By Jeffrey Meenes, CFP® (Published Date April 14, 2022)
High Earning Executive Saves Almost $20,000 Annually in Fees and Expenses by Switching to Meenes Wealth and Sleeps Significantly Better at Night
When one takes an objective look at the current advisor models, it’s not difficult to see that they are inherently flawed. You can find more detailed information on the current models here, but I would like to provide some real life examples to illustrate just how beneficial the complexity-based fee model has been for my clients—not only from a financial perspective, but a personal one, as well.
The Client Profile:
- High-earning technology executive with roughly $1.5 million in investable assets.
- Continuously promoted as a top earner at multiple different companies.
- Head of household with children, multiple goals, and changing priorities.
After trusting in both Merrill Lynch and Morgan Stanley for his asset management needs for many years, this client grew unhappy with the level of service he was receiving and the exorbitant fees he was paying annually. Of course, this client would have been happy to pay whatever fees necessary if he was satisfied with his service. But, it didn’t take long for him to feel like a number, just another client pulled in and handed a cookie cutter investment plan. He was charged high on-going fees and sent out through the rotating door without any attention paid to his big picture financial needs or goals.
Each year that his wealth increased, so did Fidelity’s rates for investment management services and this client’s displeasure. Ongoing advice beyond investment management was NOT included in this service model so each time the client needed to check in about anything beyond his portfolio, he was charged additional fees. So while the fees increased, their sub-par service level remained the same. There were no questions asked about where the client saw himself in 5 or 10 years or how he would like to use his accumulated wealth further down the road. No attention was paid to his changing life circumstances or whether those new changes were fully protected with the proper insurance policies in place. There was no integration with the client’s estate plan or even a tax optimization strategy in place. At this juncture, the client was forfeiting approximately $30,000 dollars per year in combined fund investment management expenses and investment advisory service fees for little more than a custodian watching over his portfolio and making haphazard trades that were not in alignment with the client’s overall best interests.
To say the least, Fidelity claimed to be acting as the client’s fiduciary, but their actions and behavior over time showed something very different. The reality is that too many “fiduciary” advisors are more concerned with increasing their Assets Under Management (AUM) than they are about caring for each of their individual clients. True fiduciary financial advice values client success above all else, even if that means the advisor's growth or firm expansion take a backseat.
Meenes Wealth Solutions:
Meenes wealth offered this client a more customized approach that not only saves him and his family about $20,000 annually in on-going fees and expenses, but actually helps him make progress toward his financial goals that were not being discussed, or taken seriously, at the other firms. Now this client is paying off his mortgage, saving more efficiently for retirement, saving in taxes, funding a vacation home, and putting money away for his child’s education. Targets that he was left to try and reach on his own before coming to Meenes Wealth. Now, the amount he saves in fees is reinvested in his account where they can be left to accumulate and compound over time.
See the charts below for a representation of the growing power a client can realize when their money stays invested rather than when it is liquidated to cover higher annual fees and expenses.
The top two charts illustrate the potential total portfolio management expenses and fees savings over time when working with the Meenes Wealth Complexity-based fee model versus the traditional AUM model. Note that over $100K is saved on a $1.5 million portfolio after only 5 years and an additional $1 million is saved after 17 years on total fees and expenses. Both charts are based on the same annualized return.
This third chart illustrates the potential growth and combined fee and expense savings of a $1.5 million portfolio. The Meenes Wealth portfolio significantly outpaces the AUM portfolio, after 35 years, it nearly doubles where the value of the AUM portfolio would have remained. The difference in account values are a result of different fee structures as both the Meenes Wealth and the AUM portfolio assume the same annualized returns.
The real problem that contributes to this loss of potential wealth for working professionals is the way most big company “advisors” are compensated. Fundamentally the most popular compensation models are either (1) based on a percentage of the client’s Assets Under Management (AUM) or (2) from the sale of certain financial products with transaction fees. In the Assets Under Management model, the advisor charges the client based on a percentage of the assets they manage on the client’s behalf, typically ranging anywhere from 1% to 5%. If an advisor is compensated based on product purchases with transaction fees, he or she receives payment from the financial or insurance products clients purchase through them. Both these models present far too much conflict of interest between the advisor and the client, making them inherently flawed.
The complexity-based fee model, however, eliminates these problems. Our fees do not increase simply because your wealth increases. The year after year fee savings you may achieve remains yours to compound and accumulate over time. Our model enables you to retain more of your returns to continue building upon your wealth.
Additionally, clients receive more personalized detail and attention to their life goals and changing circumstances when they work with Meenes Wealth. Not only do we provide investment management, but guidance on cash flow management, retirement planning, estate planning, insurance planning, and tax planning. All of your financial bases are covered with our comprehensive service model. You won’t be handed a run-of-the-mill portfolio allocation and sent on your way until the next year’s annual review meeting. You receive fiduciary financial advice from an ally you can trust for ongoing advisement when you need it most. And the advice you receive is always custom tailored to your unique needs and challenges.
- This client saves almost $20k annually by partnering with Meenes Wealth ($8K in AUM fees and roughly $12K in fund management expenses).
- His annual average fund management expense rate dropped from approximately 1.1% to roughly .25%.
- Client receives high-level, custom advisory services tailored unique needs and situation as well as ongoing portfolio management, not cookie-cutter service.
- His family is on track to reach their personal financial goals.
- He is realizing a higher probability of success with our custom approach and lower fee schedule.
- His portfolio retains more of his wealth to compound and grow over time.
- He is now on track to make work optional many years sooner.
- He and his wife sleep better at night.
Here we have success from both standpoints. From the financial standpoint, the client is set up to save hundreds of thousands, and possibly even millions, in fees and expenses over the course of his lifetime that is left to accumulate in his own pockets not the advisors. This enormous savings can be used to retire sooner, leave a legacy to his heirs, and enjoy the fruits of his labor. From a personal standpoint, this client has gained peace of mind. He knows he is on track to accomplish all that he has on the horizon, which allows him to enjoy the present even more, with a greater probability of success than in his prior arrangements.