Hi Client
As with most services we pay for, it's wise for us as clients to periodically confirm that our payments align with industry standards and reassess whether we still need or want the specific services we are receiving. This isn't something we do often, but conducting a high-level review every few years is a responsible exercise.
Peace of Mind
I realize I have discussed industry(Financial Services) fees with many of you, but a brief email on the subject might be helpful. It can seem complicated, and there is a lot of noise about it in the financial media. In the interest of providing you with transparency, education, and most importantly, peace of mind, here is an overview of our advisory fees.
Fees Charged in the Industry
The best place to start is by understanding how the industry generally makes money. This applies, for the most part, across all companies—Fidelity, American Funds, Merrill Lynch, Ameriprise, Schwab, etc. There are primarily four ways they charge clients: (1) commissions, (2) advisory fees, (3) investment management fees, and (4) account fees.
What makes this confusing is that you likely will not pay all four fees or expenses at the same time or in the same account. Most firms mix and match these based on the services provided, which makes an apples-to-apples comparison very difficult. Therefore, the best way to understand this is by using a tool that looks at the combination of fees. We use Nitrogen (Riskalyze), although there are other tools available. We also use Nitrogen to evaluate your investments. As you likely know, it provides a GPA for your portfolio and part of the evaluation is based on expenses.
Industry Averages
Based on a Perplexity Search, I asked, "What should I pay for a financial advisory fee for my investments?" According to smartasset.com, the average financial advisor fee is around 1.02% of assets under management (AUM) per year. This means that if you have $1 million invested, you would pay approximately $10,200 per year in advisory fees. However, this does not include the fund management fee, which averaged 0.16% for an index ETF and 0.66% for an actively managed mutual fund in 2022. Therefore, the total average could be between 1.18% and 1.68%. I know averages are not always the best way to review numbers, but they provide a basic understanding and, in this case, are likely the best way to present it
Transparency
As technology has advanced and regulations have enforced greater transparency in pricing, it has become easier to review and understand our expenses today compared to a decade ago. However, this transparency requires a certain level of understanding. In the past, we might have been paying 1% or more in expenses and fees, but this was not as apparent as it is now. An analogy that might help explain this is the difference between purchasing a spec home and building one with a custom builder. You might pay approximately the same total amount when all fees are included in both cases; however, with the custom builder, the details of the fees are visible, while with the spec home, the fees are simply a component within the overall price. Our approach is more akin to the custom builder model, where all fees are clearly presented.
Summary - Committed to High Standards and Expectations
In summary, our goal at Core Wealth Consultants is to maintain your combined advisory and investment management fees below 1%, typically around 0.80%. We can provide you with your specific rate during our next review. This competitive rate does not compromise the value we offer compared to other services. You can expect to receive substantial value, on par with any top-tier provider.
We employ many of the same tools and investments used by the nation's largest investment firms. Our toolkit includes Blueleaf for performance management, Nitrogen for portfolio reviews and assessments, Charles Schwab as our custodian, and RightCapital for financial planning. Each of these tools and providers is recognized as a leader, serving thousands of advisors and hundreds of firms.
Our fees are below average, primarily because we do not incur the extensive overhead (sales leadership, offices, advertising, etc.) typical of much of the industry. I trust you find this helpful information. Please feel free to contact me if you have any questions or need further details or clarification.
Tim Clifford
Cell 317-674-6710
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DISCLOSURE - All written content on this article is for information purposes only. Opinions expressed herein are solely those of Core Wealth Consultants. Material presented is believed to be from reliable sources, however, we make no representations as to its accuracy or completeness. Core Wealth Consultants, LLC a Registered Investment Advisor in the States of Florida, Indiana and Michigan. You should always consult an attorney or tax professional regarding your specific legal or tax situation. Diversification and asset allocation does not assure or guarantee better performance and cannot eliminate the risk of investment loss.
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