"For Sale By Owner"

I had a conversation with a prospective client the other day, someone unhappy with her current advisor. The conversation was not centred around the state of the markets or their portfolio, it was about contact. She just did not feel that her advisor was staying in touch.

The discussion at a certain point turned to fees. Turns out that she is very cost conscious and has a diversified basket of global index funds or ETF's, which mimic various indexes (the S&P 500 for example) around the world. It is a good strategy, because, historically, few portfolio managers are able to beat the indexes (approx. 30% or less). This means that paying a portfolio manager 2% or more (most mutual funds) vs. the fee for an index fund which is a fraction of the cost (approx 0.5% depending on the index) is not worth it.

Problem for her, she paid an up-front transaction fee for the advisor to buy the fund, 1%, based on the advisor's asset allocation model. When the advisor wants to earn another bit of commission, he "updates" the asset allocation model and will call the client to do so. But that's the only time he calls.

This same prospect told me that it was difficult to understand the "wealth management model". Why pay the fees?

It really depends on what you are trying to accomplish:
If you are a do-it-yourself person and feel that you have all the tools that you need to accomplish your financial goals, then by all means.

It reminds me of the house that sat on the corner of our street that had the "for sale by owner" sign out front for about 2 years. After giving up on that method the owner tried the "old fashioned" but more costly method of hiring a real estate agent and it was sold in a month.

As a professional "Wealth Management Consultant", I will charge you for our services, depending on the size of your portfolio and the complexity of your financial affairs, somewhere between .75% and 1.5% (of your invested assets, annually). In most cases add between .50% and 1.0% for an experienced portfolio manager who have proven to me that they have the ability to beat "the indexes" (some of whom will add a performance fee when they do) . In most cases and on average, clients pay 1.5%-1.75% all in.

What do they get?
Stewardship: a consultative, comprehensive and coordinated plan that we create (according to their goals), implement and monitor for as long as they and their family (we work with multi-generational families) are happy with what we provide.

Contact: regular emails, phone calls, monthly webcasts (multiple wealth topics), quarterly or at least semi-annual face to face meetings to discuss progress and any necessary adjustments that need to be considered.

We earn our fees and you have the right to question them at every meeting. If we aren't earning them, we'll adjust them.

visit our website: www.jstomenson.ca
or contact me at jstomenson@wellwest.ca