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We often encounter confusion and misunderstanding among prospective clients on the subject of fees. This is sometimes due to inadequate or misleading cost disclosures by commissioned and fee-based advisors. It is essential to make accurate, “apples to apples” comparisons when evaluating total costs for financial planning and investment advisory services. For example, some banks and brokers may provide their “advice” at little or no charge, using it as a “loss leader” to gather assets and sell commission-generating products. In my view, this approach places product before planning, often resulting in conflicted advice and higher total costs.
All costs for financial planning and investment advisory services should be fully disclosed in advance and should be fair for the client. Epple Financial Advisors’ annual fees for services are determined by estimating time expended on each client’s behalf based on the depth of service. There are no hidden charges or commissions. EFA fees compare very favorably to other financial planners.
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How internal commission-based or fee-based fees can impact total cost and thus a person’s ability to increase his or her own net worth:
1) Fees levied by brokers and banks are often several thousand dollars, but may not be clearly disclosed:
a. A typical 5% sales charge to invest $50,000 is $2,500
b. A 2.5% charge on $300,000 would total $7,500
2) Overall Portfolio Expense: There can be significant differences in the mutual fund expenses within a portfolio. For example, if a portfolio is made up of the average mutual fund expense ratio of ~1.4%:
a. The internal expense of a $700,000 portfolio would be about $9,800 annually
b. EFA’s average mutual fund expense ratio is about 0.30%. This would be about $2,100 annually on the same $700,000 portfolio |
In contrast, EFA’s fees are calculated based on a flat fee. Our recommendations, based on a fully informed overview of your business and personal financial portfolio, current situation, and goals, will typically provide you with much more value than the fee we charge each year and give you a peace of mind that you are getting unbiased advice that best fits your unique situation.
Independent, unbiased financial advisory services should be viewed as an investment, not an expense that must produce an immediate payback. While this often occurs, the primary purpose of financial planning is long-term wealth enhancement and financial independence. For most folks, this is a marathon, not a sprint, and the true value of fee-only advisory services must be evaluated in that context.
Clients recognize that EFA provides professional, conflict-free services at a very reasonable cost. Furthermore, the return on investment is often greater with a more comprehensive financial planning service.
EFA offers several financial planning packages designed to fit the varying levels of service needed by small business owners, dentists, individuals and families. We help you decide which service is best for your needs during our complementary Smart Start™ meeting. During the Smart Start meeting we will run a side-by-side comparison of fees. In almost all cases, we find that the value to investment ratio is significantly greater than the typical commission-based or fee-based planning approach.
To find out more about our services, click here.
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