"If you want to do something real and start putting the pieces in place for your extraordinary future — the time to start is now, and the most important ingredient is you."
All of our financial planning clients receive the benefit of our recommendations for investments. Many clients come to us for financial planning and then implement these investment recommendations with a discount broker such as Vanguard, TD Ameritrade, Fidelity or Charles Schwab. This two-step approach where we recommend investments and the client opens the account and buys the funds in a guided DIY approach which is best for them. But others want or need more hands-on assistance. Of course, we are honored and humbled by the trust of our clients. We will gladly work with any investor in either a guided DIY approach or as an asset manager.
And in our opinion there's no time when that's OK. Asset managers typically assess fees as a percentage of assets and automatically deduct them from client accounts. This called an AUM fee for Assets Under Management. There is no way to avoid all trading costs when buying and selling most securities so that is common no matter who you work with. No problem so far. However, many advisors are also paid sales commissions (front-end loads), 12b-1 fees, have large "account fees" or custodial fees, receive "bonuses" from their firm when clients go with preferred investments, and collect back-end loads when you sell. This makes it hard to understand what the service is truly costing you and where your advisor's incentives lie, and that’s a huge problem. Many of these people call themselves "fee-based" advisors in an effort to distract from the fact that other people besides you are paying them, and that has to color their recommendations.
(And our AUM fee is our ONLY fee.)
Putting aside the other commissions and charges, what is a reasonable percentage of assets fee?
The average fee paid to asset managers is about1% on the first $1 Million under management. [Link] This may not sound like a lot, but remember, that's a starting price of $10,000 every year. We think that's too much for work which may or may not be outsourced anyway.
Even worse, the same study showed that those with $10 million paid close to 0.7% - an average of $70,000 per year. Is it really 7 times harder to manage $10 million than $1 million? It is certainly harder, but we think that multiple is too high.
Our AUM fee starts lower and gets to our minimum rate faster than you are likely to find anywhere for professional money management customized to your situation, preferences, and needs. Here is our current typical fee schedule.
A hypothetical investor with $1 million invested would pay $7,000 per year, or $3,000 less than the industry norm. An investor with $8 million would pay $38,000 per year or about half of the industry norm described above. As your fee-only advisor there are no additional fees other than the trading cost at our custodian.