Let's Talk About Fees

Sean Sevey |

In my opinion, the Assets Under Management (AUM) fee model is not just outdated, but it is also fundamentally flawed. Its foundation lies in the mutual fund industry, which was designed to cater to a limited group of clients before technology disrupted the exclusivity of Wall Street. As advisory firms developed their pricing models, they simply replicated this outdated blueprint. However, over the past five years, trading commissions have been driven down to zero by technological advancements. Regrettably, the advice industry has been slow to adapt, clinging to fees as their primary source of revenue.

The counter argument often presented is that breakpoints and the value of advice justify the costs. Yet, based on my experience as an advisor for over 22 years, I can confidently say that the time and attention devoted to a client are not determined by the size of their account, but rather by the complexity of their needs and their emotional risk tolerance. To truly prioritize clients and act in a fiduciary capacity, we must recognize that the AUM model unfairly burdens clients with higher asset levels. I firmly believe that clients deserve a fixed annual fee that encompasses comprehensive advice, including Complex Financial Planning, collaboration with tax advisors and estate attorneys, and tailored investment recommendations.

Consider the Ultra High Net Worth individuals in our country, those with assets exceeding $100 million. They have the luxury of establishing Family Offices, where they hire investment managers on a salary basis to handle their investments, coordinate with tax and legal professionals, and provide guidance on philanthropic endeavors. Shouldn't we all have access to a similar approach?

Here are some important questions to ask your advisor:
- What is the fee differential if I invest $2 million versus $5 million?
- What additional services, time, and attention will I receive for the additional fees?
- Am I paying multiple layers of fees? Can you provide a breakdown of all the fees being charged?
- Do I pay the same rate for stocks and bonds?
- Am I being charged fees on cash holdings?

At Sevey Wealth, we have the answers to these questions and more. We are committed to providing transparent and fair pricing, ensuring that you receive the comprehensive advice you deserve. Please let us know how we can assist you in achieving your financial goals.