^ lol. They actually mentioned that some refer to them as a cult.
Well, according to DFA, you actually work for them - they just don’t have to pay you.
I would use DFA funds, but I’d have to add an additional 25 bps (Loring Ward’s fee), and I’d have to use a TAMP. And once you add the 25 bps plus the relative tax inefficiency of a mutual fund, that negates any tax benefit that you get. Instead, I just use Vanguard’s ETF platform.
dfa or vanguard are both good value. dfa adds better performance. vanguard is the cheapest. to be funny ishares actually is the market leader though, and they actually have etfs with no fees whatsoever!
Part of the problem is, at least as of right now–the investment part and the tax part have two different owners. Any financial planning work is going to benefit one of the owners to the other’s detriment. And since I’m using the tax office, and working on their time and on their dime, it seems fair to them to bill clients just as if we were doing tax work.
I kinda look at the planning fees similar to a doctor’s office. For your annual checkup–no charge. For a 10-minute clinic visit, no charge. For major surgery–hourly rates.
Why do you say we should include planning in the AUM fees?
Agreed, every time I have to send off a DFA fund approval form I roll my eyes and murmer “this sh!t again?”…
Oh man, I agree with this 1 billion percent…
Why would you agree with STL? (just curious)
If you work in asset mgt, are these guys eating your lunch or what?
So, just so were clear, are you currently managing clients investment assets, and charging a fee fo this service? I’m in Canada, and we have a very different banking system and market than in the U.S… In Canada, I would say there is probably less than 100 advisors in the country operating in the fee only model - where they charge by the hour. More and more advisors aer working under the fee only - charging a percentage of AUM as the fee, with either no commissions on funds or ETFs (or very minimal).
If your currently not managing any investment assets, but are incorporating financial planning into the tax work, then you need to be really clear as to what the service model is going to be for these types of clients. I would charge to prepare the tax return, and an additional, flat fee to prepare the initial financial plan.
basically greenie believes that advisors dont add real value, so he only wants to charge a minimal fixed fee that isnt a percentage of assets since his plan is very plain jane. greenie - the advisor you can trust
FYI - I am in a CPE class today and tomorrow. But I trust Mike to pick up the torch for me until I can respond.
Keep bantering and I’ll keep reading.
What are you CPEing?
Well typically the investment mgt practice manages the investment assets and includes the financial planning services, and charges either a flat rate fee, a percentage of AUM under a fee only, or combination of commissions and fee. Most all clients want the financial planning services included in this fee. And, you could argue that you can’t build a proper investment portfolio without going through the financial planning process. (but let’s try to stay on topic here).
I don’t think Greenie would agree with nerdy’s statement. There are lots of studies to show how advisors add value (I know Vanguard has produced these in the past, the Sirano study out of McGill university in MTL…). In general, the financial industry is facing increasing regulatory pressure on fee disclosure/transparency, fee reduction, increased regulation. So as an Advisor - and business owner, what are you going to do? Your going to look for lower cost investment strategies that fit into a fee only service model that can complement your overall practice (bc I’m not going to cut my fee), and transition investment assets from higher fee product into lower fee product and pass along cost saving to the client.
So ya, guys who work for asset managers who use an active mgt style aren’t going to like a competitor (DFA) who is taking away business from them.
If Greenie could provide some additional context about the current set up of the office (i.e. are the owners business partners, or simply a shared space arrangement) then this can help. Greenie - have you had the talk yet regarding succession planning yet? This is something I’m thinking about right now in my own situation.
1040 tax prep for next year
CPA firm - I’m a straight-up employee.
Investment firm - I’m an independent contractor. In exchange for the privelige of having a BD/IAR, I part with half my revenue. 15% goes to Cambridge and 35% goes to the owners of the local “branch”.
So far, there has been no revenue sharing or rents or any commingling between the two.
^ ok well this is a little different. For the CPA firm - I’d want to be really clear as to what your job duties / expectations are. Do they pay you to provide financial planning services to their clients? Is this an area of business the employer wants to get into, or does s/he only want to focus on the tax prep?
Also, what do you get for the 35% p/o to the owner of the local branch?
That’s a fabulous question that I’m still wondering. But since 35% of zero is zero, I’m not too worried about it. (I’m making a little money, but not much. Not yet.)
i assume that as revenue grows, payout % will too. But we’ll cross that bridge when we get there.
^ um, ok, however shouldn’t that question been answered before it was agreed to? For example, if your paying 25% and its covering compliance costs (i.e. Branch manager, back office, etc) a desk fee, tech etc then maybe that’s reasonable. (I think some broker dealers have a total payout of 50bps after the bank takes their cut, but most all of their expenses are covered by the bank). My firm has a different payout grid, its higher but we cover more of our own expenses.
I would certainly want to have an agreement in place before generating any revenues. I suspect you may be leaving money on the table here.
i dont know what a desk fee is, but all this other stuff is covered. I think that’s the vast majority of it.
Ideally, someday I’ll only be responsible for my 1/3 of the office expenses, and then, only the ones I use. (I don’t have an office, so I shouldn’t pay rent, phone, utilities, etc)
right now, I’m fine with giving back 35%. Again, as production increases, I anticipate that the 35% will decrease.