Three ways our simplified fee structure works for you
You’ve probably heard us talk about our simplified fee structure before, but you may not realize that it makes us unique among financial planning businesses. We are a flat fee-only firm. That means you pay us a single fee based on your net worth. That fee isn’t tied to the accounts we manage for you, the financial products you may buy, or anything else. It’s one clear fee and one clear fee schedule. Why do we do it this way? It’s better for you, and it’s better for us.
Let’s back up and look at the three different ways financial advisors can get paid:
- Some are commission only: You don’t pay your financial advisor directly; your advisor is paid by other financial parties. When you buy a financial product (like an annuity, permanent life insurance, or a mutual fund with a sales charge) your advisor gets a commission from the business that sells that product.
- Others are fee-based: You pay your advisor some kind of fee—a flat or hourly fee for financial planning and/or a percentage of your assets under management (AUM)—and the advisor also might get commissions on financial products you buy.
- Then there’s fee-only advisors: The advisor is only paid by you. They don’t earn commissions on the products you buy. Like fee-based advisors, the fee could be a flat or hourly fee for financial planning services and/or a percentage of your assets under management (AUM).
If you are unclear how your current advisor is getting paid, you can always ask for their Form ADV—the compensation disclosure that advisors who are registered with the Securities and Exchange Commission are required to submit. You might also want to ask if they are getting any ongoing payments from a third party for keeping you in a particular product; that will help you understand if commissions factor into your financial discussions.
We don’t take commissions.
With Sound Stewardship, it’s pretty simple. We are one of 4,200+ fee-only firms that follow the National Association of Personal Financial Advisors (NAPFA)’s strict Fiduciary Oath and Code of Ethics. The bottom line? We promise to always act in your best interest, and our advice will never be influenced by the possibility of commissions…because we don’t take them.
We don’t charge an AUM percentage fee.
What makes us rarer still, even among other fee-only firms, is that we don’t charge you an AUM percentage fee. Our fees aren’t dependent on the size of your investment accounts. Instead, once a year, we calculate your net worth and charge you a flat fee (split into four payments) based on that total.
We do cover all of your financial planning needs.
We didn’t always have a simplified fee structure. When I started Sound Stewardship, I gave clients the option of paying a flat fee for financial planning services, an AUM percentage fee to manage their assets, or both. But you know how life works: Eventually my clients who hired me to only manage their investments would ask for help using those assets to solve some kind of planning problem, like buying a home or investing in a business. They needed financial planning advice, even if they hadn’t signed up for it.
In 2012, we decided to transition to one simple financial planning fee that would cover the entire spectrum of a family’s financial planning needs. Here’s what that change allowed us to do:
Support big-picture planning.
If there’s a dollar amount attached to it, we can talk about it. Anything in your life that involves money is on the table. We don’t have to stick to just discussing your investment portfolio; we can strategize about anything and everything, from vehicle purchases to the charitable organizations you want to support.
Reduce conflicts of interest.
AUM-based advisors are disincentivized from decisions that decrease your investments. But our fee isn’t tied to your investment totals in any way. If you like where your 401K is before you start working with us, you can keep it there. If you want to use your investments to make charitable contributions, pay off a mortgage or start a business? That’s great! We’ll help you make a wise plan to reach your goals.
Follow the Spirit, not the sale.
Sales-oriented advisors are trained to overcome objections—to get you to say yes to whatever will get them that commission or increased AUM balance. With a simplified fee structure, we’re on the same page and our motivations are aligned. We can focus instead on how to best say yes to where God is leading your financial life.
When friends and family ask how to find a trustworthy financial planner, I tell them to remember advisors are beholden to whoever pays their fee. You want that person to be you!
Intrigued by Sound Stewardship’s simplified fee structure? Set up an initial consultation call with one of our wealth advisors to see if we’re a good fit for your planning needs.< Back to Updates