I usually charge my clients 1.0% for > $1mm in assets. This includes planning and portfolio management. I’ve got a client that doesn’t need planning (thank god) and would like a setup wehre we charge a % of profits above the s&p and either 0 or <1% in base fee. I’m thinking 0% base and 50% of the profits (ie - if we beat by 2% (and have a positive year), we get 1% in man fee. If we beat by 4%, we get 1/2 the profits = 2%. Anyone have a template of a management agreement? Your thoughts are welcome.
dude keep atleast 0.5% as base or u may be in trouble
Might want to run this by your compliance people
No need for the base. This client would most likely have left anyways so we aren’t really banking on any management fee. Already ran it by compliance in terms of “can we do this” but they’re in the same boat with me as to figuring out HOW we do it. Any thoughts?
just buy out of the money calls and if you win, your payoff is HUGE, all downside is on client…
If the S&P 500 is down 30% and you are down 1%, you are a hero… but you don’t get paid a dime. You could couch potato this portfolio and leverage SPY 1.5x. Up years, you win and the downside is all on the client. Have you thought about the rules of engagement with this client? Are leverage, options, etc. at your disposal? How much risk is the client willing to take? If they want low volatility and little risk of down years, you are setting yourself up for failure. What do you invest in? Are you a stock picker or do you do asset allocation with funds/ETFs? My preferred way of dealing with clients like this is to slice the fee in half or more and call it a day. Then again, we’ve rarely discounted a fee by not providing financial planning.