When the question of “How much does it cost to work with you?” inevitably comes up, most financial advisors want to dive for cover.
It’s kind of a funny paradox. Here we are advising clients and taking on such taboo topics as how to manage and steward financial resources, and yet we shrink when we have to talk about our side of the equation.
I’ve come to realize that the reason for this hesitancy to talk about fees from our industry is largely in part because we know the truth of the math – that the widespread acceptance of billing by a percentage of assets under management has allowed for massive economies of scale to be inflicted on clients’ money.
Compounding works beautifully. It takes small accounts and turns them into large accounts over time. It also takes a 1% fee and turns it into losing 20% of the returns over a 20-year investing horizon.
When I was planning to launch Birchwood Capital, I was in the fortuitous position to come in with a blank slate. This is a business that I love and plan to be doing for the rest of my career. The position that I sit offers the ability to have intimate conversations with people about things they don’t tell anyone else about. With that being said, it became imperative that I built the firm on integrity, so that I felt good about it for the next few decades and clients were treated honestly and fairly.
When it came time to choose what I would charge clients for Birchwood’s services, the decision wasn’t difficult because the commitment to do the right thing was what it all stood on. A fee schedule based on the value provided to the client – versus how much money they do or do not have – just made sense.
With Birchwood, I finally feel a sense of relief because I can be transparent about what an advisor actually does and what that is actually worth.
Agree or disagree, that’s all fine. I’m just glad I’m at a place where I can feel good about fees knowing that clients feel even better about them, too.