Full-service brokerage account: account offering advisor support and recommendations, often without discretion
• Account appropriateness: obligation to recommend the account structure that best serves the client’s interest

Common Pitfalls

• confusing non-managed fee-based accounts with self-directed order-execution-only accounts
• assuming an ongoing fee is justified even when the client is inactive
• failing to define clearly who makes the final trading decision
• paying for advice the client rarely uses
• assuming non-managed means no suitability or review obligations

Key Takeaways

• Non-managed fee-based accounts combine ongoing fees with client-retained trading authority.
• They are best for clients who want advice but still want to approve trades.
• They differ from managed accounts on discretion and from self-directed accounts on service scope.
• Cost-effectiveness depends on how often the client trades and how much advisory support the client uses.
• The advisor must still justify why this account type, and not a simpler alternative, is appropriate.

Quiz

Sample Exam Question

A client likes receiving advice and periodic planning support but insists on approving each trade personally. She trades several times a year and values a predictable fee more than paying separate commissions on each transaction.

Which account type is the strongest initial fit?

• A. A managed fee-based account, because the client wants to avoid approving trades
• B. A non-managed fee-based account, because it provides ongoing advice while leaving final trade authority with the client
• C. An order-execution-only account, because the client wants full-service advice
• D. A discretionary family office account, because every advised client needs delegated authority

Correct answer: B.

Explanation: The client wants advice and predictable pricing, but she also wants to keep final control over trading decisions. That is the central use case for a non-managed fee-based account.