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Non-%ofAUM Revenue Models

Non-%ofAUM Revenue Models

You're probably getting ripped off!!

Joe Moss
October 26, 2024

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Happy Saturday!

I enjoyed the banter this week around Derek Tharp’s article entitled: “Quantifying (More Accurately) The Real Impact Of A Financial Advisor’s Costs On Their Clients’ Nest Eggs”

tl;dr - Ramit Sethi is a notable critic of the 1% of AUM fee model that many advisors use saying that it cuts significantly into their client’s retirement nest egg. Also suggesting advisors don’t provide that much value, so its basically a rip-off.

Here’s Derek’s LinkedIn post:

Quantifying (More Accurately) The Real Impact Of A Financial Advisor’s… | 12 comments

H/t to Meg Bartelt, CFP®, RICP®, MS for posing a question a while back that served as the inspiration for my post at Kitces today.

www.linkedin.com/posts/derektharp_quantifying-more-accurately-the-real-impact-activity-7254843275713421313-HnmR?utm_source=share&utm_medium=member_desktop

And here’s a dissenter:

Fortunately, the cost of my son’s diapers, lattes, or college tuition is… | 30 comments

Fortunately, the cost of my son’s diapers, lattes, or college tuition is not linked to a percent of my wealth.

www.linkedin.com/posts/manjain_fortunately-the-cost-of-my-sons-diapers-activity-7255011498232565760-vQLy?utm_source=share&utm_medium=member_desktop

The dissenter, Manish Jain, CFA, is CEO of Mezzi, a investment accounts overlay that helps to compare performance of your accounts against each other and against benchmarks, along with several other features.

Mezzi’s website includes a calculator to this effect:

My opinion:

Many advisors are not worth 1% of AUM, especially those that only do investment management
Many advisors are worth much more than 1% of AUM, especially those that do investment management, tax planning, estate planning, budgeting, insurance planning, etc.

For example:

Dentist Advisors charges an Implementation Fee up to $3,500, Monthly Financial Planning Services Fees up to $1,250 per month, and Investment Management Fees up to 1.50% of AUM (If you have any retirement savings at all after all that… but I digress)
Jarvis Financial charges 1.5% AUM for households under $2,000,000, and 1% for households over $2,000,000

But let’s say you’re a financial advisor, and you don’t want to charge a % of AUM, what are some other examples of fee structures?

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