I thought I would take this week’s article to quickly compare how my fees and services match up against the average advisor. Man, I am having flashbacks to grade school and “compare contrast assignments.” Be gentle with your grading on this 3-minute read.
Fees Paid to Financial Advisor:
- My flat fee is $10,000 a year regardless of asset size, income, net worth, or whatever other creative way many advisors charge their clients.
- I am going to compare myself against the “average” AUM financial advisor. AUM stands for Assets Under Management. This is where the advisor charges you a percentage based on the amount of assets they manage. Like 1% a year after year after year…
- My average client has $3 million of investable assets. This is our comparison starting point.
- The average advisor charges .75% on a $3 million client. The math comes out to an annual fee of $22,500. Or, more than double my flat fee.
- And to steal from the Cleveland Cavs – the Diff is a savings of $12,500 under my unique fee structure.
Fees Paid for Investments:
- The above fees do not cover those fees connected to the investments themselves. Nope, those are in addition to the fees you pay your advisor.
- For me, my average investment fee is .40%, or $12,000 for my average client.
- In the case of the “average” advisor, that percentage is .65%, or another $19,500 for a $3 million client.
- The Diff is my clients keep another $7,500 in their accounts growing for their future.
Summary of Fees:
- Just a quick recap.
- In total, my average client pays $22,000 a year.
- Clients working with the “average” advisor are paying $42,000 a year.
- I don’t know about you but keeping $20,000 a year of YOUR money in YOUR accounts sure seems like a prudent thing to do.
- I mean, whose retirement are you funding with the fees being paid to the “average” advisor?
Let’s Talk Services:
- Fees are one thing. More importantly, what sorts of services are you getting for your fees.
- The average advisor meets with their clients once, maybe twice, a year to talk investments only.
- I had a “practice expert” in my world once say – “No credible advisor meets with a clients more than twice a year.”
- My service model is based on four meetings a year. I think we can all agree a lot can happen in 90 days, so why wait 365 days to meet?
- Here is an example of what the “average” AUM-based/fee-based advisor is doing for you:
- Acting as a Fiduciary
- Conducting Investment Portfolio Design and Management
- Meet once a year.
- Act as a Fiduciary
- Full-blown Financial Planning by a Certified Financial Planner™
- Investment Portfolio Design and Management
- Proactive Tax Planning
- Retirement Planning
- Life Planning
- Estate Planning Reviews
- Workplace Benefits Reviews
- Insurance Review and Planning (I do NOT sell commissionable products of any kind, including insurance products).
- Education Planning
- 4 Meetings a Year
- Lots More
Other Items to Mention:
- Just to be clear, I do not solely work with physicians who already have $3 million in assets.
- Nope, quite a few of my physician clients are at the starting points of their careers and want to be as proactive as possible by doing the right things from the start.
- One Note – I only work with physicians as this is my specialty. The only time I accept non-physicians is if you are referred from an existing client.
- All my clients work with me. Although I have support staff, they work behind the scenes and clients only talk to me.
- I run my own firm and report to myself. Fortunately, I no longer work in the wirehouse (large investment firms) world where advisors are simply bank employees taking sales direction from others.
This seems like a good place to stop. I am not saying one way is better than the other. I just know what works for me and my select number of physician clients wanting a better life balance while their wealth, health, and time are at their peaks. Ultimately you need to decide what is best for you.