You can find lots of articles in the media about how to choose a financial advisor and, more specifically, how to be aware of what they will charge you. I’ve seen recent articles in The New York Times and The Wall Street Journal, for example, and I’m sure there are many others. These articles talk about how fees are charged (e.g., commission, hourly, fee-only), questions to ask, how to decide what fee arrangement is best, and how not to get screwed (pardon my French).
Fees are universally unpopular with most people, including myself. Thomas Edison said: “Opportunity is missed by most people because it is dressed in overalls and looks like work.” Don't you think fees are looked at as a current expense and not an investment in the future? I think they are, and so do most financial planners and advisors. Fees are a necessary part of our business. Advisors should not apologize for charging fees; however, we should be transparent and upfront about how much and why we charge you for our efforts on your behalf.
Aspire Planning Associates charges separate fees for two services: financial planning and asset management. We identify your goals, aspirations, and needs, then propose one or both fees as needed. The fee, including how it is computed and billed, is transparent, and there are no other fees paid to us by you. The financial planning fee is based on a projected effort over the next 12 months and is evaluated annually. The asset management fee is computed as a percentage of the assets we directly manage and is reduced as the amount we manage increases over time. We do not receive any other fees from our clients, and our goal is to do what we can to keep our fees as low as we can
Most discussions on fees stop here. Yet, in our mind, of equal importance is why fees are structured the way they are. At Aspire, comprehensive and coordinated financial planning is a core offering. All of our clients go through the process of putting together a financial plan, and we do not work with clients who are focused solely on asset management. As such, our fees reflect the priority we place on financial planning. We charge all clients for financial planning, but if they choose to not have us manage their assets, there is no other fee. We charge a separate fee for strictly asset management that truly reflects the effort needed to manage, monitor, and report on the assets.
It would be easier to combine both financial planning and asset management under a single fee, usually a percentage of the assets managed and deducted from the managed accounts. In our view, easier is not always better. It is not for me to pass judgment on how others set their fees. We do what we do because we feel it is fair and transparent for all parties. It is for you to judge if we made the correct decision.
The bottom line is to understand not only how much but how you are being asked to pay for professional advice. We tend to focus on the how much, but the how can be illuminating and make your choice clearer.