I've been thinking a lot recently about Wall Street, the financial system, and what it means for the stocks of American businesses that profit from giving financial advice.

It started this past year, when my brother David and I sat down and wrote the just-released business best-seller, The Motley Fool's Money After 40: Building Wealth for a Better Life. The aim of the book is simple: to help everyone over the age of 40 design a financial plan. The goal is to eventually earn readers the freedom to live how they want, wherever they want, without the fear of not being able to keep up with rising health-care costs and a booming real estate market.

As I wended my way through the research, I kept coming back again and again to the problem of commissions in the financial industry. A great number of financial advisors today are fee-based advisors. What this means is that they'll take a flat fee and many of them will gobble up commissions for selling you particular investment products. Most consumers don't know that their advisor may be getting paid a commission for products that include:

  1. front-loaded mutual funds
  2. variable annuities
  3. whole life insurance plans

And many firms are still generating substantial profits from equity-trading commissions and putting their clients' accounts on margin!

When I think about the investment prospects for the stocks of companies like Merrill Lynch (NYSE:MER), Lehman Brothers (NYSE:LEH), Morgan Stanley (NYSE:MWD), Citigroup (NYSE:C), Bank of America (NYSE:BAC), and Prudential Financial (NYSE:PRU), I wonder the following:

Do your customers know exactly what they're paying you for?


Do they know exactly when their advisors are being paid commissions to sell them particular products?

If the answer to either of these questions is "no" or even a "qualified yes," then I wonder about the sustainability of your earnings growth in a world where financial education is picking up momentum.

In a free market, companies are free to charge however much they like in whatever fashion they choose. But, over the next 10 years, I'm betting that the educated consumer of financial products will demand far fewer commission payments, far higher levels of accountability, and, thus, far better bottom-line returns.

That certainly is one of the legs upon which Money After 40 stands.

Fool co-founder Tom Gardner does not own shares in any of the companies mentioned.