Fee-Only

Fee-only means that we have one fee that the client pays based on the amount of their investable assets. We are up front and straightforward with our bill. Each quarter in our quarterly reporting we include a clear, itemized receipt showing precisely what was deducted from each account and the total. This total represents all that we were paid.

Some of you may not know how rare fee-only advisors are in the financial industry.

Approximately 88% of financial services professionals’ compensation includes commissions. Regardless of if they provide an invoice of what they deduct in fees, every fee-and-commission adviser, broker-dealer, or salesperson has hidden fees they collect under the table. We call these professionals “The Dark Side” of financial services. You can be a good professional on the dark side, but the temptation to be bad is strong. Your very livelihood may depend on selling clients the product that produces the largest commission. Even if you intentionally strive to ignore the commissions, your entire work environment may be based on a sales mentality. Higher cost funds may be more prominently featured. Sales quotas may be expected. Employee contests may be built around pushing more product. Within such a work environment we believe that most commission-based advisers do not even realize how much harm their compensation method does to consumers. The adviser sees only the small commission they directly receive and are unaware of the greater commissions collected by the company through many different avenues.

A commission-based professional’s incentives may be directly in opposition to yours. To increase his wages, he may need to get you to purchase products which cost you more. This method of compensation, while legal in the United States, is flat-out illegal in many other countries.

In contrast, fee-only advisors such as our firm avoid this particular conflict of interest entirely.

We get no commissions, no kickbacks, and no payments other than the client’s fee. Our fee is up front and straightforward. Our fee is a percentage of assets under management, so it increases when your asset value increases and decreases when your asset value decreases. We believe this better aligns our incentives with yours. We have every incentive to strive to keep your fund and brokerage costs low in order to keep the returns you receive as high as possible.

Incentives matter. If you are going to get a financial advisor, we recommend you select a competent fee-only advisor who you can trust to provide integrated personal financial planning.

An Honest Conversation About Compensation
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For the proper Victorian, acts of love and money should not mix. Although this honest conversion may ruffle Victorian sensibilities, it is a foundation of the trust we forge with our clients.

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Fiduciary

Most investors are not aware of a critical division of professionals in the world of financial services. This distinction lies between fee-only fiduciaries who are obligated to act in your best interest and commission-based agents and brokers who are required to act in the best interest of the companies that employ them. Even when people have some inkling about the differences, several important misconceptions continue about both the nature of the problem and an adequate solution.

Although any person who acts as an executor or as a trustee or under a power of attorney is considered a fiduciary, the SEC is allowing many financial professionals to hide in a lower legal requirement, not meet a fiduciary standard, and call it “Best Interest.” The SEC states plainly, “We have declined to subject broker-dealers to a wholesale and complete application of the existing fiduciary standard under the Advisers Act because it is not appropriately tailored to the structure and characteristics of the broker-dealer business model (i.e., transaction-specific recommendations and compensation).” In other words, the way commission-based agents make their money stands in opposition to acting in your best interest. A broker-dealer’s relationship with a client stems from a sales-like transaction, and their regulation requires no ongoing responsibilities.

In contrast, being a fiduciary requires ongoing responsibilities. Fiduciaries are bound by a code of ethics. They take oaths. Their conduct is based on applying ethical principles. A fiduciary is held to the highest legal and ethical standards for the property entrusted to her care and has a legal obligation to act in a client’s best interest.

We take the fiduciary responsibility very seriously. It is at the core of our identity. It is the heart of our tenets of customer service. In fact, we have made the fiduciary standard our mission statement: “Our goal is to help our clients meet theirs.”

If you are going to get a financial advisor, we recommend you select a fee-only fiduciary who you can trust to put your interests first.

Everyone Deserves a Fiduciary Standard of Care (or Why We Have a Service Level with No Minimums Now)
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Thank you, Robert, for your email and your readership. I hope that everyone enjoys our new “Do-It-Yourself” service level.

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