The Issue of Fees

We have spent a lot of time here at Thompson Creek thinking about this subject. If you have perused this site at all, you have no doubt concluded we are not happy with the conflicts of interest associated with commission based selling, nor the hidden fees, double dipping and other behaviors, which characterize the delivery of much of the current financial advice. We are not claiming that those who do things differently are necessarily behaving in an inappropriate manner, but we do believe incentives matter.

What needs to be considered?

The first step for us is to maintain a firm commitment to being fee only. That means more than just forgoing commissions. All too often, this leads to merely charging a fee for advice and then having you pay a commission to someone else. Nope, we intend to eliminate or return commissions, revenue sharing and other hidden costs to you wherever possible and appropriate. We commit to NOT receiving fees from anyone but you!

The second step was examining how our fees should be structured. This was the difficult part. Every solution we came up with had its drawbacks. While possibly fair to some, our initial efforts were not fair or appropriate for others.

We feel the advisory profession has made tremendous progress in making the move to fees, but we are not satisfied with the typical approach either. The most common method is to base it on “Assets Under Management.” If investment management is the only job, that may be appropriate, but it also carries a large conflict of interest. Some of the time, this may be the best way to handle the issue as long as the client is aware that in giving advice, there is a powerful incentive to gather more assets, even where inappropriate or not your wish. The integrity of the advisor and your vigilance in service of your best interest is your best protection in this case.

In situations where advisors are hired to provide more extensive advice, it may not be appropriate at all. Since the advisor’s income under the Assets Under Management Model is dependent on the size of investment accounts and not your overall financial well-being, it is not surprising that Wealth Management has often devolved into asset management with the other areas relegated to an afterthought. In fact gathering assets is the most direct way to increase their compensation, while financial, estate and tax planning is a cost.

Others have dealt with this by charging additional hourly or flat fees to take care of financial, estate and other  planning   The unfortunate issue with this is you, the client, trying to rationally and responsibly control costs tends to under plan and avoid the ongoing review and monitoring of the plan required for proper implementation. The number of financial plans gathering dust on shelves is a tragedy.

Our Solution

Our opinion is that Wealth Management fees should reflect accomplishing your goals and the scope of the work required. Despite all of our efforts, we can’t find a way that is perfect for everyone.

Here are the guidelines we used in setting our fees.

• We did not want to charge more than typical for wealth management, even though we will provide far more service than is typically delivered. It isn’t your fault that a perfectly reasonable fee level has generally not carried the service that you should expect with it.
• It should reflect the likely complexity and effort involved to provide comprehensive planning.
• It should not bias us toward asset gathering, but instead toward improving your entire situation.
• It should only be a “first pass” guide, since it may not be appropriate for you and should be customizable to your situation.

Our answer, which works in most cases, was one based on your net worth. The fee should be lower than typically charged under an “Assets Under Management” model, but charged on a larger base. This way the fee reflects our goal of improving your total situation, not the size of accounts. In most instances, it results in a fee that is no larger, or even lower, than is typically charged. Usually, with only minor tweaks, it can be made fair and appropriate for all concerned.

Is it perfect? No. If appropriate we may suggest an alternate approach, or decide we are just not a fit. In the end, it has to make sense for you.

It is important to remember that our Comprehensive Wealth Advisory Services include all fees for investment, financial, legal, tax and insurance planning and consulting by appropriate professionals. It does not include actual legal document drafting and tax return preparation

Therefore, with all that explanation for how we think about this, here is our standard fee schedule* for Comprehensive Wealth Management Services, which may be customized based on your net worth and objectives:

* A minimum fee may apply.

For those who require services that are not comprehensive in nature, such as Asset Management only, or an extensive planning project, where appropriate we will be glad to discuss other arrangements.

If you’d like to talk further with us about your unique situation, please contact us today. There is no charge for any initial discussions.