Financial Planning with Sensible Fees

Financial Planning San Francisco

Financial Planning with Sensible Fees

Make financial planning more accessible by de-linking financial planning from asset management.  Offer fee-only financial planning for a sensible flat fee.  These ideas may not sound radical, but they represent a clear alternative to the traditional financial advisor business model.

Challenging Sacred Cows

The most common way financial advisors change for their services are fees based on percent of assets under management (AUM), usually 1%.  This means that a client with assets of $5 million will typically pay close to five times the fees of a similar client with $1 million in assets.  To this day, this has left me scratching my head wondering why.   I have learned over the years that the reality is that it doesn’t take five times the effort to re-balance a $5 million portfolio compared to a $1 million portfolio.  It also doesn’t take five times as much time to create a financial plan except that the numbers are bigger!

After more than 5 years of working at a traditional high cost firm, I decided it was time to do things a little differently.  In June 2016 I left to open a flat fee financial advisory firm so that I could offer my clients a better alternative.   I decided to offer both comprehensive financial planning and asset management for one annual flat fee of $6,000/year per client relationship.  For those who either don’t want or don’t need asset management, financial planning only is also offered for a flat monthly charge of $150/month.

Affordable Financial Planning

From the beginning, I designed the structure of the firm to keep costs low for my clients.  I use modern technology to reduce paperwork and make the financial planning process both more efficient and convenient for clients.  I meet with clients virtually online, so I don’t need to maintain an expensive office or support staff.  Investment fees, trading costs, and taxes are reduced by using low cost Vanguard index funds and ETFs, and asset management is based on a low cost buy, hold and rebalance index investing philosophy.

Complete Transparency

One clear advantage of the flat fee model is that it aligns our interests and reduces conflicts of interest.   Some people are lucky enough to have a great low-cost 401k retirement plan available through their employer.  In many cases, the best course of action is to simply keep the money in the plan after retirement or when they leave their employer instead of rolling it over to be managed by an advisor in an IRA.  With flat fees there is no incentive to gather additional assets under management to increase fees, I simply recommend what is best for you.  There is also no incentive to discourage you from spending, gifting, or paying down your mortgage which would reduce your assets under management.

A flat fee also allows an advisor to be compensated fairly as financial markets move up and down through economic cycles.  You save money on fees because you do not pay additional fees simply because you worked hard to save more for retirement and added to your accounts or your assets increased during a bull market.

If you are currently working with a financial advisor, you may have noticed that it’s sometimes quite difficult to pin down the total fees you are paying.  This is no accident, because I think if most clients were able to easily see what they were paying their advisor, they would be pretty shocked.  With flat fees, the billing process is simple and my clients will always know exactly what they are paying.

As a fee-only financial advisor, I do not receive any commissions from selling products, so there is no incentive to sell high priced life insurance, long term care policies, or annuities that are not in your best interest.  Instead of trying to time the markets, I help clients to tune out the noise and focus on the things that they can control, such as reducing their expenses and saving more towards retirement.  Instead of attempting to identify active fund managers who are unlikely to beat their benchmarks over time, I focus on helping clients capture the return provided by the financial markets using a diversified portfolio of low cost index funds.

THINK about your future, make a PLAN, then SAVE to make it happen.

To get started, contact me Here.

Charles W. Malsbury, CFP®
malsbury@thinkplansave.com
No Comments

Post A Comment

Want More?

Want More?

Join my email list and receive a FREE pdf report on my Top 10 Free Online DIY Financial Planning Tools that you can start using today!

You have Successfully Subscribed!