Compound Your Portfolio, Not Your Expenses.
One simple, annual flat fee.
Instead of charging a percentage based on assets under management as is common, Meredith Wealth Planning has implemented a flat annual fee structure that does not increase or decrease based on the amount of money we manage for you. The current amount for new clients is $5,700.
We do not accept any commissions and adhere to a fiduciary duty at all times while serving clients.
What is included in the annual fee?
The flat annual fee is designed to encompass advice on all of your investable assets, whether they are under the management of Meredith Wealth Planning or not. In addition to portfolio management and investment advice we will provide financial planning in any or all of the following categories:
–Retirement planning – Projections on future income sources, distribution analysis, Social Security strategies etc.
–Tax planning strategies – Roth IRA conversions, capital gain/loss harvesting as needed, tax-efficient portfolios, qualified charitable distributions etc.
–Employee Benefits Optimization – Which benefits offered through your employment that should be utilized and which ones should not.
–Insurance – Life insurance and disability insurance analysis as needed.
Why do flat fees matter?
Generally speaking there is not more time, services, or overhead involved for a $1 million client versus one with say $500,000. But if both clients are charged 1% annually, one of them pays $10,000 while the other pays $5,000. Assuming they are both receiving the same service, why should one client be charged twice as much as the other? It may seem equitable as they are both charged the same percentage, but why should they be charged a percentage in the first place? A flat annual fee can make more sense given that the services rendered are substantially similar.
It’s hard to imagine many other services you pay for in the private sector where the sole determinant of your cost is based on how much money you have. Imagine shopping for a financial planner and one of the questions you ask is how much your advisory fee is annually in terms of dollars, and they respond with “how much money do you have?”.
It’s no difference than the scene from National Lampoon’s vacation when the Griswold family is broken down at a remote tire repair shop:
Clark Griswold: “How much will it be?”
Mechanic: “How much ya got?”
How much money you have shouldn’t be the sole determinant of what you pay for a service.
A Compounding Effect
What we want as investors is for our portfolios to benefit from the wonderful nature of compounding interest, but we’d probably be okay if our costs didn’t. Asset-based fees compound and can make a significant difference in the long run.
Allow me to demonstrate, this chart below displays the comparison over a 20 year period of two $1 million portfolios, where one pays 1% annually of assets under management and the other pays a flat annual fee of $5,700 (the current flat fee for new clients of Meredith Wealth Planning). Assuming both portfolios earn a gross annual return of 6% annually, the asset-based fee portfolio would pay about $216,000 more in expenses over those 20 years:
Conflicts of Interest
Conflicts of interest still exist under an asset-based fee model. Imagine you’d like to take $100,000 out of your portfolio to invest into a rental property, and you ask the opinion of your financial advisor. There is now a conflict, as a withdrawal from your account will affect the advisory firm’s revenue if they work on an asset-based fee schedule.
Another common scenario is if your employer has offered a lump sum distribution for your pension benefit. Imagine you have the choice of receiving a $35,000 annual pension, or a lump sum benefit of $500,000. Getting objective advice on such a matter would be difficult, if the person giving you advice could get a significant raise by suggesting the lump sum.
Why Do Asset-Based Fees Persist?
Short answer, it is commonly accepted since it’s been done this way for so long and many are unaware that more equitable pricing models exist.