- “It’s important to note that many advisers who manage money and charge asset management fees are likewise engaging in this unintentional barter. A common practice is to charge a 1 percent asset management fee and to include the financial planning services in that 1 percent. There is no communication about what portion of the 1 percent is being allocated to the planning services. What happens when the market causes downward pressure on asset management fees? Now the adviser has to charge .75 percent or .5 percent to remain competitive. Can he or she still afford to do the financial plan? Which portion is being squeezed- the quality of the plan or the quality of the investment advice and service? If the plan is so good, why not ask the wealth holder to pay for it? If it’s not, why is it being offered at all?” The Right Side of the Table: Where do You Sit in the Minds of the Affluent? By Scott Fithian and Todd Fithian. Page 92-93
- “Picture this. A cleaning service shows up at your house unannounced. They mention the names of several of your neighbors whom you know and trust and ask to clean your house to see if you like it. They’re building their business and you’re just the type of client who fits their service model. It feels uncomfortable. Shouldn’t everyone get paid for their work? They persist. You accept A week later, they’re still cleaning. You’ve never seen anyone work so hard, yet they won’t accept payment. Don’t worry, they say, they’ll be compensated plenty in the end. You wonder where all that money’s going to come from. The next day, you get home from work and they’ve been grocery shopping and cooking. They took your dog to the groomer and did your laundry. At this point, you have no idea what services they offer and how much it’ll cost you. The work looks good but the commerce confusion is overwhelming. You politely cut a check for what seems reasonable and back out of the deal. It was far too vague and far too good to be true. In contrast, when a professional relationship begins with a clear fee-for-service value exchange, certain things happen. The adviser demonstrates confidence in what he or she is bringing to the planning table. The wealth holder makes a clear and committed choice to be part of the process. It’s far easier to help someone who wants to be helped. By charging an explicit fee just for planning services, one that is commensurate with your expertise and scope of work, you’ve taken yourself out of the sales model and into the advice model. Now, let’s make sure the value exchange plays out.” The Right Side of the Table: Where do You Sit in the Minds of the Affluent? By Scott Fithian and Todd Fithian. Page 93