Why do financial advisors charge an asset-based fee such as 1%?

The answer is simple. It's easier to tell a prospective client, "Our fee is 1% annually" versus "Our 1% fee equates to $15,000 annually based on the $1.5 million in assets we will manage for you."  In most cases, they will never disclose the actual dollar amount you will pay. You will have to search for your advisor's fee on your quarterly report or custodian statement. Many investors simply won't take the time to review their statements for fees or ask their advisor to calculate the dollar amount they pay for wealth management services. We've seen advisors charge 2% per year! Always do the math! Quick calculation: Your assets multiplied by .01 = your advisory fee based on 1%.

 

Don't get caught in this very expensive trap!

Some financial advisors are dually registered with a registered investment advisor (RIA) firm and a broker-dealer or "fee-based" advisors. This means they are able to collect their 1% fee as an RIA and accept sales commissions and hidden fees embedded in the investment products they may sell to you through their broker-dealer. Watch for hidden sales commissions and fees in some annuities, mutual funds, and non-publicly traded real estate investment trusts. Fee-based advisors have an incentive to sell these products to you as sales commissions can add an additional 2 - 8% to the advisor's compensation, in addition to ongoing revenue from fees.

 

 

Advisors talk about keeping costs low - until it comes to their fees

Our $7,500 annual flat fee includes asset management and financial planning services.

We do not have a required asset minimum. However, clients with $500,000+ are best suited for our services.

Clarity's annual advisory fee of $7,500 is billed in arrears at $1,875 per quarter to your designated investment account(s).

We are fee-only advisors this means our only source of compensation are the fees we collect from our clients for our fiduciary services.

Our investment options do not have any sales commissions or hidden fees.

 

 

Where does your current advisor's annual fee rank on this chart? If you don't know, you owe it to yourself to find out.

The annual asset-based fees used in the chart and calculations below are from the AdvisoryHQ study, "Average Financial Advisor Fees and Costs 2019 Report." 

 

 

The Flat-Fee Advantage: Total Fee Transparency for Investors

At Clarity Capital Advisors, our pricing structure is in line with other legal, medical, and tax professionals - one simple and straightforward fee. We believe investors should pay financial advisors a fair, flat fee based on the advisor's education, professional designations (e.g., Certified Financial Planner CFP® and Chartered Financial Analyst CFA®), financial experience, and the services they provide such as financial planning (e.g., retirement planning, investment planning, retirement income strategies, college planning, etc.) and asset management. Our fee-only, flat-fee form of compensation provides Total Fee Transparency and is aligned with the Fiduciary Standard for financial advisors.

 

 

Invest wisely! Anyone can call themselves a Financial Advisor and give you advice. 

Chartered Financial Analyst CFA® and Certified Financial Planner CFP® are the two primary designations for financial professionals. 

 

When choosing an advisor, always look for education, professional designations, and experience. 

Anyone can pass a securities exam and hang out a shingle calling themselves a "Financial Advisor" or a "Financial Planner". You wouldn't go to a physician who didn't have the appropriate education and credentials, would you? Then why would you trust and place your financial assets (i.e., your retirement savings) with someone, a salesperson, who didn't take the time or make an effort to complete advanced designations related to asset management and financial planning? Ideally, you wouldn't. Unfortunately for investors, there are many talented "salespeople" out there making empty promises and baseless market predictions who simply won't be able to provide you with the professional financial guidance and investment recommendations offered by a credentialed, fiduciary wealth advisor.

We bring to you over 50 years of combined financial experience.

We are a team of fee-only, credentialed Certified Financial Planner CFP® professionals and a Chartered Financial Analyst CFA®  with over 50 years of combined financial experience. Clarity's structure ensures a team approach to meet the asset management and financial planning needs of each client. True to the fee-only form of compensation for advisors, we do not recommend investments with sales commissions, surrender charges, or hidden 12b-1 fees. Fee-only advisors have a fiduciary responsibility to act in their clients' best interest at all times and have fewer conflicts of interests compared to "fee-based" advisors who are able to collect commissions and charge an advisory fee.  

Meet our Credentialed Fiduciary Wealth Advisors.
      

 

Are you paying a financial advisor 25% of your retirement income?

Note: An advisor's fee is in addition to (not included in) your retirement income calculations. 

Over time, high asset-based, percentage fees can cause people to work longer and rob retirees of a significant portion of their retirement income every year.

Example: You have accumulated $1 million in retirement assets, a 4% withdrawal rate would be $40,000 per year and the advisor's 1% fee would be an additional $10,000 per year or 25% of your retirement income. Now let's assume that you have $2.5 million for retirement and you are withdrawing 4%. That's $100,000 per year and your advisor's 0.88% fee is an additional $22,000 per year. This would equate to 22% of your income. At $5 million in assets your 4% withdrawal would be $200,000 and your advisor's 0.84% fee is an additional $42,000 per year or 21% of your income. At $7.5 million in assets your 4% withdrawal rate or $300,000 and your advisor's 0.80% fee is an additional $57,750 per year or 19% of your income.

(The annual asset-based fees used in the calculations are from the AdvisoryHQ study, "Average Financial Advisor Fees and Costs 2019 Report.")

 Ask your advisor, "What is the actual dollar amount I am paying?" Then ask yourself, "WHY"?

 

 

How are we able to charge such low fees compared to other firms?

We've cut out the middleman.

Our fees are based on our firm's costs and reasonable compensation for a credentialed financial professional to provide you with asset management and financial planning services. As an independent, fee-only, registered investment adviser (RIA) firm, we are able to negotiate our software costs and other relevant fees directly with our service providers, thus reducing our firm's overhead. 

Unlike other financial advisors who are employees of financial firms (i.e., banks, brokerage firms, broker/dealers, other RIA firms, or insurance companies), we do not give a portion of our income to an employer. Some so-called "independent firms" outsource their asset management and back office duties to a turnkey asset management platform (TAMP), a robo-advisor firm, or another firm such as LPL (the middleman). Many of these financial firms and service providers take a portion of an advisor's income primarily based on a percentage of the assets the advisor holds with the firm or service provider. This is why many investors are charged assets under management (AUM) percentage (e.g.,1%) fees.

This is how it works.

Let's assume you have $1 million invested with a firm that is charging you 1% per year. Your fee is $10,000 annually. When the fee is deducted from your accounts, the middleman firm (your advisor's employer) may take anywhere between 60 - 80% of the $10,000 fee and leave your advisor with a fraction of the fee as compensation. The amount your advisor receives is called a "payout" and it's normally a percentage of the fee the firm collects. The $6,000 - $8,000 of your money may go towards the firm's advertising (we see a lot online and in TV commercials), providing your advisor with a posh office in a nice location, company parties, etc. If you are working with a "fee-based advisor" (a fee and sales commission advisor) at one of the larger firms, some independent firms, an insurance company, or a bank investment program, plan on being sold investments with a sales commission and some hidden 12b-1 fees on top of the 1%. That's if the additional sales commissions and fees are even disclosed to you.

As an independent firm, we have 100% control over our operating costs compared to financial advisors who are employees of other firms. By keeping our costs low for advertising and office space, and placing our capital in areas that make us more efficient, we are able to pass the savings directly to you. Ask us about our complimentary fee analysis.

5 Myths About Low-Cost Advisors...

 

FACT: High advisor fees counteract the use of low-cost investments

We see financial advisors touting low-cost mutual funds or a low-cost investment strategy while charging their clients 1% or a tiered percentage asset-based fee. This defeats the purpose of a low-cost investment strategy. With historically high market valuations and very low interest rates contributing to lower future investment returns, wise investors do all they can to control investing costs. One of the easiest ways to do this is to avoid using a financial advisor who charges you an annual advisory fee based on a percentage of the assets you place with them to manage. The good news is that you now have a viable alternative to high-cost advisors that requires no sacrifice in the level of service received, Clarity Capital Advisors.

 

Q: We are currently with another advisor and pay much more than your stated fees. How can we work with Clarity Capital Advisors to reduce our advisor fees?

 

A: We work with clients nationwide. Please give us a call at 800-345-4635 or complete the Contact Form below.

Many financial advisors require their new clients to liquidate their existing investments to move into the advisor's recommended investments and asset allocation. We recognize that while this may be convenient for the advisor, it may be expensive from a tax standpoint for investors with significant embedded capital gains. Assuming your investments align with your financial goals, ask us how we can manage your existing investment accounts and incorporate our financial planning and retirement planning services for one flat annual fee.

 

We do not hold any client assets. Your accounts will be held with our custodian, TD Ameritrade Institutional (TDAI), for safekeeping. TD Ameritrade Institutional does not charge any annual account maintenance fees. If your accounts are currently held with TDAI you will simply sign one Advisor Authorization form for each account you would like us to manage. The Advisor Authorization form limits our access to your accounts to the purchase and sale of securities and the authorization to debit our fees from your designated account(s).

If your accounts are not held with TDAI, we will provide you with new account documents to make the transition as easy as possible. To facilitate the transfer we will need a copy of your most recent statement from your current advisor. Please be advised that your accounts will transfer with the investments you currently hold so you do not have to worry about being out of the market during this process. The transfer time from most firms to TDAI is ten business days. Your advisor's firm may charge a small one-time transfer fee per account.

 

FAQ