Can you expand on the last sentence? (…we charge you every way possible)
Take it literally. Loads, trails, wraps, management, marketing, hourly, turnkey, commisions, whatever. That’s what fee-based can include. Anything and everything. The term was invented to decieve here in good old America.
^ The issue is that there are so many different ways to purchase investments and advice today it can make it difficult for the average investor to compare the services received for the cost of service. If you survey 10 different advisors on their service model, investment strategy etc you’d likely get 10 different answers.
We are seeing alot of new rules and regulations being implemented to help provide investors more enhanced fee transparency.
In Canada, as a Fee-based advisor you would sell F class funds that don’t pay any sales commissions (on MF, managed solutions). A flat trade fee would apply if you were trading stocks, ETFs. ($0 goes to the advsior in this case). Clients pay annual trustee fees on registered plans, pay for the advisors services by completing a fee-based agreement (and pay directly from a bank acct or from the investment accounts). The advisor has to collect the tax (HST @ 13% (not a typo)) and remit quarterly or annually. Client pays the fund co. directly through the fund (if MF are held).
Charging customers for services is the way companies make money, which makes the world go round.
I don’t work for free. Nothing is free. (However I use a lower cost of service model for my clientele. I keep fees down as much as possible. At the end of the year, the client recevies their account statement and it shows how much, in dollars, for that year. For all accounts).
Its actually quite easy. All an investor has to do is ask their advisor for a detailed summary of all the fees they pay or paid for the last calendar year.
What do you actually do all day? If you make investment decisions, what makes you qualified to make such decisions? And the marketplace does not care if I earn money for my services or not and has no relevance.
Q: you guys think 1% AUM plus 10% of profits (with high water mark) is unreasonable these days? Friends & Family group of accounts, under $1M each.
I’ve got to figure out my free structure for new people. The fact is I’ve outperformed global equities every single year I’ve been in the market (and strategically not been in the market years like 2008). After fees people would have still massively outperformed. Still, fees suck, I wonder if I should lower that to “1 and 5” to be a nice person?
I’d even be fine with just 1% AUM, but I feel like that is wrong in principle, the point should always be outperforming…not lazily collecting fees (which is what everyone else does).
if you need an annual bonus as an incentive to outperform, that is the problem. since you already get a % of AUM, you are incentivized to grow that AUM steadily over time, which is a better incentive than big bonuses if you have a good year.
^ Well yeah, that’s the whole problem with the industry, it’s relationships (golf) and getting your 1% while sucking hard at markets (most don’t even try, in January they start preparing excuses for why they will underperform that year).
I’m in a completely different profession, the beating markets profession. I half wonder if I shouldn’t go “0 and 10” with high water-mark protection. Probably almost nobody has the balls for that?
^ Sure go with that. Let me know how it works out.
free structure cant be beat
That’s what I’m trying to predict, how it will work out (client reactions, not market performance). It seems the 1% is still standard for these smaller accounts, but what are most people doing on performance? Nothing, just the 1?
PA: I’m not sure how much experience you have in wealth management but if you believe that investment returns are the only topic clients are interested in then your mistaken. Yes 1% is reasonable for a household under a million and then you can offer discounts if you like.
Sure, I realize that. Beating the market is what I’m interested in, and I only want clients who are into what I do.
I need to ponder this more…every time I think about this industry, I remember why I have always avoided it.
^ LOL. Those clients are usually a real PITFA …never satisfied, difficult to get along with, think they more than you. Good luck.
^ Dammit.
LOL, I just need to go 1% AUM, market to grandpas, learn golf, talk about sports, T-bonds, or whatever normal people do.
Does this mean you are going to start using a website to verify your returns to others? Assuming you perform as you stated, it would be interesting to see if that performance persists when you are under the different set of pressures of managing others money.
Naw, and naw. No point in a website, person can see their own performance in their account, anyone who is not them can f@#$ off. And I refuse to do anything other than buy when I want to buy, sell when I want to sell, sit all cash, lever up. Anybody who doesn’t like it can also fu@# off. This sort of changing your behavior to fit other’s expectations is why people fail. Never do that.
^ How do think that is going to work from a compliance perspective? The regulators seem to be going crazy right now on suitability, use of leverage, seniors etc. Your compliance and trade surveillance dept will so far up your a$$ you better be ready cuz they will be going in hard and dry.
Have you given any thought to which firms you would consider as a dealer? The big banks in Canada are focused on growing the WM business but some have cut the smaller end of advisors (BMO, Scotia). They want to increase the AUM per advisor. You wanna start from scratch - well that’s going to be a challenge.
come on mike. pa is looking for accredited investors only. and accredited investors who wish to invest in a fund that is breaking the law. don’t cloud his sound mind with talk of OMs and other necessary fund related thingies.
^ Don’t think so as PA mentioned the AUM / household is < $1 million. I don’t think they would qualify as accredited in that case unless income was high (north of $200k?)
Didn’t even mean it that way. More of its different when your taking risk vs you taking risk for your mom. But yes, you would also need to deal with withdrawals when they didn’t respond well to your reactions haha. Unless you are going to lock up the capital