@ Huskie: the main reason the burnout rate is so high is because its actually really difficult to convince someone to hand over and entrust their life saving with you (as an Advisor). This business is all about relationships. The barriers to get into this business are very low, (along with the licensing requirements) and today its just so easy to buy investments. There are so many different business models in the market, it makes it very difficult for the average investor (unlike the OP - BTW is a charterholder) to be able to dintinguish between the various service and cost models.
define: finance professional
true. okay, much lower rate of hustling/bustling.
Believe it can still be found in the CFA curriculum. Greater good, large body of knowledge, all that.
Someone who’s paid based on the value that they add rather than the amount they can extract.
+1
^ that’s the whole point of working with a Fee-Based advisor. The compensation is outlined on the FBA (and not dependant on the investment is selected).
Fee-based Agreements can charge either a percentage of AUM or a flat fee for each account you are opening.
For funds that have embedded fees, the advisor only receives a portion of the total fee (MER). In this case, the client is choosing to pay for service through the fund itself. The logic that comp is dependant on which product is chosen doesn’t sit well with me.
Again, I think the OP should meet with a Family office (where they won’t be charged for initial discovery meetings) to find out more information and should also meet with a firm that charges by the hour. We don’t have enough information to understand the purpose of the portfolio, family dynamics, etc to be providing recommendations on what the asset mix should be etc.
The logic? Don’t follow. If the comp differs depending on investment, there is a serious conflict.
The fund manufacturers set the trailing commission for mutual funds, not the advisor.
Under Fee-based the Advisor and client determine the fee rates.
What’s the difference between fee-based and fee-only, if any, in Canada? Big difference here in God’s country.
I would consider a Fee-Based advisor who charges a % of AUM or flat fee for investment services and financial planning.(Licensed to provide investment advice and financial planning). In this case, the Advisor is managing the investment assets and providing financial planning.
Fee-only charges a flat fee (or hourly fee, or whatever) for a financial plan, estate plan, financial projections, portfolio construction but isn’t licensed to sell investments. (So you meet a fee only planner - they go through the process and design a portfolio for you then you go and implement the portfolio as a DIY investor or through a broker etc.)
Look up the American terminology. Your points will not be clear to us inconsequential Americans. Our markets are quite small you know.
i don’t think it’s that complicated. my american clients understand the language because the language speaks for itself. fee-only means “this one-time fee only” while fee-based implies it’s a recurring fee. there’s no other way to interpret the difference between the two given the context.
^ Just not the vernacular here in America. Where is STL when you need him?
http://moneyover55.about.com/od/findingqualifiedadvisors/g/Feeonlyadvisor.htm
Fee-only can still charge a fee based on AUM, and most do here in America.
You two obviously don’t have much exposure to American RIAs or their clients.
Why is it so hard for people to stick to their wheel house?
Thanks all for the lengthy discussion. This will def serve as a nice thread to come back to as I continue through this process. For the most part, our advisor currently provides little if any actual tax, estate or other ancillary planning (e.g. insurance). We already have an estate attorney and a good chunk of tax planning is done in-house with the help of a CPA. As such, I’m really leaning on the idea of going with a flat-fee model (no AUM %). I’d like to have semi-annual reviews for the first couple of years and start out this way with only a quarter or half of the portfolio (building up to 100% as we get more comfortable with this model). Lastly, I’d definitely like to set up a system of checks-and-balances that would keep us disciplined and help reduce fiduciary risk.
As far as investment objectives, we’re still trying to work that out as the family’s needs differ. For example. 1) me: young/single; 2) parents: getting older, but still entrepreneurial and capable; 3) sister: family of 5, so may need some big outlays (house and such).
At some point, we will likely take a chunk of this portfolio and actively manage in-house for alternatives since the talent is there (e.g. individual businesses, real estate, etc…). That though would still need to be kept separate from the liquid portfolio, which would not be drawn upon. Again, the checks-and-balances will be key to keep us disciplined.
Best,
CFABB
I have only a handful of clients who are in the U.S. (NY, Cali, CO)
Good for you, I think that’s a wise choice.
As for the checks and balances, there’s no problem with having two seperate advisors who you can utilize as a way of keeping an eye on the other. Several ways to do this. You could have two advisors at all times or youu could have a ‘primary advisor’ and use other advisors as a way of ‘checking up’ on the primary advisor.
For example, go through the whole process with advisor A, and then 6 months later go through the process with advisor B. I’m sure the second advisor will have some different suggestions and recommendations, but for the most part you can simply use him/her as a way of discovering if advisor A has somehow done something unethical or imprudent. If so, that’s where advisor B will really provide you the most value.
Also, ‘advisor b’ can be changed as often as you feel necessary. Any advisor that charges by the hour will be happy to give you a second opinion, check out the fees you’ve paid and what types of products you’re in. If it only costs you $2,000 for a checkup, it’s well worth your time and money.
i understand. it’s just common sense when you use both phrases.
i typically deal with Canadian clients with U.S. assets and U.S. clients with Canadian assets, both of which 99.99999% of RIAs cannot do. that said, i don’t see why having different language prevents me from stealing the business of U.S. RIAs when my offering is superior.
yeah, it’s fair to remember that CFABB is a chartholder and probably only need minimal guidance beyond his expertise. most of what we talked about in this thread pertained to those who had little to no expertise.
So in the States, fee-based has become slight of hand. The media has been jumping on the fee-only(no commission) bandwagon, so the broker-dealers started using the term fee-based knowing the consumer would think that is the same as fee-only, as recommended by their favorite money magazine. Fee-based in America really means we charge you every way possible and hope you don’t pay much attention to our disclosures.