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2017 Inside Information AUM/fees Survey

Page

2017

Planning Profession

Fee Survey

Presented by: Inside Information

http:www.bobveres.com 0.12%

0.12%

0.12%

0.25%

1.84%

0.98%

1.11%

2.58%

1.47%

11.79%

2.83%

6.02%

4.79%

6.88%

19.41%

11.06%

8.60%

6.51%

0.00%

11.43%

0.00%

0.00%

0.86%

0.74%

0.25%

0.25%

0.05

%0.10

%0.15

%0.20

%0.25

%0.30

%0.35

%0.40

%0.45

%0.50

%0.55

%0.60

%0.65

%0.70

%0.75

%0.80

%0.85

%0.90

%0.95

%1.00

%1.10

%1.20

%1.25

%1.50

%1.75

%2.00

%

AUM Fee Levels: Portfolios $2-$3 million

Median: 0.75%

0.42%

0.11%

0.84%

0.84%

7.26%

6.94%

7.78%

7.68%

6.83%

4.94%

8.83%

4.10% 5.57%

4.10%

3.68%

7.47%

4.73%

3.47%

4.10%

0.00%

5.47%

3.15%

0.11%

0.84%

0.42%

0.32%

0%

0.05%

0.10%

0.15%

0.20%

0.25%

0.30%

0.35%

0.40%

0.45%

0.50%

0.55%

0.60%

0.65%

0.70%

0.75%

0.80%

0.85%

0.90%

0.95%

1.00%

1.25%

1.35%

1.50%

1.75%

2.00%

Estimated Blended Expense Ratios of Portfolio Investments

Median: 0.50%

Total Annual Costs $1-$2 Million

Client Portfolios

1.41%

4.64%

5.06%

5.34%

8.30%

9.00%

8.58%

8.16% 10.27%

9.00%

6.47%

4.50%

2.81% 4.50%

1.97%

2.95%

0.70%

1.27%

0.98%

0.42%

0.98%

0.42%

0.14%

0.28%

0.28%

0.14%

0.00%

0.42%

0.28%

0.14%

0.00%

0.00%

0.00%

0.56%

.20%

-.65

%.66%

-.9%

.91%

-1.00%

1.01

%-1.10%

1.11

%-1.20%

1.21

%-1.30%

1.31

%-1.40%

1.41

%-1.50%

1.51

%-1.60%

1.61

%-1.70%

1.71

%-1.80%

1.81

%-1.90%

1.91

%-2.00%

2.01

%-2.10%

2.11

%-2.20%

2.21

%-2.30%

2.31

%-2.40%

2.41

%-2.50%

2.51

%-2.60%

2.61

%-2.70%

2.71

%-2.80%

2.81

%-2.90%

2.91

%-3.00%

3.01

%-3.10%

3.11

%-3.20%

3.21

%-3.30%

3.31

%-3.40%

3.41

%-3.50%

3.51

%-3.60%

3.61

%-3.70%

3.71

%-3.80%

3.81

%-3.90%

3.91

%-4.00%

4.00

%+

Median: 1.50%Under1% 8.16%Bet.1-2% 73.70%Bet.2-3% 15.89%Bet.3-4% 1.97%above4% 0.56%1.0%-2.0% 73.70%

4.70%

2.03% 4.

57%

2.92% 4.95%

5.33%

5.96%

3.05%

6.09%

1.14%

20.81%

1.14%

7.87%

5.46%

5.71%

9.14%

4.19%

2.16%

2.41%

0.38%

0.00%

Advisors reporting % of AUM Fees

That Pay for Non-Asset Management Client Services

(Financial Planning etc.)

FeeStructureBreakdown

AUMOnly 33.37%AUM+Retainer 23.85%AUM+Hourly 8.05%AUM+Commission 8.68%AUM/Hourly/Retainer 8.68%RetainerOnly 5.23%HourlyOnly 3.24%Hourly&Retainer 2.93%CommissionOnly 0.63%Commission+Hourly 0.21%Commission/AUM/hrly 2.09%Commission/AUM/Ret. 1.57%AllFour 1.46%

AverageAUMFee: $6,689AveragePlanningFee: $6,175LowestAUMFee: $938LowestPlanningFee: $0HighestAUMFee: $15,750HighestPlanningFee: $13,500


Page 1

The DOL fiduciary rulehas raised a question that nobody

seems prepared to answer: what

are reasonable fees for managing

a client’s investment assets? Wehear about an industry standard

1% of assets under management,

but we also know that this fee level

doesn’tapplyequallytoportfoliosof all sizes. Are there any industry

statisticswhich comparedifferentfee levels for different size portfo-

lios, and help us arrive at a work-

ingdefinitionof“reasonable?” At the same time, it has

been widely reported that the fi-

nancial planning profession ismoving away from a pure AUM

revenue model. The destination is,

asyet,uncertain,butwecanplau-

sibly speculate that the evolutionwill move toward a blended AUM/

fixed fee (what used to be called“retainer”)model,wherethefixedfee pays for planning while the

AUM fee pays for the asset man-

agementactivities.Someadvisorsare shifting to a fixed feemodel,while others are adding hourly

fees. And,ofcourse,manyadvi-sory firms are still earning com-

missions on their product recom-

mendations.

This, too, raises a lot of

interesting questions. Among

them: where are we in this evo-

lutionaryprocess? Howmanyfi-

nancial planningfirms are, today,stillcompensatedpurelybyassetsunder management? How manyare using one of the various blend-

edmodels:AUMplus fixed fees;AUMplushourly,AUMpluscom-

missions.

And how many have

moved away from AUM altogeth-

er, and are charging either fixedfeesorsomecombinationoffixedfeesplushourlyorcommission,or

Introductionhourlyfeesalone? Is the trend away from

AUM visible in today’s financialplanning community, or is it, asyet,purelyspeculation? Beyond that, there are other

coststoconsider.Advisorschargefor their own services, but clientportfolios also incur the blendedexpenseratiosoftheunderlyingin-

vestments,plustradingcosts,plus,insomecases,additionalplatformfees tocompensateabroker-deal-er,TAMP,custodialNTFprogramorwrapfeeprogram.Whatdoweknow about standard all-in costsof clientportfolios,wheneachofthese cost components are addedtogether?Canwearriveatanin-

dustrystandardforall-incosts? Are there differences incost structures among differenttypesoffirms?Doportfoliosman-

agedbywealthmanagerstypicallycost more, or less, than similar-sized portfolios managed by dual-

ly-registered advisors, wirehouse

brokersorfee-onlyfinancialplan-

ners?Aretheredifferencesincostwhenthefirmsarebrokendownbysize, or by the number of years a

plannerhasbeeninthebusiness? WhenafinancialplanningfirmchargesoneAUMfee for itsfull range of services, what per-centage of that total fee pays forfinancial planning and other non-investment related services, vs.what percentage should properlybe allocated to managing clientportfolios? Finally, for advisory firmswho are looking at moving from an

AUMtoflatfeearrangement,whatwouldbeareasonablecostforpro-

vidingfinancialplanningservices,and asset management services?Is there a way to arrive at industry

standardpricing?

This white paper will en-

deavor to answer these and other

interesting questions about fee

structuresinthefinancialplanningmarketplace. Over the next 22pages, the reader will find chartswhich break down the data col-lected from nearly a thousand fi-

nancialplanningfirmsinthefallof2016, as part of a comprehensivetechnologysurvey. The result may represent

the most comprehensive pictureyetofferedofhowfinancialplan-

nersarechargingtheirclients,andhowmuch.Thisreportnotonlyof-fers some tentative answers to the

questions about industry-standard

feesandall-inportfoliocosts,butalsopaintsapictureofaprofessionin transition.

There will be analysis pro-

vided throughout the report, but

unlike many white papers in the in-

dustry, the goal here is for the read-

ertodrawhis/herownconclusionsand apply the research to yourowncircumstances.Theopinionsof the author are far less relevant

than the faithful reproduction ofthedatawecollected,representedhereby59chartsandtables. Iwant tooffermysincerethankstoJoDayofTrumpet,Inc.,and Jennifer Goldman of My Vir-

tualCOO,whograciouslyencour-agedtheiraudiencestoparticipatein the survey.

And I want to invite any

readers to help me think of ques-

tions that should have been asked,

orwaystoevaluatethedatawecol-lected in potentially useful ways.Every effort was made to createthe most relevant fee survey in the

profession’sshorthistory,butthereisclearlymuchmoreworktodo.

Bob Veres

Inside Information


Page

ChartTitle

1 2 3 4

Survey Responents Breakdown: Years in Business

20+ Years

48.52%

11-20 Years

32.02%

6-10 Years

12.46%

1-5 Years

6.99%

WhoAretheParticipants? The survey was sent out

to three primary audiences in thefinancial planning profession:the readers ofBobVeres’s InsideInformation newsletter service;members of Joel Bruckenstein’sT3 community, and the readersof the Advisor Perspectives/APViewpointinformationservice. Inallwecollected956use-able survey forms. In order to de-

terminehowcloseourrespondentswere to a representative sample

of the profession, we asked about

their experience, their businessstructure and the size of the firmwhere they worked, measured in

total annual revenues.

The results are shown in

thethreechartsonthispage.Gen-

erally, the respondents tended to be

abitmoreexperiencedthanaver-age; almost half reported havingspent more than 20 years in the

business, and another 31% have

worked 11-20 years.

Turning to business struc-ture, we attracted a very smallnumber of wire-house affiliatedbrokers, and a slightly larger,

still insignificant, number of as-setmanagers.Thepreponderanceof the respondents were fee-only

planners(52.62%ofthetotal);andcomprehensive wealth managers

ChartTitle

1 2 3 4 5

Survey Responents Breakdown: Business Structure

ComprehensiveWealthManager

25.24%

Dually-Registered

Advisor

17.43%

Wirehouse-AffiliatedBroker2.14%

Fee-Only Asset

Manager

2.57%

Fee-Only

FinancialPlanner 52.62%

(25.24%), along with lesser rep-

resentation among the communi-ties of dually-registered advisors

(17.43%),assetmanagers(2.57%)

and wirehouse-affiliated brokers(2.14%). Thesurveycapturedagoodcross-sample of firm size, with aslightbiastowardlargerfirmsthathavesuccessfullycreatedscale. Overall, the survey seems

tohavebeenskewedtofirmsthatoffer financial planning services,whichistobeexpectedifmanyofthe respondents were members of

theInsideInformationcommunity. Let’s take a look at how- and howmuch - these advisoryfirmschargeforassetmanagementandotheractivities,fromavarietyof angles.

2

ChartTitle

1 2 3 4 5 6

Survey Responents Breakdown: Firm Revenue

$250,000-$500,000

16.31%

$1 million - $4 million

28.81%

$4+ Million

11.55%

$500,000-$1 million

20.55%

$50,000-

$100,000

9.53%$100,000-250,000

13.24%


Page

Revenue Models

Percent Using AUM As Part of their Fee

Structure: 87.75%

Percent Using Retainers As Part of their

Fee Structure: 43.72%

Percent Using Hourly Fees As Part of

their Fee Structure: 26.66%

One key question we

sought to answer with this survey

was: Is there a visible trend away

from the AUM revenue model to-

wardothermodels? Thechartattheupperrightcontains a great deal more infor-mation than its size would suggest.

It reveals a trend toward more di-

verserevenuesources,butonestillin its early stages. Whereas fiveyearsago,theAUM-onlycategorywouldalmostcertainlyhavebeen

over 70%, today it represents al-

most exactly one-third of the re-spondents. More than 85% of the

respondentsstillchargesomeformof AUM, but just under two-thirds

are now supplementing AUM fees

withretainerorhourly(andsomecommission)revenues. Basedonthecommentswereceived in the open-ended fieldsthroughout the survey, it appears

that the AUM + Retainer and AUM

+ Hourly models generally mean

thatanadvisorischargingfortheup-front planning work and there-

after charging on anAUM basis,with perhaps some project workpaid for by retainers or fees as time

passes. However, others are bi-furcating their asset managementwork(paidbyAUM)andplanning(paidbyhourlyorretainerfees).

Intheabsenceofclearpro-

fession-wide data, it is hard to see

howadvsiorscandetermine“rea-sonable”feesforclientportfolios.Wehear that1%of a clientport-foliois“industrystandard,”butisthistrueforportfoliosofallsizes?IsittrueforANYsize? This survey sought to ad-

dress this question in the most

straightforward possible way: by

asking survey respondents to pro-

videustheirAUMfeelevelforcli-ent portfolios of different sizes.

The first set of charts, tothe right, reflect the responsesfor portfolios below $250,000. A

smallpercentofadvisorschosenot

3

FeeStructureBreakdown

AUMOnly 33.37%AUM+Retainer 23.85%AUM+Hourly 8.05%AUM+Commission 8.68%AUM/Hourly/Retainer 8.68%RetainerOnly 5.23%HourlyOnly 3.24%Hourly&Retainer 2.93%CommissionOnly 0.63%Commission+Hourly 0.21%Commission/AUM/hrly 2.09%Commission/AUM/Ret. 1.57%AllFour 1.46%

Fee Levels

0.38%

0.13%

0.64%

0.13%

1.40%

1.02%

0.89%

0.89%

2.93%

1.78%

3.44%

4.20%

49.49%

21.76%

7.38%

2.16%

1.15%

0.25%

0.13%

0.26%

0.52%

0.13%

1.43%

0.78%

0.39%

0.13%

1.82%

1.43%

1.56%

2.99%

43.25%

24.42%

13.64%

2.08%

3.90%

1.17%

AUM Fee Levels: Portfolios $250,000-$500,000

AUM Fee Levels: Portfolios Below $250,000

Median: 1.00%

Median: 1.00%


Page 4

0.25%

0.13%

0.50%

0.38%

0.50%

2.64%

1.51%

1.88%

1.01%

7.29%

4.77%

5.53%

8.29%

0.38%

49.87%

0.25% 10.93%

2.76%

0.88%

0.25%

AUM Fee Levels: Portfolios $500,000-$1 millionMedian: 1.00%

0.25%

0.12%

0.74%

0.49%

0.49%

1.35%

0.86% 6.86%

1.10%

3.68%

3.19%

3.19%

17.77%

9.19%

8.09% 13.11%

0.12%

25.00%

0.25%

0.25%

2.45%

0.98%

0.25%

0.25%

0.10

%0.20

%0.25

%0.30

%0.35

%0.40

%0.45

%0.50

%0.55

%0.60

%0.65

%0.70

%0.75

%0.80

%0.85

%0.90

%0.95

%1.00

%1.10

%1.20

%1.25

%1.50

%1.75

%2.00

%


Median: 0.85%

0.12%

0.12%

0.12%

0.25%

1.84%

0.98%

1.11%

2.58%

1.47%

11.79%

2.83%

6.02%

4.79%

6.88%

19.41%

11.06%

8.60%

6.51%

0.00%

11.43%

0.00%

0.00%

0.86%

0.74%

0.25%

0.25%

0.05

%0.10

%0.15

%0.20

%0.25

%0.30

%0.35

%0.40

%0.45

%0.50

%0.55

%0.60

%0.65

%0.70

%0.75

%0.80

%0.85

%0.90

%0.95

%1.00

%1.10

%1.20

%1.25

%1.50

%1.75

%2.00

%


Median: 0.75%

to answer this question, because$250,000 is below their stated

minimum, but one of the surprises

of the survey was that, in the real

world,morethan2/3rds(68.85%)ofplanningfirmsareactuallyman-

aging portfolios of this size.

At this asset level, the 1%

consensus estimate seems to bereasonablyaccurate,andthatholdstrue for portfolios up to the $1 mil-

lionlevel(seeleft).Above$1mil-lion, the standard fee level drops to

85basispoints, and the spectrumoffeesbecomeswider,makingitabitmoredifficult to identifywhatis“reasonable.” The median fee drops to 75

basis points for portfolios in the

$2-$3 million range, and further to

65basispointsforclientportfoliosin the $3-$5 million range. Only

about 60% of respondents gave us

information in the $5-$10 million

range (this level is more aspira-tionalthanreflectiveofactualex-

perienceformanyfirms),butthosewho did reported a median of 50

basispoints.(Severalrespondents,intheopenfields,toldusthattheirfeesatthatlevelarenegotiable.) What is interesting, andwillbereflectedin latercharts, isthebroadspectrumoffeescharged.The industry standard 1% appears

tobereflectedmoreinthebreachthan the actual experience, witha significant number of advisorscharging45basispointsorlesson$3 million portfolios. Some read-

ers, meanwhile, are likely to reg-

ister some degree of astonishment

at the long, thin tail along the right

side of the graph, which reflectsadvisoryfirmschargingmorethan1.25%-inafewcases,muchmore-onclientportfoliosofsignificantscale.

0.13%

0.27%

0.13%

0.00%4.56%

1.88%

1.48%

0.13%

5.37%

18.12%

2.68%

10.60%

7.79%

7.38%

14.90%

7.92%

5.23%

3.22%

0.00%

6.71%

0.00%

0.00%

0.40%

0.54%

0.27%

0.13%

0.05

%0.10

%0.15

%0.20

%0.25

%0.30

%0.35

%0.40

%0.45

%0.50

%0.55

%0.60

%0.65

%0.70

%0.75

%0.80

%0.85

%0.90

%0.95

%1.00

%1.10

%1.20

%1.25

%1.50

%1.75

%2.00

%

Median: 0.65%



0.15%

0.60%

0.15%

1.05%

9.58%

2.99%

3.89% 7.19%

4.04%

26.35%

4.64% 8.83%

6.44%

4.04% 9.

43%

3.59%

1.65%

1.05%

0.00% 3.29%

0.15%

0.00%

0.00%

0.45%

0.15%

0.15%

0.05

%0.10

%0.15

%0.20

%0.25

%0.30

%0.35

%0.40

%0.45

%0.50

%0.55

%0.60

%0.65

%0.70

%0.75

%0.80

%0.85

%0.90

%0.95

%1.00

%1.10

%1.20

%1.25

%1.50

%1.75

%2.00

%

Median: 0.50%


Page

0.42%

0.11%

0.84%

0.84%

7.26%

6.94%

7.78%

7.68%

6.83%

4.94%

8.83%

4.10% 5.57%

4.10%

3.68%

7.47%

4.73%

3.47%

4.10%

0.00%

5.47%

3.15%

0.11%

0.84%

0.42%

0.32%

0%0.05

%0.10

%0.15

%0.20

%0.25

%0.30

%0.35

%0.40

%0.45

%0.50

%0.55

%0.60

%0.65

%0.70

%0.75

%0.80

%0.85

%0.90

%0.95

%1.00

%1.25

%1.35

%1.50

%1.75

%2.00

%

AdditionalPortfolioCosts Of course, AUM fees areonly one component of the coststhat are paid out of client portfo-

lios. Are there industry standards

forsomeoftheseothercosts? These additional expensesincludetheblendedexpenseratiosof the underlying investments in

clientportfolios-whethertheyaremutualfunds,ETFsorotherstruc-tures. We asked respondents toestimate theirexpenseratiocosts,andcametotheinterestingconclu-

sionthattheplanningprofession’sportfolio management processesare nowhere near as homogenous

astradepressarticleswouldhaveone believe.

The alert reader will no-

ticethatafewadvisorsreportzerounderlying expense ratios. Howis this possible? The commentsfields offers an explanation: thefar left of the expense ratio chartisoccupiedbyadvisoryfirmsthatmanageindividualstockandbondportfoliosfor theirclients-ratherthan funds and ETFs.

Meanwhile,onecanseebythecenterofgravityweightingonthechart’sleft-handsidethetrendtowardindexfundsandETFsgen-

erally, while a muddled middle

seems to show that a large plural-

ity of advisoryfirms are utilizingactively-managed funds in clientportfolios.

Some readers will onceagain be surprised at the not-alto-

gether-thin tail on the far right side

of theexpense ratiograph,whereadvisoryfirmsappeartobeinvest-ingthemajorityofclientassetsinhedgefundvehicles. The median of 50 basis

points a year would seem to be a

decent “reasonableness” figureexcept that in the real world itprobably divides two very differ-

entassetmanagementapproaches:those who build all-index portfo-

lios would fall on the left; thosewho follow a “core and explore”managementphilosophyclusteredaround the middle, and advisors

who employ actively-managedfunds positioned somewhat to the

rightofthecenter. Tradingcosts - that is, thecostofbuyingandsellingintoadoutofclientportfolios-isanotherobvious component of portfolioexpenses. As the reader can seeon thechartbelow,mostadvisorsappear to be working hard to keep

trading costs low (median 0.05%

5

Estimated Blended Expense Ratios of Portfolio Investments11.00%

2.12%

1.69%

50.92%

18.76%

5.78%

4.37%

1.97%

0.85%

0.71%

0.42%

0.28%

0.85%

0.28%

0 . 00% 0.01% 0.02% 0.05% 0.10% 0.15% 0.20% 0.25% 0.30% 0.35% 0.40% 0.45% 0.50% 0.55%

Estimated Annual Trading Costs in Client Portfolios

Median:

0.50%

Median: 0.05%


Page

a year) but there is a very longthin tail that extends all the wayout to 0.55% a year. Some advi-

soryfirmsareaddingmorethan50basis points a year in client costsas a result of what one can onlyconclude are hyperactive tradingactivities. Based on the chart, itwould appear that the “reasona-bleness” threshold is indangerofbeing breached if annual tradingcostsexceed10basispoints. The 11% of survey re-

spondents who report 0% annual

tradingcostsmightseemperplex-

ing at first, but once again therewere two explanations on our“open”fields. First?Apparentlyitisnottotally uncommon for advisoryfirmstopayallclienttradingcostsoutoftheirexpenseratios-whichistosay,outoftheirownpockets. Theotherexplanation?Wealso asked the survey respondents

to tell us their platform fees - that

is, the fees incurred on their bro-

ker-dealer platforms, or for wrap

6

77.91%

0.10%

0.10%

0.10%

0.52%

0.10%

0.10%

0.52%

0.21%

0.84%

0.31%

5.45%

3.14%

1.88%

1.05%

1.68%

0.63%

0.63%

0.10%

0.31%

0.31%

0.31%

0.42%

0.31%

0.10%

0.31%

1.99%

0.52%

Annual Platform Fees in Client Portfolios

feeaccounts,ortheirparticipationin institutional NTF platforms.(Seechartabove.) Asthereadercansee,most(just under 78%) are not payingany platform fees at all. For the

advisorswhoincurthem,theplat-form fees often represented some

orallof their tradingcosts. Thatis, some would report zero trading

costs, and platform fees instead.Others reported low trading costsplus platform fees.


Page

TotalPortfolioCosts Once you’ve gathered theAUM fees for different size portfo-

lios, plus an estimate of the blend-

edexpenseratiosoftheunderlyinginvestments in client portfolilos,along with annual trading costsandplatformfees,itbecomespos-sibletocalculateanall-incost,foreach participating advisory firm,for client portfolios of differentsizes.

Here, the profession’ssearchfor“reasonableness”reach-

esitsmostmeaningfulstage. It’spossible that some advisors are

chargingabove-averageAUMbuttheotherexpensesarebelow-aver-age,meaningtheirclientsarepay-

ingsomethingcomparabletowhatclientsarepayingwhentheyworkwith planning firms that chargehigher AUM rates.

It should be noted, before

we take a tour of the data, that

no attempt was made to assess

the effectiveness of the portfolio

management activities. It’s theo-

reticallypossiblethatsomeofthehighest-costportfoliosreflectedinthis survey are among the highest-

returning. It is also possible that

inexpensive portfolios are deliv-

ering some of the lowest perfor-

mance. Ontherightthereadercansee,forthefirsttimeinthissurvey,two tight bell graphs representing

the all-in costs for smaller clientportfolios - those under $250,000

in assets, and those with $250,000

to$500,000inclientassets.Eachgraphcomeswithachartthatshowsthemedianall-incost(1.85%and1.75%respectively)-datathatwearecertainhasnotbeencollectedand displayed anywhere else be-

forethepublicationofthissurvey.

7

Total Annual Costs

Under-$250,000 Client

Portfolios

1.04%

1.19%

1.79% 3.13% 4.76%

5.51% 6.85%11.16%

6.55%

6.40% 7.74%

8.33%

6.40%

5.51%

4.61%

3.27%

2.68%

2.23%

1.49%

2.23%

1.64%

0.74%

0.74%

0.60%

0.15%

0.45%

0.45%

0.45%

0.60%

0.60%

0.30%

0.15%

0.30%

.25%

-.9%

.91%

-1.00%

1.01

%-1.10%

1.11

%-1.20%

1.21

%-1.30%

1.31

%-1.40%

1.41

%-1.50%

1.51

%-1.60%

1.61

%-1.70%

1.71

%-1.80%

1.81

%-1.90%

1.91

%-2.00%

2.01

%-2.10%

2.11

%-2.20%

2.21

%-2.30%

2.31

%-2.40%

2.41

%-2.50%

2.51

%-2.60%

2.61

%-2.70%

2.71

%-2.80%

2.81

%-2.90%

2.91

%-3.00%

3.01

%-3.10%

3.11

%-3.20%

3.21

%-3.30%

3.31

%-3.40%

3.41

%-3.50%

3.51

%-3.60%

3.61

%-3.70%

3.71

%-3.80%

3.81

%-3.90%

3.91

%-4.00%

4.00

%+

Wealsomadeanattempttodefine the “reasonableness” spec-trumbyidentifyingthepercentageof respondents whose numbers,

whenaddedtogether,fellintocer-tain ranges, and at the bottom, the

all-incosts thatdefined theupperand lower boundaries of the larg-

est range. If the all-in costs fallanywhere between those two num-

bers - 1.4% to 2.4% for the small-

est portfolios - one would imagine

that a reasonable person would de-

finethemas“reasonable.”Acourtof law or the DOL would probably

workoffofabroaderspectrum.

Total Annual Costs

$250,000-$500,000

Client Portfolios

1.29%

2.01%

1.73% 3.74% 5.90%

6.04%

7.34%

11.80%

7.77%

7.91%

9.21%

7.48%

5.47%

4.03%

3.88%

2.30%

1.87%

1.44%

1.58%

1.29%

1.01%

0.29%

0.58%

0.72%

0.58%

0.29%

0.43%

0.43%

0.43%

0.43%

0.00%

0.00%

0.72%

.35%

-.9%

.91%

-1.00%

1.01

%-1.10%

1.11

%-1.20%

1.21

%-1.30%

1.31

%-1.40%

1.41

%-1.50%

1.51

%-1.60%

1.61

%-1.70%

1.71

%-1.80%

1.81

%-1.90%

1.91

%-2.00%

2.01

%-2.10%

2.11

%-2.20%

2.21

%-2.30%

2.31

%-2.40%

2.41

%-2.50%

2.51

%-2.60%

2.61

%-2.70%

2.71

%-2.80%

2.81

%-2.90%

2.91

%-3.00%

3.01

%-3.10%

3.11

%-3.20%

3.21

%-3.30%

3.31

%-3.40%

3.41

%-3.50%

3.51

%-3.60%

3.61

%-3.70%

3.71

%-3.80%

3.81

%-3.90%

3.91

%-4.00%

4.00

%+




Page

If the reader imagined that

the higher AUM levels were some-

howcancelledoutbycomparablylow portfolio expense ratios ortrading costs, the charts offer anantidote in the form of the long

thin tail stringing along to the right

ofthefirsttwographs,andcontin-

uing through thenextfive. Onceyou get beyond all-in costs ofroughly 2.4% for portfolios under

$1 million, and 2.0% for portfolios

under $3 million, you begin to see

asmallbutpersistentpercentageofthesamplewhoseclientsarepay-

ingincreasinglyhighcosts-higherthan 3% and, in a small handful of

cases,above4%ayear. Overall, however, it would

appear that clients of financialplanning and wealth management

firms - the great majority of re-spondents to this survey - are get-

ting a break on fees. The broker-

age world has boasted a flat 3%total all-in portfolio cost, whichin recent years has been stead-

ily negotiated downward to 2.5%.

Planning and wealth management

firms, on the other hand, seem tobeclustering,forportfoliosabove$1 million, in a range below 2% a

year,insomecaseswellbelow. Meanwhile, one sees a def-

inite shift to the left (lower all-inexpenses) asportfoliosget larger,but it’s fair to wonder whetherthese larger portfolios require a

great deal more effort on the part

of the planning/wealth manage-

ment firm to justify the slow de-clineinAUMfees.

8

Total Annual Costs

$500,000-$1 Million

Client Portfolios

2.73%

0.86% 3.

17%5.61% 7.48%

7.48% 8.92%

10.65%

9.64%

8.20%

8.49%

5.04%

5.04%

2.30% 3.45%

2.45%

1.01%

1.01%

1.29%

0.86%

0.72%

0.72%

0.14%

0.14%

0.58%

0.00%

0.43%

0.58%

0.00%

0.14%

0.14%

0.14%

0.58%

.25%

-.9%

.91%

-1.00%

1.01

%-1.10%

1.11

%-1.20%

1.21

%-1.30%

1.31

%-1.40%

1.41

%-1.50%

1.51

%-1.60%

1.61

%-1.70%

1.71

%-1.80%

1.81

%-1.90%

1.91

%-2.00%

2.01

%-2.10%

2.11

%-2.20%

2.21

%-2.30%

2.31

%-2.40%

2.41

%-2.50%

2.51

%-2.60%

2.61

%-2.70%

2.71

%-2.80%

2.81

%-2.90%

2.91

%-3.00%

3.01

%-3.10%

3.11

%-3.20%

3.21

%-3.30%

3.31

%-3.40%

3.41

%-3.50%

3.51

%-3.60%

3.61

%-3.70%

3.71

%-3.80%

3.81

%-3.90%

3.91

%-4.00%

4.00

%+


Total Annual Costs

$1-$2 Million

Client Portfolios

1.41%

4.64%

5.06%

5.34%

8.30%

9.00%

8.58%

8.16% 10.27%

9.00%

6.47%

4.50%

2.81% 4.50%

1.97%

2.95%

0.70%

1.27%

0.98%

0.42%

0.98%

0.42%

0.14%

0.28%

0.28%

0.14%

0.00%

0.42%

0.28%

0.14%

0.00%

0.00%

0.00%

0.56%

.20%

-.65

%.66%

-.9%

.91%

-1.00%

1.01

%-1.10%

1.11

%-1.20%

1.21

%-1.30%

1.31

%-1.40%

1.41

%-1.50%

1.51

%-1.60%

1.61

%-1.70%

1.71

%-1.80%

1.81

%-1.90%

1.91

%-2.00%

2.01

%-2.10%

2.11

%-2.20%

2.21

%-2.30%

2.31

%-2.40%

2.41

%-2.50%

2.51

%-2.60%

2.61

%-2.70%

2.71

%-2.80%

2.81

%-2.90%

2.91

%-3.00%

3.01

%-3.10%

3.11

%-3.20%

3.21

%-3.30%

3.31

%-3.40%

3.41

%-3.50%

3.51

%-3.60%

3.61

%-3.70%

3.71

%-3.80%

3.81

%-3.90%

3.91

%-4.00%

4.00

%+


Total Annual Costs

$2-$3 Million

Client Portfolios

2.76%

3.37%

3.68%

9.49%

8.42% 11

.03%

9.34%

7.66%9.65%

8.58%

5.36%

4.29%

2.14% 3.

83%

2.60%

1.53%

1.07%

1.38%

0.46%

0.61%

0.15%

0.00%

0.31%

0.00%

0.46%

0.31%

0.46%

0.15%

0.31%

0.00%

0.00%

0.00%

0.15%

0.46%

.15%

-.65

%.66%

-.9%

.91%

-1.00%

1.01

%-1.10%

1.11

%-1.20%

1.21

%-1.30%

1.31

%-1.40%

1.41

%-1.50%

1.51

%-1.60%

1.61

%-1.70%

1.71

%-1.80%

1.81

%-1.90%

1.91

%-2.00%

2.01

%-2.10%

2.11

%-2.20%

2.21

%-2.30%

2.31

%-2.40%

2.41

%-2.50%

2.51

%-2.60%

2.61

%-2.70%

2.71

%-2.80%

2.81

%-2.90%

2.91

%-3.00%

3.01

%-3.10%

3.11

%-3.20%

3.21

%-3.30%

3.31

%-3.40%

3.41

%-3.50%

3.51

%-3.60%

3.61

%-3.70%

3.71

%-3.80%

3.81

%-3.90%

3.91

%-4.00%

4.00

%+



Page 9

Total Annual Costs

$3-$5 Million

Client Portfolios

Total Annual Costs

$5-$10 Million

Client Portfolios

3.35%

11.89%

8.99%

7.47% 9.

60%

10.21%

6.40% 7.47%

8.08%

7.01%

3.81%

2.74%

1.83%

2.74%

1.98%

1.07%

0.30% 1.52%

0.46%

0.61%

0.30%

0.30%

0.30%

0.15%

0.00%

0.61%

0.15%

0.00%

0.15%

0.00%

0.00%

0.00%

0.30%

0.15%

.15%

-.65

%.66%

-.9%

.91%

-1.00%

1.01

%-1.10%

1.11

%-1.20%

1.21

%-1.30%

1.31

%-1.40%

1.41

%-1.50%

1.51

%-1.60%

1.61

%-1.70%

1.71

%-1.80%

1.81

%-1.90%

1.91

%-2.00%

2.01

%-2.10%

2.11

%-2.20%

2.21

%-2.30%

2.31

%-2.40%

2.41

%-2.50%

2.51

%-2.60%

2.61

%-2.70%

2.71

%-2.80%

2.81

%-2.90%

2.91

%-3.00%

3.01

%-3.10%

3.11

%-3.20%

3.21

%-3.30%

3.31

%-3.40%

3.41

%-3.50%

3.51

%-3.60%

3.61

%-3.70%

3.71

%-3.80%

3.81

%-3.90%

3.91

%-4.00%

4.00

%+


3.68%

18.42%

9.12%

10.00%

10.00%

6.14%

9.65%

7.19%

5.79%

2.98%

2.98%

3.16%

2.28%

1.75%

1.40%

0.53%

0.70%

0.88%

0.70%

0.35%

0.53%

0.35%

0.18%

0.00%

0.35%

0.00%

0.18%

0.18%

0.18%

0.00%

0.00%

0.00%

0.18%

0.18%

.20%

-.65

%.66%

-.9%

.91%

-1.00%

1.01

%-1.10%

1.11

%-1.20%

1.21

%-1.30%

1.31

%-1.40%

1.41

%-1.50%

1.51

%-1.60%

1.61

%-1.70%

1.71

%-1.80%

1.81

%-1.90%

1.91

%-2.00%

2.01

%-2.10%

2.11

%-2.20%

2.21

%-2.30%

2.31

%-2.40%

2.41

%-2.50%

2.51

%-2.60%

2.61

%-2.70%

2.71

%-2.80%

2.81

%-2.90%

2.91

%-3.00%

3.01

%-3.10%

3.11

%-3.20%

3.21

%-3.30%

3.31

%-3.40%

3.41

%-3.50%

3.51

%-3.60%

3.61

%-3.70%

3.71

%-3.80%

3.81

%-3.90%

3.91

%-4.00%

4.00

%+


Inthefinaltwototalannualcostcharts,whichreflecttheall-inexpensesofclientportfoliosabove$3 million in size, the slow shift

totheleftcontinues,andwhathadbeenabell-likecurvemorecloselyresembles a slope.

The center of gravity re-sides in the 0.6% to 1.7% range,

again significantly lower than thereported costs associated withbroker-managed portfolios, onceagain with the now-familiar long

thin tail extending to the right.Advisors who are making a men-

talcalculationare likely tobeas-toundedatthecostseitherchargedor incurred by a very small, butstillvisiblepercentageofthetotalrespondent base.


Page

All-InCostByFirmType

Thepreviouschartsbeggedan interesting question: are differ-

enttypesoffirmschargingclientsdifferently?Arefirmsofdifferentsize, or advisors of different ex-

perience level,managingmoreorlessexpensiveportfolios? In the beginning of this

study, it was reported that we had

collected several types of “de-mographic” data about our re-spondents:theirbusinessstructure(wealth management vs. dually-registered, vs. asset manager, vs.

fee-only advisor, vs. brokerage

firmrep),theiryearsofexperienceandthesizeoftheirfirms.Byas-sociatingthatinformationwiththeall-inexpensesofeachrespondentforwhichwehadthisprofiledata,wewereabletoexaminewhetherdifferent types of advisors couldbe associated with different ex-

pensestructures. In this and subsequent

pages,weexamine theall-in coststructures for portfolios of $1-$2million in value - a size categorythat seemed not to be below most

minimums or above most firms’actualexperience. Thetoprightchartreflectsthe relatively low percentage ofbrokerage firm representatives intheoverallsample(agoodreasonto view the resultswith caution),whilethebottomchartonthispagereflects a similarly small numberof fee-only asset managers. The

median brokeragefirm all-in costappears to be in line with other

published reports, but the sur-

prise is theconsiderablevariation

10

0.00%

0.00%

0.00%

6.67%

0.00%

6.67%

6.67%

6.67%

6.67%

6.67%

0.00%

0.00%

0.00%

0.00%

6.67%

0.00%

6.67%

20.00%

6.67%

0.00%

6.67%

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

6.67%

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

.20%

-.65

%.66%

-.9%

.91%

-1.00%

1.01

%-1.10%

1.11

%-1.20%

1.21

%-1.30%

1.31

%-1.40%

1.41

%-1.50%

1.51

%-1.60%

1.61

%-1.70%

1.71

%-1.80%

1.81

%-1.90%

1.91

%-2.00%

2.01

%-2.10%

2.11

%-2.20%

2.21

%-2.30%

2.31

%-2.40%

2.41

%-2.50%

2.51

%-2.60%

2.61

%-2.70%

2.71

%-2.80%

2.81

%-2.90%

2.91

%-3.00%

3.01

%-3.10%

3.11

%-3.20%

3.21

%-3.30%

3.31

%-3.40%

3.41

%-3.50%

3.51

%-3.60%

3.61

%-3.70%

3.71

%-3.80%

3.81

%-3.90%

3.91

%-4.00%

4.00

%+

Median: 2.27%

0.00%

5.56%

0.00%

5.56%

16.67%

0.00%

11.11%

16.67%

0.00%

5.56%

11.11%

0.00%

11.11%

5.56%

0.00%

11.11%

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

.20%

-.65

%.66%

-.9%

.91%

-1.00%

1.01

%-1.10%

1.11

%-1.20%

1.21

%-1.30%

1.31

%-1.40%

1.41

%-1.50%

1.51

%-1.60%

1.61

%-1.70%

1.71

%-1.80%

1.81

%-1.90%

1.91

%-2.00%

2.01

%-2.10%

2.11

%-2.20%

2.21

%-2.30%

2.31

%-2.40%

2.41

%-2.50%

2.51

%-2.60%

2.61

%-2.70%

2.71

%-2.80%

2.81

%-2.90%

2.91

%-3.00%

3.01

%-3.10%

3.11

%-3.20%

3.21

%-3.30%

3.31

%-3.40%

3.41

%-3.50%

3.51

%-3.60%

3.61

%-3.70%

3.71

%-3.80%

3.81

%-3.90%

3.91

%-4.00%

4.00

%+

Median: 1.40%

among individual brokers. True,

most respondents build portfolios

with all-in expenses of 2.3% to2.6%, but a substantial plurality of

brokers with a financial planningorientation - which is what thisstudycaptured-areofferingabet-ter deal: portfolios costing 1% toaround 1.7%.

We see a similar diversityamong the fee-only asset manag-

ers,although theirall-incostsareconsiderably lower - indeed, thelowest of the total survey. In fu-

turereports,we’llneedtoaskhowit ispossible tomanageclientas-setsprofitablyforlessthan90ba-sis points a year.

Fee-Only Asset Managers

Brokerage Representatives


Page 11

0.00% 1.

58%

4.21% 5.26%

7.89% 9.

47%

10.00%

7.37%

10.53%

8.42%

7.37%

5.26%

2.63%

5.79%

2.63%

2.63%

0.53% 1.58%

0.53%

1.05%

1.58%

1.05%

0.00%

0.53%

0.53%

0.00%

0.00%

0.53%

0.53%

0.00%

0.00%

0.00%

0.00%

0.53%

.20%

-.65

%.66%

-.9%

.91%

-1.00%

1.01

%-1.10%

1.11

%-1.20%

1.21

%-1.30%

1.31

%-1.40%

1.41

%-1.50%

1.51

%-1.60%

1.61

%-1.70%

1.71

%-1.80%

1.81

%-1.90%

1.91

%-2.00%

2.01

%-2.10%

2.11

%-2.20%

2.21

%-2.30%

2.31

%-2.40%

2.41

%-2.50%

2.51

%-2.60%

2.61

%-2.70%

2.71

%-2.80%

2.81

%-2.90%

2.91

%-3.00%

3.01

%-3.10%

3.11

%-3.20%

3.21

%-3.30%

3.31

%-3.40%

3.41

%-3.50%

3.51

%-3.60%

3.61

%-3.70%

3.71

%-3.80%

3.81

%-3.90%

3.91

%-4.00%

4.00

%+

Median: 1.60%

0.00%

0.73%

0.73% 2.19%

5.11%

8.03%

5.11%

8.03%

13.14%

10.95%

9.49%

4.38%

4.38%6.57%

2.92% 4.38%

0.73% 2.19% 3.65%

0.00%2.19%

0.73%

0.00%

0.00%

0.73%

0.73%

0.00%

0.73%

0.00%

0.73%

0.00%

0.00%

0.00%

0.73%

.20%

-.65

%.66%

-.9%

.91%

-1.00%

1.01

%-1.10%

1.11

%-1.20%

1.21

%-1.30%

1.31

%-1.40%

1.41

%-1.50%

1.51

%-1.60%

1.61

%-1.70%

1.71

%-1.80%

1.81

%-1.90%

1.91

%-2.00%

2.01

%-2.10%

2.11

%-2.20%

2.21

%-2.30%

2.31

%-2.40%

2.41

%-2.50%

2.51

%-2.60%

2.61

%-2.70%

2.71

%-2.80%

2.81

%-2.90%

2.91

%-3.00%

3.01

%-3.10%

3.11

%-3.20%

3.21

%-3.30%

3.31

%-3.40%

3.41

%-3.50%

3.51

%-3.60%

3.61

%-3.70%

3.71

%-3.80%

3.81

%-3.90%

3.91

%-4.00%

4.00

%+

Median: 1.70%

The three graphs to the

rightrepresentthethreelargestco-

hortsofrespondentsbasedonfirmtype.Dually-registeredrepsclear-lyreflectthebroadestspectrumofcosts, but there is clustering be-tween 1% and around 2.1%. It is

important to remember that these

AUMfeesare,inmanycases,sup-

plementedbycommissions,sotheAUM fee doesn’t reflect the fullcompensationstory. Fee-only planning firmsappear to be the most cost-con-

scious among the different firmtypes;theirmedianistiedforlow-

est with the asset managers, and

theclusteringisfurthertotheleftof the graph, with considerablenumbers reporting all-in portfolio

costsunder1.5%. Comprehensive wealthmanagersaresomewhatmoreex-

pensive in the $1-$2 million port-

folio range, and their responses

form another bell curve around amedianof1.6%all-inexpenses. By now, the reader will not

be surprised by the long thin tails

extendingouttotherightoneachgraph, with the tails a bit fatter for

dually-registered reps and wealth

managementfirms.Indeed,asig-

nificant plurality of participantswhoself-identifiedasdually-regis-tered or wealth manager reported

all-inexpensesabove2.6%-asex-

pensive as the standard wirehouse

feestructure.

Comprehensive Wealth Management Firms

1.80%

8.98%

7.78%

6.89%

9.58%

9.58%

8.98%

8.68%

9.28%

8.98%

5.09%

4.49%

2.10%

2.69%

1.20% 2.10%

0.60%

0.00%

0.00%

0.30%

0.00%

0.00%

0.30%

0.30%

0.00%

0.00%

0.00%

0.60%

0.30%

0.00%

0.00%

0.00%

0.00%

0.00%

.20%

-.65

%.66%

-.9%

.91%

-1.00%

1.01

%-1.10%

1.11

%-1.20%

1.21

%-1.30%

1.31

%-1.40%

1.41

%-1.50%

1.51

%-1.60%

1.61

%-1.70%

1.71

%-1.80%

1.81

%-1.90%

1.91

%-2.00%

2.01

%-2.10%

2.11

%-2.20%

2.21

%-2.30%

2.31

%-2.40%

2.41

%-2.50%

2.51

%-2.60%

2.61

%-2.70%

2.71

%-2.80%

2.81

%-2.90%

2.91

%-3.00%

3.01

%-3.10%

3.11

%-3.20%

3.21

%-3.30%

3.31

%-3.40%

3.41

%-3.50%

3.51

%-3.60%

3.61

%-3.70%

3.71

%-3.80%

3.81

%-3.90%

3.91

%-4.00%

4.00

%+

Median: 1.40%

Fee-Only Planning Firms

Dually-Registered Representatives


Page

0.00%

7.63% 8.47%

6.78%

4.24%

9.32%

7.63% 8.47%

8.47%

6.78%

5.93%

5.93%

3.39%

5.93%

1.69% 2.54%

0.00% 0.85%

0.85%

0.85%

0.85%

0.00%

0.00% 0.85%

0.00%

0.00%

0.00%

0.00% 0.85%

0.00%

0.00%

0.00%

0.00%1.69%

.20%

-.65

%.66%

-.9%

.91%

-1.00%

1.01

%-1.10%

1.11

%-1.20%

1.21

%-1.30%

1.31

%-1.40%

1.41

%-1.50%

1.51

%-1.60%

1.61

%-1.70%

1.71

%-1.80%

1.81

%-1.90%

1.91

%-2.00%

2.01

%-2.10%

2.11

%-2.20%

2.21

%-2.30%

2.31

%-2.40%

2.41

%-2.50%

2.51

%-2.60%

2.61

%-2.70%

2.71

%-2.80%

2.81

%-2.90%

2.91

%-3.00%

3.01

%-3.10%

3.11

%-3.20%

3.21

%-3.30%

3.31

%-3.40%

3.41

%-3.50%

3.51

%-3.60%

3.61

%-3.70%

3.71

%-3.80%

3.81

%-3.90%

3.91

%-4.00%

4.00

%+

5.81%

3.49%

9.30%

6.98%

11.63%

3.49%

6.98% 8.14%

6.98%

5.81%

4.65%6.98%

2.33%4.65%

1.16%

0.00% 1.16%

1.16% 2.33%

0.00% 1.16%

1.16%

1.16%

1.16%

0.00%

0.00%

0.00% 1.16%

1.16%

0.00%

0.00%

0.00%

0.00%

0.00%

.20%

-.65

%.66%

-.9%

.91%

-1.00%

1.01

%-1.10%

1.11

%-1.20%

1.21

%-1.30%

1.31

%-1.40%

1.41

%-1.50%

1.51

%-1.60%

1.61

%-1.70%

1.71

%-1.80%

1.81

%-1.90%

1.91

%-2.00%

2.01

%-2.10%

2.11

%-2.20%

2.21

%-2.30%

2.31

%-2.40%

2.41

%-2.50%

2.51

%-2.60%

2.61

%-2.70%

2.71

%-2.80%

2.81

%-2.90%

2.91

%-3.00%

3.01

%-3.10%

3.11

%-3.20%

3.21

%-3.30%

3.31

%-3.40%

3.41

%-3.50%

3.51

%-3.60%

3.61

%-3.70%

3.71

%-3.80%

3.81

%-3.90%

3.91

%-4.00%

4.00

%+

All-InCostbyFirmSize Aretheredifferencesinall-in costs basedonfirm size? Theanswer isyes;at least, theshapesof the graphs appear to be differ-

ent, and the medians for the small-

est firms (see right) and largest(seenextpage)firmsaredifferentfrom their peers.

The three graphs on the

right side of this page are almost

certainlysoloadvisoryfirms.Thesmallest firms are the most cost-conscious,butallthreegroupsareclusteredinthe1%to2%range.

12

6.00%

10.00%

8.00%

8.00% 10

.00%

10.00%

8.00%

6.00%

14.00%

4.00%

0.00% 2.00%

2.00% 4.00%

0.00% 2.00%

0.00%

0.00% 2.00%

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

0.00% 2.00%

0.00% 2.00%

0.00%

0.00%

0.00%

0.00%

.20%

-.65

%.66%

-.9%

.91%

-1.00%

1.01

%-1.10%

1.11

%-1.20%

1.21

%-1.30%

1.31

%-1.40%

1.41

%-1.50%

1.51

%-1.60%

1.61

%-1.70%

1.71

%-1.80%

1.81

%-1.90%

1.91

%-2.00%

2.01

%-2.10%

2.11

%-2.20%

2.21

%-2.30%

2.31

%-2.40%

2.41

%-2.50%

2.51

%-2.60%

2.61

%-2.70%

2.71

%-2.80%

2.81

%-2.90%

2.91

%-3.00%

3.01

%-3.10%

3.11

%-3.20%

3.21

%-3.30%

3.31

%-3.40%

3.41

%-3.50%

3.51

%-3.60%

3.61

%-3.70%

3.71

%-3.80%

3.81

%-3.90%

3.91

%-4.00%

4.00

%+

Median: 1.30%

Median: 1.45%

Median: 1.45%

Revenues: $50,000 - $100,000

Revenues: $100,000 - $250,000

Revenues: $250,000 - $500,000


Page

0.66%

5.92%

5.92%

3.95%

9.87%

10.53%

8.55%

3.29%

10.53%

11.18%

7.24%

1.32%3.29%

2.63% 3.95%

4.61%

0.00% 1.32%

1.97%

1.32%

0.00%

0.66%

0.00%

0.00%

0.66%

0.66%

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

.20%

-.65

%.66%

-.9%

.91%

-1.00%

1.01

%-1.10%

1.11

%-1.20%

1.21

%-1.30%

1.31

%-1.40%

1.41

%-1.50%

1.51

%-1.60%

1.61

%-1.70%

1.71

%-1.80%

1.81

%-1.90%

1.91

%-2.00%

2.01

%-2.10%

2.11

%-2.20%

2.21

%-2.30%

2.31

%-2.40%

2.41

%-2.50%

2.51

%-2.60%

2.61

%-2.70%

2.71

%-2.80%

2.81

%-2.90%

2.91

%-3.00%

3.01

%-3.10%

3.11

%-3.20%

3.21

%-3.30%

3.31

%-3.40%

3.41

%-3.50%

3.51

%-3.60%

3.61

%-3.70%

3.71

%-3.80%

3.81

%-3.90%

3.91

%-4.00%

4.00

%+

0.47%

3.30%

1.89% 3.

77%

8.02%10.38%

9.43%

10.38%

10.38% 13.21%

7.55%

5.19%

2.36%4.72%

1.89%

2.36%

0.47%

1.42%

0.00%

0.00%

0.94%

0.47%

0.00%

0.00%

0.47%

0.00%

0.00%

0.94%

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

.20%

-.65

%.66%

-.9%

.91%

-1.00%

1.01

%-1.10%

1.11

%-1.20%

1.21

%-1.30%

1.31

%-1.40%

1.41

%-1.50%

1.51

%-1.60%

1.61

%-1.70%

1.71

%-1.80%

1.81

%-1.90%

1.91

%-2.00%

2.01

%-2.10%

2.11

%-2.20%

2.21

%-2.30%

2.31

%-2.40%

2.41

%-2.50%

2.51

%-2.60%

2.61

%-2.70%

2.71

%-2.80%

2.81

%-2.90%

2.91

%-3.00%

3.01

%-3.10%

3.11

%-3.20%

3.21

%-3.30%

3.31

%-3.40%

3.41

%-3.50%

3.51

%-3.60%

3.61

%-3.70%

3.71

%-3.80%

3.81

%-3.90%

3.91

%-4.00%

4.00

%+

0.00%

0.00% 1.15%

6.90%

5.75% 6.90% 8.05%

12.64%

13.79%

4.60%

9.20%

4.60%

3.45% 5.

75%

1.15%

4.60%

3.45%

1.15%

0.00%

0.00%

3.45%

0.00%

0.00%

0.00%

0.00%

0.00%

0.00% 1.15%

0.00%

0.00%

0.00%

0.00%

0.00% 2.

30%

.20%

-.65

%.66%

-.9%

.91%

-1.00%

1.01

%-1.10%

1.11

%-1.20%

1.21

%-1.30%

1.31

%-1.40%

1.41

%-1.50%

1.51

%-1.60%

1.61

%-1.70%

1.71

%-1.80%

1.81

%-1.90%

1.91

%-2.00%

2.01

%-2.10%

2.11

%-2.20%

2.21

%-2.30%

2.31

%-2.40%

2.41

%-2.50%

2.51

%-2.60%

2.61

%-2.70%

2.71

%-2.80%

2.81

%-2.90%

2.91

%-3.00%

3.01

%-3.10%

3.11

%-3.20%

3.21

%-3.30%

3.31

%-3.40%

3.41

%-3.50%

3.51

%-3.60%

3.61

%-3.70%

3.71

%-3.80%

3.81

%-3.90%

3.91

%-4.00%

4.00

%+

13

Median: 1.60%

Median: 1.55%

Median: 1.55%

Larger firms appear tochargemore,but thedifferenceisnotdramatic,andcouldbeduetoawiderrangeofservices,orsimplyamarketingpresence in thecom-

munity that allows for higher fees.

In addition, as firms getlarger, the fee structure seems tobecome somewhat more stand-

ardized. There is still a great deal

ofvariation,andcertainlynoevi-denceofprofessionalcollusion,butthebellshapeofthecostcurvesismore tightlydefinedaround1.3%to 2.0% a year. As the eye strays to

the right side of the graphs, some

readers will be scratching theirheads at firms incurring as muchas 3.4% a year - or, in a handful of

cases, reporting all-in fees above4% a year.

Revenues: $1-4 Million

Revenues: $500,000 - $1 Million

Revenues: $4+ Million


Page

2.33%

11.63%

4.65%6.98%9.30%

9.30%

9.30%

2.33%

9.30%

6.98%

0.00%

0.00%2.33%

9.30%

4.65%

2.33%

0.00%2.33%

0.00%

0.00%2.33%

0.00%

0.00%

0.00%

0.00%2.33%

0.00%

0.00%2.33%

0.00%

0.00%

0.00%

0.00%

0.00%

.20%

-.65

%.66%

-.9%

.91%

-1.00%

1.01

%-1.10%

1.11

%-1.20%

1.21

%-1.30%

1.31

%-1.40%

1.41

%-1.50%

1.51

%-1.60%

1.61

%-1.70%

1.71

%-1.80%

1.81

%-1.90%

1.91

%-2.00%

2.01

%-2.10%

2.11

%-2.20%

2.21

%-2.30%

2.31

%-2.40%

2.41

%-2.50%

2.51

%-2.60%

2.61

%-2.70%

2.71

%-2.80%

2.81

%-2.90%

2.91

%-3.00%

3.01

%-3.10%

3.11

%-3.20%

3.21

%-3.30%

3.31

%-3.40%

3.41

%-3.50%

3.51

%-3.60%

3.61

%-3.70%

3.71

%-3.80%

3.81

%-3.90%

3.91

%-4.00%

4.00

%+

1.33%

6.67% 8.00%

6.67% 8.00%

12.00%

4.00%

2.67%

13.33%

8.00%

4.00% 5.33% 6.67%

4.00%

1.33%

0.00% 1.33%

1.33%

0.00%

0.00% 1.33%

1.33%

0.00%

0.00%

0.00%

0.00%

0.00% 1.33%

0.00%

0.00%

0.00%

0.00%

0.00% 1.33%

.20%

-.65

%.66%

-.9%

.91%

-1.00%

1.01

%-1.10%

1.11

%-1.20%

1.21

%-1.30%

1.31

%-1.40%

1.41

%-1.50%

1.51

%-1.60%

1.61

%-1.70%

1.71

%-1.80%

1.81

%-1.90%

1.91

%-2.00%

2.01

%-2.10%

2.11

%-2.20%

2.21

%-2.30%

2.31

%-2.40%

2.41

%-2.50%

2.51

%-2.60%

2.61

%-2.70%

2.71

%-2.80%

2.81

%-2.90%

2.91

%-3.00%

3.01

%-3.10%

3.11

%-3.20%

3.21

%-3.30%

3.31

%-3.40%

3.41

%-3.50%

3.51

%-3.60%

3.61

%-3.70%

3.71

%-3.80%

3.81

%-3.90%

3.91

%-4.00%

4.00

%+

1.81%4.07% 5.

88%

4.07%

10.86%

9.05%

9.95% 11

.76%

6.79%

11.31%

4.98%

5.43%

2.26% 4.

07%

1.81%

2.71%

0.45%

0.90%

0.90%

0.45%

0.00%

0.45%

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

.20%

-.65

%.66%

-.9%

.91%

-1.00%

1.01

%-1.10%

1.11

%-1.20%

1.21

%-1.30%

1.31

%-1.40%

1.41

%-1.50%

1.51

%-1.60%

1.61

%-1.70%

1.71

%-1.80%

1.81

%-1.90%

1.91

%-2.00%

2.01

%-2.10%

2.11

%-2.20%

2.21

%-2.30%

2.31

%-2.40%

2.41

%-2.50%

2.51

%-2.60%

2.61

%-2.70%

2.71

%-2.80%

2.81

%-2.90%

2.91

%-3.00%

3.01

%-3.10%

3.11

%-3.20%

3.21

%-3.30%

3.31

%-3.40%

3.41

%-3.50%

3.51

%-3.60%

3.61

%-3.70%

3.71

%-3.80%

3.81

%-3.90%

3.91

%-4.00%

4.00

%+

14

All-InCostbyYearsofExperience Domoreexperiencedadvi-sors chargemore, or createmoreexpensive portfolios? The evi-denceisclearlymixed. The least experienced re-spondents to our survey also re-

ported the lowest overall expens-es, with the majority telling us that

their costs, when added together,amount to less than 1.50% a year.

1.50% was the median for

respondents who report having

6-10yearsofexperience,andfromhere, the graphs of advisors with

diffrent experience levels lookquite similar. It would appear that

professionals, regardless of ex-

perience, fall intomuch the samepattern in terms of all-in portfolio

costs.

Median: 1.35%

Median: 1.50%

Median: 1.45%

Experience: 1-5 Years




Page

0.84%

3.62%

3.90%5.85%

6.41%

8.91%

8.91%

7.80%

11.14%

8.08%

8.91%

4.18%

2.51% 3.90%

1.95% 3.

62%

0.84%

1.39%

1.39%

0.56%

1.11%

0.28%

0.28%

0.56%

0.56%

0.00%

0.00% 1.11%

0.28%

0.28%

0.00%

0.00%

0.00%

0.84%

.20%

-.65

%.66%

-.9%

.91%

-1.00%

1.01

%-1.10%

1.11

%-1.20%

1.21

%-1.30%

1.31

%-1.40%

1.41

%-1.50%

1.51

%-1.60%

1.61

%-1.70%

1.71

%-1.80%

1.81

%-1.90%

1.91

%-2.00%

2.01

%-2.10%

2.11

%-2.20%

2.21

%-2.30%

2.31

%-2.40%

2.41

%-2.50%

2.51

%-2.60%

2.61

%-2.70%

2.71

%-2.80%

2.81

%-2.90%

2.91

%-3.00%

3.01

%-3.10%

3.11

%-3.20%

3.21

%-3.30%

3.31

%-3.40%

3.41

%-3.50%

3.51

%-3.60%

3.61

%-3.70%

3.71

%-3.80%

3.81

%-3.90%

3.91

%-4.00%

4.00

%+

15

Median: 1.55%

The reader is encouraged tobenchmark your own portfoliosagainstadvisoryfirmsofyourownexperience level,but itwouldap-

pear, from the graph at the right

comparedwith thepreviousones,that there is little consensus, andlittlecleardifferenceamongadvi-sorswhensortedbythiscriterion.

Experience: 20+ Years


Page

AllocationofFeestoServices A question which seemsnever to be asked in the planning

profession is: when you chargean AUM fee, what percent of itshould properly be allocated tomanaging assets, vs. non-asset-

managementserviceslikefinancialplanning,taxandestateplanning?In other words, of the total AUM

fees you’re collecting, howmuchispayingforotherservices? In our survey, we asked that

question in just that way. The an-

swerswereceivedarereflectedinthechartattheright,whichshowsalmost equal dispersion around

the tallest bar representing 50%.

Thereseemstobelittleconsensusamong advisors regarding what

percentageof theirAUMfeesarepayingforotheractivities. There is, however, agree-

ment on one issue. One quicklynotices that none of the respond-

ents reported that 100% of their

AUM fees should be allocated toplanning and other work. Indeed,

very few answered more than 80%.

The obvious conclusion: advisorswho charge some kind of fee formanaging assets view the portfolio

managementactivitiesashavingatleast some value.

At the other end of the

spectrum,a significantnumberofadvisoryfirmswouldappeartobepure asset managers, allocating20% or less of their AUM fees to

planning and other non-AUM re-

lated work.

However, these numbersshould be approached with a de-greeofcaution,andweshouldbeespecially cautiousof the conclu-

sion that these advisors see little

value in their planning work. Two-

thirds of the advisory firms whoparticipated in thesurveyalso re-

4.70%

2.03% 4.

57%

2.92% 4.95%

5.33%

5.96%

3.05%

6.09%

1.14%

20.81%

1.14%

7.87%

5.46%

5.71%

9.14%

4.19%

2.16%

2.41%

0.38%

0.00%

Advisors reporting % of AUM Fees That Pay for Non-Asset

Management Client Services (Financial Planning etc.)

16

portcharging,inadditiontoAUM,some form of flat fees, hourly orcommission revenue. Indeed, aquicklookbackattheoriginaldatafile reveals thatmore thanhalfofthosewhowouldnotallocateanyof their AUM to planning work

do,indeed,chargesomecombina-tionofflatandhourly fees. 30%of those who would allocate just5% to non-planning activities arecharginginotherways,asare80%ofthoseallocating10%tonon-in-

vestmentactivities. As reported earlier, we

asked advisors to elaborate about

their fee structures inopen-endedfields. Some respondents madeit clear that their retainer incomepaid for their front-end planning

work, while ongoing planning

services were paid for under theAUMstructure. Otherassessflator hourly fees on a project basis,whileothershavebifurcated theirannual fees between AUM and a

flat fee structure, paid quarterly,monthly or annually. In those

cases, the AUM fees are payingpurely forAUM activities, while

the other compensation methodsarecoveringtheplanningandoth-

er non-AUM work. It is impossi-

ble to know, based on the data we

collected,whetherthisrepresentsatrend,butitmightpossiblyexplainthe high number of respondents

whose answers fall on the left side

of the graph.

What we CAN concludefromthisdatais thatasignificantnumberofplanningfirmsareusingthe AUM model to pay for a sig-

nificantamountofnon-AUMser-vices.Themedianfigureis50%. Meaning? When we talkabout industry standard AUM

fees, (whether promptedby someversion of the DOL Rule or other

exogenous circumstances) weshouldrecognizethataportionofthe fees ostensibly paid for manag-

ingtheportfolioisactuallypayingforthingsnotdirectlyrelatedtothemanagement of the portfolio.

When you read that theprofessioncharges1%ofAUMforportfolio management, the actualfigure may be closer to 50 basispoints - or less.


Page

DollarCostofServices The survey collected av-

erage AUM fees for portfolios of

various sizes, and the percentageof those fees that should be allo-

catedtopayingforassetmanage-ment vs. non-asset management

(planning-related) services. Withthis information in hand, we have

an opportunity to explore an in-

creasingly important topic in thefinancialplanningprofession. We’ve seen already thatthere is a trend toward either sup-

plementing AUM with hourly or

retainerfees,orreplacingAUMal-together with these alternative fee

structures.Butasyet,thetrendap-

pears to be in its early stages. Over

thenextseveralyears,manyadvi-sors will be asking important ques-

tions:

-Whatisanappropriateflatannualfeetochargeformanagingclientassets?Doesitincreasewithportfoliosize? -Whatisanappropriateflatannual fee for the financial plan-

ning work that is now paid for

outofmyAUMrevenues? DoesTHAT change for wealthier cli-ents? Unfortunately, the survey

didn’t ask respondents to tell ushowmuch theywere charging inretainers.Butthisdatacanbeeval-uated,directly,byothermeans. How? Almost exactly athirdoftheprofessionalswhocom-

pleted the survey told us that they

were compensated exclusively byAUM. Nearly all of them alsogave an estimate as to what per-

centageoftheirAUMfeesshouldproperly be attributed to their as-

setmanagementservices,vs.theirnon-AUMservices. By lookingat thepercent-of-AUM fees for different portfolio

17

sizes, and multiplying that by the

estimated allocation percentages,wecancalculateadollarcostthatthis implies for planning and asset

managementservicesforeachsur-veyparticipant.Thenwecanmapthosedollarcoststodifferentsizeportfolios,anddrawaspectrumofcosts for asset management, andfor non-asset-managment work

likefinancialplanning. Ideally, this would give an

advisor who is looking for a way

to migrate from AUM fees to an

annual flat feemodel some cluesabouthowmuchtocharge.

Inthisseriesofcharts,weassumed portfolios of different siz-

es: $250,000, $400,000, $800,000,

$1.5 million and $2.5 million.

What did we learn? Thefirst set of charts on this pageshows a broad spectrum of feeschargedbyadvisorsforbothtypesofservices,generallyclusteredbe-

4.70%

2.03% 4.

57%

2.92% 4.95%

5.33%

5.96%

3.05%

6.09%

1.14%

20.81%

1.14%

7.87%

5.46%

5.71%

9.14%

4.19%

2.16%

2.41%

0.38%

0.00%

0.36% 3.

21%

2.50%

7.14% 10

.00%

10.36%

16.43%

8.57%

6.07%9.29%

4.29% 5.71% 7.14%

1.43%

1.07%

1.79%

1.07%

1.07%

0.71%

0.71%

0.00%

0.00%

0.71%

0.36%

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

$0-$20

0$2

01-$35

0$3

51-$50

0$5

01-$70

0$7

01-$90

0$9

01-$1,10

0$1

,101

-$1,30

0$1

,301

-$1,50

0$1

,501

-$1,70

0$1

,701

-$1,90

0$1

,901

-$2,10

0$2

,101

-$2,30

0$2

,301

-$2,50

0$2

,501

-$2,70

0$2

,701

-$2,90

0$2

,901

-$3,10

0$3

,101

-$3,30

0$3

,301

-$3,50

0$3

,501

-$3,70

0$3

,701

-$3,90

0$3

,901

-$4,10

0$4

,101

-$4,30

0$4

,301

-$4,50

0$4

,501

-$4,70

0$4

,701

-$4,90

0$4

,901

-$5,10

0$5

,101

-$5,30

0$5

,301

-$5,50

0$5

,501

-$5,70

0$5

,701

-$5,90

0$5

,901

-$6,10

0$6

,101

-$6,30

0$6

,301

-$6,50

0$6

,501

-$6,70

0

7.14%

2.50%

7.14%

5.00%

5.00% 7.14%

15.36%

9.29%

8.21%

12.50%

2.86%6.07%

5.71%

1.43%

1.43%

0.36%

1.43%

0.71%

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

0.71%

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

$0-$20

0$2

01-$35

0$3

51-$50

0$5

01-$70

0$7

01-$90

0$9

01-$1,10

0$1

,101

-$1,30

0$1

,301

-$1,50

0$1

,501

-$1,70

0$1

,701

-$1,90

0$1

,901

-$2,10

0$2

,101

-$2,30

0$2

,301

-$2,50

0$2

,501

-$2,70

0$2

,701

-$2,90

0$2

,901

-$3,10

0$3

,101

-$3,30

0$3

,301

-$3,50

0$3

,501

-$3,70

0$3

,701

-$3,90

0$3

,901

-$4,10

0$4

,101

-$4,30

0$4

,301

-$4,50

0$4

,501

-$4,70

0$4

,701

-$4,90

0$4

,901

-$5,10

0$5

,101

-$5,30

0$5

,301

-$5,50

0$5

,501

-$5,70

0$5

,701

-$5,90

0$5

,901

-$6,10

0$6

,101

-$6,30

0$6

,301

-$6,50

0$6

,501

-$6,70

0


Annual Asset Management Costs

$250,000 Client Portfolio

Annual Planning (NonAUM) Costs



Page

6.38%

1.06%

2.48%

2.48%

6.74%

3.55% 5.32%

4.96%

3.19%

1.77%

17.38%

1.42%

9.22%

3.90%

4.61%

9.93%

2.13%

2.48%

2.48%

3.19%

0.71%

0.35%

1.06%

0.71%

0.00%

1.06%

0.00%

0.00%

0.71%

0.00%

0.35%

0.00%

0.00%

0.35%

$0-$20

0$2

01-$35

0$3

51-$50

0$5

01-$70

0$7

01-$90

0$9

01-$1,10

0$1

,101

-$1,30

0$1

,301

-$1,50

0$1

,501

-$1,70

0$1

,701

-$1,90

0$1

,901

-$2,10

0$2

,101

-$2,30

0$2

,301

-$2,50

0$2

,501

-$2,70

0$2

,701

-$2,90

0$2

,901

-$3,10

0$3

,101

-$3,30

0$3

,301

-$3,50

0$3

,501

-$3,70

0$3

,701

-$3,90

0$3

,901

-$4,10

0$4

,101

-$4,30

0$4

,301

-$4,50

0$4

,501

-$4,70

0$4

,701

-$4,90

0$4

,901

-$5,10

0$5

,101

-$5,30

0$5

,301

-$5,50

0$5

,501

-$5,70

0$5

,701

-$5,90

0$5

,901

-$6,10

0$6

,101

-$6,30

0$6

,301

-$6,50

0$6

,501

-$6,70

0

0.00%

0.00% 3.

19%

1.42%

2.48%

6.74% 8.87%

6.38%

5.32%

2.84%

17.38%

2.48%

9.57%

2.48% 4.26% 6.74%

4.26%

2.48%

2.48%

2.84%

3.19%

0.71%

0.00%

0.00%

1.06%

1.06%

0.00%

0.00%

0.71%

0.00%

0.71%

0.35%

0.00%

0.00%

$0-$20

0$2

01-$35

0$3

51-$50

0$5

01-$70

0$7

01-$90

0$9

01-$1,10

0$1

,101

-$1,30

0$1

,301

-$1,50

0$1

,501

-$1,70

0$1

,701

-$1,90

0$1

,901

-$2,10

0$2

,101

-$2,30

0$2

,301

-$2,50

0$2

,501

-$2,70

0$2

,701

-$2,90

0$2

,901

-$3,10

0$3

,101

-$3,30

0$3

,301

-$3,50

0$3

,501

-$3,70

0$3

,701

-$3,90

0$3

,901

-$4,10

0$4

,101

-$4,30

0$4

,301

-$4,50

0$4

,501

-$4,70

0$4

,701

-$4,90

0$4

,901

-$5,10

0$5

,101

-$5,30

0$5

,301

-$5,50

0$5

,501

-$5,70

0$5

,701

-$5,90

0$5

,901

-$6,10

0$6

,101

-$6,30

0$6

,301

-$6,50

0$6

,501

-$6,70

0

18


low $2,300 with little clarity be-yond that.

Thepicturebecomesmoreinteresting as the analysis moves

tolargerportfolios.Whatseemedtobeabroadspectrum(i.e.nocon-

sensusintheprofession)becomesbroader as we move to $400,000

client portfolios, and this trendcontinues; that is, the picture be-comes increasingly muddled asportfoliosizeincreases. Asset management fees

for $400,000 portfolios tended

to “cluster” (using the term verybroadly)between$350ayearand$4,000, while financial planningfeessimilarly“clustered”between$0 and $3,900, with averages

somewhat higher for the larger

portfolio.

The substantially higher

planning-related fee for clientswith larger portfolios raises a ques-

tion: should wealthier people auto-

matically pay more for planningwork? Notice also the long thintailalongtherightofthesecharts.There are apparently advisory

firmswhichcharge$4,000,$5,000,even $6,000 a year for asset man-

agement work for $400,000 port-

folios, and some charge a similarfeeforplanningwork.(Note: the

AUMandplanning charts are in-

dependent of each other; that is,the firms charging $3,000 a year






Page

4.90%

0.00% 2.

10%

0.35% 2.

45%

0.70% 2.45%

2.45% 3.50%

1.40%3.85%

0.70%

4.20%

1.05% 3.

15%

1.40%

4.55%

1.75% 3.15%

1.05%

13.99%

0.35%

3.85%

0.35%

5.94%

3.50%

3.50%

0.70%

4.20%

0.35%

8.74%

0.35% 1.75%

0.00% 1.05%

1.05% 2.10%

1.05%

0.00%

0.00%

0.00%

0.00%

0.70%

0.00%

0.00% 1.05%

0.00%

0.00%

0.00%

0.00%

0.35%

0.00%

0.00%

0.00%

0.00%

19

0.00%

0.00%

0.00%

0.00%2.45%

1.75%

1.05%

1.40%

2.10%

1.05%

9.44%

0.35%

6.64%

0.70%

4.20%

1.40%

6.29%

2.10% 3.85%

1.40%

14.34%

0.35% 1.75%

0.35%

5.59%

3.85%

2.45%

2.10% 3.50%

0.35%

3.85%

0.35%

3.50%

0.00% 1.05%

0.00%2.45%

0.00% 2.

10%

0.00%

2.80%

0.00% 1.05%

0.00%

0.00%

0.00%

0.00%

0.35%

0.00%

0.35%

0.70%

0.00%

0.35%

0.00%

0.35%


forAUMmay be chargingmuchless,ormore,forplanningwork.) The dispersion is even

greater when we look at $800,000

portfolios, and what is most sur-

prisingishowquickly(intermsofportfoliosize)wearriveatavirtu-

ally zero consensus state on howmuchtocharge,indollarterms,forplanning and asset management

activities. The advisor who is looking

atthischartasaguidetoareason-

able fee for his/her various ser-

viceswilllikelycomeawayeitherconfusedordisappointed. So toowill an advisor who is searchingforasafeharbor“reasonable”feefor portfolio management activi-ties, whether to satisfy some future

version of the DOL rule, avoid

potential litigation or benchmarkhim/herself against profession-

widecompetition. Note, meanwhile, thatthe average portfolio manage-

ment cost, in dollar terms, for an$800,000 portfolio is nearly three

times as high as for a clientwith$250,000, and the planning fee is

morethandouble.Onceagain,wecanaskwhetherthewealthiercli-






Page 20

0.00%

0.00%

0.00%

0.00%

0.00%

0.70%

1.05%

1.75%

0.00% 1.05%

1.05%

1.40%

0.70%

1.05% 2.45% 3.50%

1.40%

2.10%

0.35%

6.29%

2.80%

0.70%

3.50%

0.00%

2.45%

0.70%

3.85%

1.75%

4.90%

1.05%

4.55%

0.00%2.10%

1.05%

4.20%

0.00%

0.00%

10.84%

0.35%

2.80%

0.00% 1.05%

0.35%

0.00%

0.70%

5.24%

0.00% 1.05%

1.05%

0.35%

0.00% 1.

75%

2.10%

0.00%

0.70%

0.00% 1.40%

1.05%

0.00%

0.00% 1.40%

1.40%

0.00%

0.00%

2.45%

0.00%

0.35% 2.

10%

0.00%

0.00%

0.35%

0.70%

0.00%

0.00%

0.00% 1.

75%

0.00%

0.00%

0.00%

0.35%

$0-$20

0$3

51-$50

0$7

01-$90

0$1

,101

-$1,30

0$1

,501

-$1,70

0$1

,901

-$2,10

0$2

,301

-$2,50

0$2

,701

-$2,90

0$3

,101

-$3,30

0$3

,501

-$3,70

0$3

,901

-$4,10

0$4

,301

-$4,50

0$4

,701

-$4,90

0$5

,101

-$5,30

0$5

,501

-$5,70

0$5

,901

-$6,10

0$6

,301

-$6,50

0$6

,701

-$6,90

0$7

,101

-$7,30

0$7

,501

-$7,70

0$7

,901

-$8,10

0$8

,301

-$8,50

0$8

,701

-$8,90

0$9

,101

-$9,30

0$9

,501

-$9,70

0$9

,901

-$10

,100

$10,30

1-$1

0,50

0$1

0,70

1-$1

0,90

0$1

1,10

1-$1

1,30

0$1

1,50

1-$1

1,70

0$1

1,90

1-$1

2,10

0$1

2,30

1-$1

2,50

0$1

2,70

1-$1

2,90

0$1

3,10

1-$1

3,30

0$1

3,50

1-$1

3,70

0$1

3,90

1-$1

4,10

0$1

4,30

1-$1

4,50

0$1

4,70

1-$1

4,90

0$1

5,10

1-$1

5,30

0$1

5,50

1-$1

5,70

0

4.90%

0.00%

0.00% 1.

75%

0.70%

0.00%

0.35%

2.80%

0.70% 1.75%

1.75%

2.45%

0.70%

0.70%

1.40% 2.80%

0.70% 1.75%

0.70% 2.

45%

0.70%

1.40%

4.55%

0.35% 1.40%

0.35% 2.

10%

1.05%

4.55%

0.70%

4.20%

0.70%2.80%

0.35%

3.85%

0.70%

1.40%

10.49%

0.35%

1.05%

0.70%

1.05% 2.45%

0.00%

0.70%

5.94%

0.00%

2.45%

1.75%

2.10%

0.00% 1.40%

1.40%

0.00%

0.70%

0.00%

3.15%

1.05%

0.00%

0.00% 1.

75%

0.35%

0.00%

0.00% 1.05%

0.00%

0.35%

0.35%

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

$0-$20

0$3

51-$50

0$7

01-$90

0$1

,101

-$1,30

0$1

,501

-$1,70

0$1

,901

-$2,10

0$2

,301

-$2,50

0$2

,701

-$2,90

0$3

,101

-$3,30

0$3

,501

-$3,70

0$3

,901

-$4,10

0$4

,301

-$4,50

0$4

,701

-$4,90

0$5

,101

-$5,30

0$5

,501

-$5,70

0$5

,901

-$6,10

0$6

,301

-$6,50

0$6

,701

-$6,90

0$7

,101

-$7,30

0$7

,501

-$7,70

0$7

,901

-$8,10

0$8

,301

-$8,50

0$8

,701

-$8,90

0$9

,101

-$9,30

0$9

,501

-$9,70

0$9

,901

-$10

,100

$10,30

1-$1

0,50

0$1

0,70

1-$1

0,90

0$1

1,10

1-$1

1,30

0$1

1,50

1-$1

1,70

0$1

1,90

1-$1

2,10

0$1

2,30

1-$1

2,50

0$1

2,70

1-$1

2,90

0$1

3,10

1-$1

3,30

0$1

3,50

1-$1

3,70

0$1

3,90

1-$1

4,10

0$1

4,30

1-$1

4,50

0$1

4,70

1-$1

4,90

0$1

5,10

1-$1

5,30

0$1

5,50

1-$1

5,70

0


entislikelytobethatmuchmorecomplicated or resource-intensivetoservice. Onecanconcludefromthechart of imputed costs for a $1.5millionportfolio that thisconsen-

susismoreelusivethanever-ex-

ceptthatfees,generally,arehigherfor wealthier individuals.

In these charts,we had tocreate a broader spectrum, sincethelongtailontheright(particu-

larly for portfolio management)extendstomuchhigherfeelevels.

Thisisalsoagoodplacetonote, in this and previous charts,that a substantial number (typi-cally 4%) of respondents, all ofthemcompensatedexclusivelyviaAUM,arecharging,by theiresti-mate,$0forfinancialplanningandothernon-AUMservices. Ontheother hand, as you can see from

the extreme left end of the assetmanagementcharts,fewarecharg-

ing zero or nearly zero for asset

management work. Otherwise, the

graphs tend to look similar; thatis, similar fees are being charged(albeitbydifferentadvisoryfirms)for planning and asset manage-

ment. The conclusion: there is a


$1.5 Million Client Portfolio




Page 21

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

0.34%

0.00% 1

.03%

0.34%

0.00% 0.68% 1.37%

0.00%

0.00% 0.68%

2.40%

0.34%

0.00% 1

.03% 1.37%

1.03%

1.37%

3.42%

0.34%

2.05%

0.68% 1

.71%

2.74%

0.00%

1.37%

2.74%

2.40%

1.37%

0.68%

1.03%

0.00%

6.16%

0.00% 0.68%

0.34%

2.05%

2.40%

0.00%

3.08%

1.03%

0.00%

5.48%

0.68%

0.68%

5.48%

0.00%

0.34%

3.42%

0.00%

0.34%

4.11%

0.34%

0.00%

0.00%

0.00% 1

.03%

4.11%

0.00%

0.34%

1.71%

1.37%

1.03%

0.00%

0.00%

2.40%

0.34%

0.00%

0.34%

0.34%

2.40%

0.00%

0.34%

0.34%

0.68%

1.03%

0.00%

0.00%

0.00%

1.37%

1.03%

0.00% 1

.03%

0.00%

0.00% 0.68%

0.00%

0.00%

0.00% 0.68%

1.03%

1.03%

0.00%

0.00%

0.00%

1.37%

0.68%

0.00%

0.00%

0.00%

0.00% 0.68%

0.34%

0.00%

0.34%

0.00%

0.00%

0.34%

0.00%

0.00%

0.00%

0.00%

0.34%

0.00%

0.34%

0.00%

0.00%

0.34% 1.03%

0.34%

$0-$20

0$5

01-$70

0$1

,101

-$1,30

0$1

,701

-$1,90

0$2

,301

-$2,50

0$2

,901

-$3,10

0$3

,501

-$3,70

0$4

,101

-$4,30

0$4

,701

-$4,90

0$5

,301

-$5,50

0$5

,901

-$6,10

0$6

,501

-$6,70

0$7

,101

-$7,30

0$7

,701

-$7,90

0$8

,301

-$8,50

0$8

,901

-$9,10

0$9

,501

-$9,70

0$1

0,10

1-$1

0,30

0$1

0,70

1-$1

0,90

0$1

1,30

1-$1

1,50

0$1

1,90

1-$1

2,10

0$1

2,50

1-$1

2,70

0$1

3,10

1-$1

3,30

0$1

3,70

1-$1

3,90

0$1

4,30

1-$1

4,50

0$1

4,90

1-$1

5,10

0$1

5,50

1-$1

5,70

0$1

6,10

1-$1

6,30

0$1

6,70

1-$1

6,90

0$1

7,30

1-$1

7,50

0$1

7,90

1-$1

8,10

0$1

8,50

1-$1

8,70

0$1

9,10

1-$1

9,30

0$1

8,70

1-$1

9,90

0$2

0,30

1-$2

0,50

0$2

0,90

1-$2

1,10

0$2

1,50

1-$2

1,70

0$2

2,10

1-$2

2,30

0$2

2,70

1-$2

2,90

0$2

3,30

1-$2

3,50

0$2

3,90

1-$2

4,10

0$2

5,00

0-$3

0.00

0

4.79%

0.00%

0.00%

0.00%

0.34%

1.71%

0.68%

0.00%

0.00%

2.05%

0.68%

1.03%

1.03%

0.68%

0.68%

0.68%

3.08%

1.03%

0.00%

2.05%

0.68%

0.68%

0.68%

0.34%

0.00%

1.37%

0.68%

0.68%

1.03%

0.00%

2.05%

2.05%

0.68%

0.68%

0.68%

1.03%

0.00%

6.16%

0.00% 1

.03%

0.00%

3.42%

0.68%

0.00%

1.71%

1.71%

0.00%

4.79%

0.68%

0.68%

4.11%

0.00%

1.37%

3.08%

0.00% 0.68%

4.11%

0.00%

0.00%

0.00%

0.34%

2.05%

3.42%

0.00%

1.71%

0.68% 1

.71%

0.00%

0.00%

1.37%

3.77%

0.00%

0.00% 0.68% 1

.71%

2.74%

0.00%

0.00%

0.00% 1

.03% 1.71%

0.34%

0.00%

0.00%

1.37%

1.71%

0.00% 1

.03%

0.00%

0.00% 1

.03%

0.00%

0.00%

0.00% 0.68%

0.00% 0.68%

0.00%

0.00%

0.00%

0.34%

0.00%

0.00%

0.00%

0.00%

0.00%

0.34%

0.00%

0.00%

0.34%

0.00%

0.00% 1

.03%

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

$0-$20

0$5

01-$70

0$1

,101

-$1,30

0$1

,701

-$1,90

0$2

,301

-$2,50

0$2

,901

-$3,10

0$3

,501

-$3,70

0$4

,101

-$4,30

0$4

,701

-$4,90

0$5

,301

-$5,50

0$5

,901

-$6,10

0$6

,501

-$6,70

0$7

,101

-$7,30

0$7

,701

-$7,90

0$8

,301

-$8,50

0$8

,901

-$9,10

0$9

,501

-$9,70

0$1

0,10

1-$1

0,30

0$1

0,70

1-$1

0,90

0$1

1,30

1-$1

1,50

0$1

1,90

1-$1

2,10

0$1

2,50

1-$1

2,70

0$1

3,10

1-$1

3,30

0$1

3,70

1-$1

3,90

0$1

4,30

1-$1

4,50

0$1

4,90

1-$1

5,10

0$1

5,50

1-$1

5,70

0$1

6,10

1-$1

6,30

0$1

6,70

1-$1

6,90

0$1

7,30

1-$1

7,50

0$1

7,90

1-$1

8,10

0$1

8,50

1-$1

8,70

0$1

9,10

1-$1

9,30

0$1

8,70

1-$1

9,90

0$2

0,30

1-$2

0,50

0$2

0,90

1-$2

1,10

0$2

1,50

1-$2

1,70

0$2

2,10

1-$2

2,30

0$2

2,70

1-$2

2,90

0$2

3,30

1-$2

3,50

0$2

3,90

1-$2

4,10

0

AverageAUMFee: $10,039AveragePlanningFee: $9,139LowestAUMFee: $1,250LowestPlanningFee: $0HighestAUMFee: $31,250HighestPlanningFee: $22,500

cohort of advisory firmswho be-lieve that all their value lies in their

asset management work.

Turning to a chart repre-sentingtherespondents’figuresfora $2.5 million portfolio, we gener-

ally see more of the same, with a

wider dispersion and virtually no

consensus. Here again, the aver-age fee for managing assets and for

providing financial planning ser-viceswent up proportional to thesize of the portfolio.

The essential lesson re-

mainsthesame:thefinancialplan-

ning profession has a number of

verybasicquestionstoanswerbe-fore we arrive at a profession-wide

standardfeeforservicesrendered. That said, it should be re-

membered that there was no ef-

fort, in this survey, to collect anyinformation about the actual ser-vices rendered. Thus, the verybroad spectra illustrated here re-flecteachfirm’sAUMadjustedbythepercentage that each respond-

ent would allocate to planningvs. portfolio management, but the

actual services that their clients

receive could be very different.The advisory firm that typicallycharges $31,250 to manage $2.5million client portfoliosmight begenerating significant alpha, andthefirmthatchargesplanningfeesof $22,500 a year might be doing

an extraordinary taxmanagementand trust creating job. Until thenextsurveyasksmorepenetratingquestions,wejustdon’tknow.






Page 22

Conclusions Whatdidwelearnfromthisexercise?Attheoutset,Ipromisednot to overburden this white paper

with the author’s opinions or su-

perfluous analysis, on the theorythat thereader ismorethancapa-ble of interpreting the data and ap-

plying it to your own business life.

I do, however, believe

that this snapshot of a profession

in transition offers some insights

whichcanbesummarizedbriefly.Among them:

The profession IS in tran-

sition, from an almost universal

AUM revenue model to some

combination ofAUM plus eitherhourly fees or flat fee charges -what some call retainers. This isalmostcertainlyanearlystageofalongerjourney,andwecanspecu-

late(withnodefinitiveproof)thatthe journey will entail a smaller

percentageoftotalfeeschargedbyAUM,andacorrespondinglylarg-

erpercentageofflatfeeorhourly.It may lead to an eventual aban-

donment of AUM altogether.

Second, for all the talkabout the commoditization of as-setmanagement (and, sometimes,financial planning) services, theprofession seems to be chargingcomfortablefeesforitsefforts.Infuture surveys, we will have the

opportunity to assess whether fees

arecomingdown,butthesnapshotdoes not give evidence that advi-soryfirmsarebeingforcedtodis-counttheircompensation. Third, Isuspect thatmanyreadersofthisreportwillfindtheall-incoststobesurprisinglylow,andmuchofthatseemstobedueto reductions in theaggregateex-

pense ratios of the underlying as-

setsinclientportfolios.Costdoesseem to matter when advisors are

selecting investments. I thinkwe

knewthisanecdotally,buttheevi-dencehereprovesthecase. Yet, it is also clear that alargepercentageofadvisoryfirms,perhaps more than half, are still

using actively-managed funds intheir client portfolios, based onthe expense structures reportedhere.Thenumbersshowasignifi-

cant numberof advisors have cutportfolio-relatedcosts(andtradingcosts)deepdowntothebone,butothers appear to be comfortablebuying reasonably-priced judg-

mentinthefundstheyrecommendtoclients. Fourth, there are a number

ofareaswhereadvisoryfirmshavenot only not reached a consen-

sus, but seem to be quite far from

agreement. For instance, whatpercentage of AUM fees shouldbe properly allocated to servicesnot connectedwithmanaging cli-entportfolios?Theanswerswerescattered across the graph, from0% to near 100%, and the most

commonanswer-50%-looks,inretrospect,likearandomguess.Ifadvisoryfirms aregoing tomovefrom an AUM revenue model to

something else, they are going to

needtobemorepreciseabouttheappropriate fees for different as-

pectsoftheirservice. We saw this lack of con-

sensus in the AUM fees that ad-

visors (anddifferentcategoriesofadvisors) were charging at eachportfoliolevel.Thereisclearlynoindustry-standard pricing at thisstageoftheprofession’sevolution.Willthereeverbe? And we failed to finda consensus most particularlywhen we took a deeper dive into

the numbers, and produced somegraphswhichthesurveyrespond-

entsprobablydidn’texpecttosee:

anactualdollarfigurefortheassetmanagement and financial plan-

ningservicesforclientswhohaveportfolios of different sizes. The

broad spectrum of fees almosttaxed the ability for the page tohold the width of the graph. Sure-

ly, the profession will eventually

achieve a better approximationof profession-standard pricing atsome point in the future. This is

an evolutionary development to

watch. Finally, I doubt that many

readers were surprised at the

graphsthatshowedjusthowmuchmore wealthier clients were pay-

ing for planning and portfolio

management services than theirless-wealthycohorts.Butthatin-

formation would likely be a great

surprise to theclients themselves.Isaclientwitha$2.5millionport-folio really receiving four or fivetimesasmuchvaluefromtheplan-

ing engagement as the person with

$500,000?Atthismoment,thisisarhetoricalquestion.Buteventu-

ally, the profession is going to have

toconfrontthisissuehead-on,andit will be interesting to see the out-

come. There’s more, of course,andeveryreaderwillhavenoticeddifferent interesting issues, trends,

anomalies and quirks in the data.

The author has commented mul-tiple times on the most surprising

things he found: the long thin tails

at the right of the graphs where a

smallbutsignificantnumberofad-

visors are deviating dramaticallyfrom their peers on the high side.

Whatdidyoulearn?Ihopethe survey helped you better under-

standyourownfeestructure-andperhaps also some of the most in-

teresting trends in this ever-inter-

esting, still evolving, profession.

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