My advisor (or someone at his/her firm) does my taxes every year, created my estate plan, or provides insurance products to cover all my insurance needs. Are these services not worth a higher fee?
All of these services can be valued at market rates, and they are unlikely to come even close to an additional 0.5% to 1.5% of your net worth, year after year. While you may perceive an advantage (i.e., convenience) to having some or all of these services under one roof, please take a second look at the bar chart on our Fixed Fee Pricing page showing Clarity's fee vs. industry standard financial advisor fees. That is a lot to pay for convenience! At Clarity, we will either work with your current accountant/estate planning attorney/insurance provider or we will help you find one who will charge you a reasonable rate for the services provided.
I am not sure how much I am paying my advisor or the costs associated with my investments. Will you analyze my investment portfolio to determine how much I am paying?
Yes! We will prepare a fee analysis detailing your current fees and expenses and let you know how much you can save with Clarity. To prepare your analysis, we require a copy of your most recent monthly or quarterly statement from your current provider or advisor (please do not include account numbers). Contact us to get started.
My financial advisor claims that his asset allocation has been engineered to provide a higher expected return that compensates for his higher fee. Should I not be willing to pay the higher fee to get the higher return?
While indeed (based on long-term historical data), there are allocations that have a higher expected return than the overall market. Those higher expected returns come at a price of higher risk (in the form of higher volatility or divergence from the returns of the market or both). Aside from diversification, there are no free lunches in investing. The bottom line is that your consent to take on more risk does not justify a higher fee from your advisor.
My financial advisor tells me that his higher fees and investment expenses are justified by his ability to identify managers who will outperform the market. If he can accomplish this, why would I not be willing to pay higher fees and/or expenses?
Thanks to Morningstar®, all of us can find managers who have shown recent outperformance (it isn’t rocket science, folks). In fact, when we review the account statements provided by former clients of these high-cost advisors who claim to excel at finding great managers, we see that they are indeed populated by funds that have had outperformance, the operative word being “had”. The unfortunate thing about outperformance is that it has no persistence other than what we would expect from chance, according to the Standard & Poors Persistence Scorecard.
The fact of the matter is that some of the best minds in finance have tried to solve the problem of how to identify outperforming managers in advance and have not succeeded. The chances that your advisor will accomplish this are slim-to-none.
Do I have to sell my existing investments to work with Clarity Capital Advisors?
No. We will work with you to transition any existing investments in a tax-aware manner that do not meet our guidelines and retain the ones that do in your Clarity portfolio(s). This is an excellent opportunity for clients with legacy assets and investments with significant embedded capital gains to maintain ownership of their assets while investing in our portfolios. For new clients whose existing investments align with their financial goals, ask us how we can manage and monitor your investment accounts at a reasonable cost.