Fee-Only Based on Net Worth, not Portfolio Size

I can see that the recent posts on fee-based versus fee-only are generating some comments (both on this blog and on Jonathan Chevreau’s). Just to add a little spice to the mix: did you know that some fee-only planners charge a fee based not on investment portfolio size, but instead by net worth in total? Assuming that your fixed assets are larger than your liabilities, this means that the fee could be based on not only your portfolio size, but also on the equity you have in your house, cottages, real estate and incorporated entities, etc. Certainly this changes the game quite a bit.

There are some planners out there who may only deal with a few families, offer a very special level of service, and the value may in fact be there – think Tom Hagen to the Corleone family. :)

But, I think the main message is that there are a lot of options out there, and unfortunately the bulk of advisors do not go out of their way to bring clarity to the topic of fees. It’s tough painting with such a broad stroke, but the sad reality is that the deck is stacked against the average investor.

Preet Banerjee
Preet Banerjee
...is an independent consultant to the financial services industry and a personal finance commentator. You can learn more about Preet at his personal website and you can click here to follow him on Twitter.
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Showing 6 comments
  • Jordan

    Hey Preet, I have twisted idea for the industry, why not mix a financial planner with a blog. I’ve seen so much fantastic advice all over the blogs when people ask for financial help.

    So take it to the next step. Someone could create an online community just for financial advice. A free website or one that offers it as a low cost service with micro-payments to contributors who provide financial advice. Think a combination of Digg.com, Yahoo Answers (minus the idiots) and the former Google Answers service. Amateur investors, hobbiest, advocates, even professionals could throw out opinions, plans and suggestions to people looking for financial help who are willing to bare all to the community. People would then vote or “digg” the best suggestions to pick the winners.

  • Preet

    @Jordan – an interesting concept!

  • Derek van Brussel

    Hi Preet,

    This is a very interesting concept. I sold my business well over a year ago for a 7-figure sum and have been looking for a trustworthy financial advisor ever since, while staying in MMF. I have been reading up a lot on the financial advice industry (i.e. John de Goey’s book) and have been all over the Canadian blogs as well. I am quite frankly more than a little concerned with most of the industry’s push-equity, borrow-more-to invest, long only, high-fees/low (follow-up) service practices. The total net worth concept -although unusual- interests me, since it might eliminate some of my conflict-of-interest concerns.
    Could you give me any links to or info on the advisors charging a Net Worth fee ?

  • John Amonson

    Hi Derek,
    Check out my firm’s website. It might be what you are looking for.

    John Amonson MBA, RFP, TEP
    Unbiased Wealth Management Inc.

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