Fee Based Charges on Cash

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Apr 13, 2009 3:21 pm

Does anybody bend on charging a fee on cash in fee based accounts? 

 
I am mixed on it, but have a UHNW client transferring in and that is important to them.  I might make less on them if I journal cash over to a commissioned account prior to the billing date, but assuming she likes us, maybe we get more referrals.  They associate with many other UHNW people.
Apr 13, 2009 6:05 pm

How much dough?

Apr 13, 2009 6:14 pm

I think if it is cash they are using as a cash reserve or to make purchases, then fine, they shouldn't be charged. If it is part of a strategy, then hell yes. I always make holding cash part of the strategy. So they get charged.

Apr 13, 2009 6:14 pm

About $700k to start.  Total net worth of about $20MM, about $5MM investable (best guess). 

 
A few of their friends are in the same ballpark net worth wise.  Majority of their friends and colleagues are in the $2MM-$5MM range.  They are very well connected. 
Apr 13, 2009 6:35 pm

This is just a guess and throwing it out there, but HNW clients might be more respectful of an advisor who charges the fee and has a strong position on it. Also, you are going to get referrals based on performance and service and not because you can save their friends a few dollars.

Apr 13, 2009 6:42 pm
buyandhold:

This is just a guess and throwing it out there, but HNW clients might be more respectful of an advisor who charges the fee and has a strong position on it. Also, you are going to get referrals based on performance and service and not because you can save their friends a few dollars.


 
I agree with everything you said.  However, you don't know this person.  Conventional wisdom has been thrown out the window.
 
 
Apr 13, 2009 6:52 pm
snaggletooth:
I agree with everything you said.  However, you don't know this person.  Conventional wisdom has been thrown out the window.
 
 



I'd go with your gut feeling, then.



Apr 13, 2009 7:45 pm

Snaggletooth:

Here is my take. Set up two accounts, one of the cash, one of investments. I would not charge for cash in the cash account, and would charge for the cash in the investment account.
Apr 13, 2009 8:10 pm
JackBlack:

Snaggletooth:

Here is my take. Set up two accounts, one of the cash, one of investments. I would not charge for cash in the cash account, and would charge for the cash in the investment account.



Here's your answer.  Right on the money.

Apr 13, 2009 8:21 pm

Tail wagging dog....

Apr 13, 2009 8:23 pm
HAAIC:

Tail wagging dog....

 
You're right about that. 
Apr 14, 2009 3:45 pm

if she is transferring the account purley based on fee structure then you need to consider the overall profitability of the relationship. hopefully she is doing business with you because she values your advice.


all that being said; bring in those assets!

May 20, 2009 12:11 am

Always late to the party but....

 
You might look at putting a small package of corporate notes to shift cash to. I saw GE Interest Plus offering fairly attractive yields and it doesn't look like the lockup is as bad as a CD. It looks like you can write checks from the notes account and move money fairly easily when she needs it. Again, it's unsecured debt and all that jazz....
Jun 4, 2009 10:48 pm

JackBlack offers a good option. I know at ML, the ML Personal Advisor wrap fee program does not bill fees on the cash balance portion of the account, so it's done automatically.



Wonder what programs at other firms do?



I wholeheartedly agree on working on a fee-basis with clients, trust me, but hard to justify an advisor charging even 1% on cash especially when MMA rates are pathetically low to begin with.

Jun 4, 2009 11:26 pm
Wildcat02:


I wholeheartedly agree on working on a fee-basis with clients, trust me, but hard to justify an advisor charging even 1% on cash especially when MMA rates are pathetically low to begin with.




 
Here's a good thread that talks about when its appropriate to charge for cash.  I was against it as well beforehand.
 
http://forums.registeredrep.com/forumposts.asp?TID=8939&PN=3