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Introducing a New Advisory Fee Structure for SFM Clients

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This is a test. Are you reading this? 

After speaking with a client about how we should implement our new fee structure, we were advised that it’s always better for the service provider to leave things as they are, unless the customer takes action to change them.  We all know how frustrating it is to get those new account agreements that go into effect whether we like them or not.  So we’re giving you a choice.

It is with this newsletter that we announce an optional (you must opt in or it doesn’t change for you) change to our fee structure for 2014 and beyond.  Instead of simply telling you we’re reducing your advisory fees, you must take action—as there is a small catch. (more on that later)

We will be changing from a “linear” fee schedule to a “tiered” fee schedule.  So instead of the client with $99,999 paying $48/quarter more than the client with $100,001 under our management (crazy, isn’t it?), it will be a more reasonable transition to reduced fee tiers.

I will tell you that if all clients opt in to the new fee schedule, it will result in a 9% reduction in our advisory fees collected. We’re okay with that.  First, as we grow in assets under management, our fixed costs remain the same, allowing us to provide our services at lower rates.  Second, as technology efficiencies are gained, investment products and service costs are declining.  By reducing our average fees we will become ever more competitive in the investment advisory space.  Given all of your options, we feel no one in this day and age should pay more than 1% for investment advice and management.

“So what’s the catch?” you ask?  In the past, we’ve billed our fees “in arrears”, or after the quarter ended.  With the new fee structure, we will now be collecting prepaid quarterly fees.  So the first quarter billing after you opt in (if you opt in) will effectively be a double-billing.  

The other small catch is that clients with assets between $100,000 and $250,000 under our management would see no reduction in fees until they cross the quarter million dollar mark. (It’s just the way the math works out.)

Original fee structure (existing clients only), billed in arrears:

Clients' Aggregate AssetsAnnualized Fee
Under $100,0001.2%
$100,000 - $1,000,0001.0%
$1,000,000 - $3,000,0000.8%
$3,000,000 - $5,000,0000.6%
$5,000,000 - $10,000,0000.4%
$10,000,000 +0.2%

Our new fee structure (prepaid quarterly), available to new & existing clients:

Clients' Aggregate Assets:Annualized Fee
The first $250,0001.0%
The next $750,0000.8%
The next $2,000,0000.6%
The next $2,000,0000.4%
All assets above $5,000,0000.2%

For example, a client with $500,000 will have a blended fee rate of 0.90% with the new agreement, versus 1.0% according to the original arrangement—a 10% annual savings.  I encourage you to do the math based on your situation (your aggregate balance is included in our quarterly mailings), and if you’re interested in changing to the new fee schedule, simply call or email Joyce or Tina at the office and they’ll send you an Advisory Agreement Addendum.

We know that you have many options when it comes to investing your money (we watch CNBC and professional sports commercials too); and we want to thank you for your continued trust as you allow us to help you make the most of the money you worked hard to save.  We look forward to improving our service offering through both technology, and personal interaction—even while reducing our fees.  

2013 turned out to be a terrific year for your investments, and I am grateful for the opportunities that still abound.  I am looking forward to another year of success, growth and prosperity for all in 2014.