The investment management industry has evolved an incredible amount over the past 25 years with the advent of lower cost index funds and zero commission trading. We believe that the wealth management and financial planning industry has lagged in relation to those advancements and will need to play catch up to align with them.
Where Things Started
Investing in the past involved transactional costs like commissions. This system created an incentive for advisors to make new recommendations because they would get paid with every client change or trade. Incentive based advice of pitching stock or mutual fund ideas for clients to act on created an environment that in our opinion was not in a long term investors best interest. Luckily, this method of wealth management is no longer as widely practiced.
The Choice That Clients Must Make Now
With that said, investors are left with a fork in the road.
Option one is to invest with a big firm that entices their clients with little to no fees on investments. In this model, you work with an advisor that has 300-500 other clients which makes it difficult to get any personalized attention. In addition to receiving a cookie-cutter form of investment advisory, you will be steered toward the most profitable area of their business. It is easy to infer where you stand on their priority list should you steer away from their higher fee alternatives.
On the opposite, more investor-focused model, you can work with a full-service financial planning firm that has less clients and provides more individualized attention. They offer professional investment management and customized financial planning, and typically charge in the 1% of assets range. These models are “a fiduciary,” meaning they do not charge any commissions and no transaction costs: only the asset-based percentage fee. These firms act in your best interest as they do not receive commissions nor have any incentive to make client trades.
Is the Assets-Based Fee Model in the Client's Best Interest?
We believe that this model is a big improvement from the large commission days, however, it leaves out one question: “Is 1% of assets a fair way to charge clients for financial planning?” Thanks to technology, the investment management of a $500,000 portfolio costs about the same amount of time and energy as managing a $5,000,000 portfolio.
Both clients likely require about 2-5 meetings per year. Both clients likely spend their time with us focusing on similar things such as withdrawal strategies, social security planning, taxes, or supporting their children. If they are receiving such similar advisory, why should they pay drastically different fees?
Although individuals with more money do tend to have increasingly complex needs and require a bit more work to plan, we wonder if that discrepancy warrants charging the larger account tens of thousands of dollars and the smaller account only a fraction of that. Why don’t attorneys or CPA’s charge clients based on how much money they have?
Evergreen Simplifies Everything
At Evergreen Retirement Planning, we seek to solve this issue and believe that this solution is the direction that our industry is going toward in the future. We understand that some clients need more of our attention and planning than others do, however, we do not believe that our fee should be based on that. We charge a flat fee of $6,300 per year, which comes out to a $525 monthly fee no matter how much you invest with us. We do have a $500,00 minimum account size to ensure our flat fee is not what we feel would be too high of a percentage.
We believe that this system is very valuable in a number of ways. It is extremely simple, which allows us to focus even more on your planning needs.
A flat fee not only directs our focus, it ensures that every client is equal. You have peace of mind in knowing that you are equally as valuable to our firm as every other client regardless of account sizes.
You also do not have to worry about abrupt changes in fees as your assets grow or as you transfer additional accounts to Evergreen.
Learn more about our fee structure and how we invest your assets here.
A Bright Future
Evergreen Retirement Planning was founded to fill a void in financial planning and investment management. With this philosophy in mind, we seek to provide our small number of clients sound financial planning and low-cost investment management that focuses on their goals for a long period of time. We hope to provide you with confidence in your plan, which in turn allows you to invest more strategically.
Although our firm will change and grow over time, that growth will never be without intention. Our goal-- even through change-- is to always focus on you and to never detract from our core values.
As the firm started with our community’s best interest in mind, we want to give back by donating 5% of our profits annually to Massachusetts based 501(c)(3) organizations with the emphasis that business can be used for good.