How are your fees computed?
The primary source of fees for services that I provide is based on a percentage of assets under management. Assets under management consist of the financial assets for which clients give me the opportunity (delegate fiduciary responsibility) to help them manage. We use TD Ameritrade Institutional Services as the custodian for clients accounts. Therefore, assets under management consist of the account balances (for which I serve as the Registered Investment Advisor) in the clients accounts at TD Ameritrade. Although other account balances which are not available to be transferred to TD Ameritrade, such as 401(K) accounts and annuities, are certainly included in the comprehensive financial plan these balances are not considered to be assets under management. My related fee is determined by a percentage per year of the assets under management as follows:
Up to $500,000 = 1%
From $500,000 to $1,000,000 = .75%
Over $1,000,000 = .50%
I ask to be compensated on a quarterly basis. Therefore, the fee is actually computed at one-fourth of the above percentages per quarter. For example, the fee for $400,000 of assets under management would be $1,000 per quarter. Our arrangement is to have the fees taken from the TD Ameritrade client account balance each quarter. Most fee-only advisors that I am aware of ask to be compensated in advance. However, I ask to be compensated after the quarter ends. At the end of each calendar quarter, we simply determine the value of each account and then determine the related fee based on the above percentages. The fee is prorated for assets deposited or withdrawn during a quarter. (Therefore, my motivation is to make my clientsâ€™ accounts grow rather than simply to make transactions.) The 1% fee includes basic financial planning which I feel is required to make intelligent decisions regarding the investment management. I encourage my clients to meet with me on a quarterly basis, or as needed, and this meeting is included in the above fee. I send each client quarterly reports (or as needed) and an invoice indicating the computation of the fee.
I also charge an hourly fee for other additional services that are requested by my clients. For example some of my clients request that I prepare their income tax returns. And I am occasionally asked to provide other services in addition to the basic financial planning and investment management, such as comprehensive life insurance analysis, estate planning, business planning, etc. My hourly fee for these services is $110.
Thank you again for considering our services.