Page 21 - Investment Advisor - December 2021

money they have, if you’re going to do What do you propose, then? What else do you think is wrong with the
advice plus portfolio management. A lot The way you solve the problem with the way advisors handle their fees?
of advisors are doing that now — charg- advisor who does quote-unquote money A fiduciary advisor has a legal responsi-
ing a flat quarterly or annual fee and giv- management and advice is to charge bility to review costs in a client’s port-
ing the client unlimited advice. a flat annual or quarterly fee or even folio every single year. But they’ll skip
a monthly fee. And it doesn’t change over their own fee whenever they come
What do AUM- and commission-based based on the amount of money the advi- to it. They won’t address their own
advisors say in objecting to your views? sor is managing. fee ever. If the client complains about
They try to justify their fee: “You have The first track is complete separation the fee, the first thing the advisor will
to measure the value we add” and between the advisor who’s giving the say is, “That’s the industry standard,”
“We’re entitled to a portion of that value advice and the advisor who’s managing which is nonsense.
added — what we do makes money for the portfolio. The advice-giver gets paid There’s no such thing as a standard
the client, so we’re entitled to a portion an hourly fee or a retainer or subscrip- fee. If the client argues some more and
of that money,” they say. tion. The second solution, if an advisor the advisor thinks they’re going to lose
But that’s not true. An advisor is like a is doing both advice and portfolio man- the client, they’ll give them a break and
CPA: They do your tax return but aren’t agement, is that you have to structure reduce their fee somewhat. But no advi-
entitled to a portion of your refund [if the compensation so that regardless of sor is ever going to come to the client
you get one]. Advisors aren’t entitled to the advice they give, they get paid the and say, “You know, we’ve decided that
a percentage of the financial benefits the same amount of money. You can do a flat 1% is too high now, and we’re going to
client gains from the portfolio. family fee of $8,000 or $9,000 a year. reduce our fee.”

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DECEMBER 2021 INVESTMENT ADVISOR 19