Fee Base Schedule

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Aug 20, 2008 5:47 pm

I have a new fee based platform and am curious as to how much you guys charge at certain levels including what your BD's or clearing firm's cut:


25k-250k = ?


250k-500k = ?


500k - 1MM = ?


1MM - 2MM = ?


Aug 20, 2008 6:35 pm

25k-250k = ? 25 to 100  1% or C shares, Perfer C shares under a 100k


250k-500k = ?  .8%


500k - 1MM = ? .75%


1MM - 2MM = ?  .5%

Aug 20, 2008 6:44 pm
Greenbacks:

25k-250k = ? 25 to 100  1% or C shares, Perfer C shares under a 100k


250k-500k = ?  .8%


500k - 1MM = ? .75%


1MM - 2MM = ?  .5%

 
You're only charging 80 bps on 250k-500k?!?!  I was thinking I would be closer to 1.25%.  How do you make a living on that?
Aug 20, 2008 7:48 pm

Under $100K - 1.5% or C-shares

$100K-250K - 1.25%
$250K & up - 1%
 
Yes, I've bent this schedule in the past, but now that I have a reasonable asset base, I don't see me discounting going forward, except in very rare circumstances/large accounts.
Aug 20, 2008 10:20 pm

Wow Ice.  I'm surprised to see the advisor managed fee is that much lower than the cookie cutter model.

 
25k-250k = 42 bps Admin Fee
250k-500k = 24 bps Admin Fee
500k-1MM = 14 bps Admin Fee
 
The way I look at this is that I could charge 1.5%, 1.25%, and 1.15% respectively and still net 1% before it hits my 83% payout.
 
So I think those fees aren't that bad.  The 12b-1 fees are paid to the advisor.
 
I'm trying to get a feel for what others are charging.  I have a client from a private placement that has indicated he'd like to work with me more (pending something in his personal life), that is paying 1.25% on $5MM at a bank.
 
Ice, it seems like you're not netting very much on the advisor managed accounts, what do you think?
Aug 21, 2008 10:18 am

My broker dealer allows us to use C-shares only for investors who have short term time horizons.  If we try to use C shares for the sake of diversification (multiple fund companies) we have to write a 12 page essay.  Greenbacks and Indyone, I take it your b/d is more flexible?

Aug 21, 2008 10:20 am

It's nice to be able to participate in this type of discussion.  Finally.

 
Jones has two fee based platforms.  Advisory Solutions fee schedule is at tiered program.  I'm not sure how the rest of the world functions, but here's it is:
 $100K - $500K = 1.35%
 Next $500K      = 1.25%
 Over $1 MM      = 1%
 
12b-1 fees and revenue sharing dollars are used to offset the fee.  We have Research models put together by CFAs at HQ and we have custom models that advisors can build themselves.  Fees are the same for both.  40% payout across the board.  Payout only gets cut if we discount more than I believe up to 15% on accts under $1 MM and 30% on accts above $1 MM.  If we discount more than that, payout gets cut to 30%. 
 
The second is our SMA platform called MAP.  Fees are higher I would assume because clients are paying Jones and the money managers.  Fees are dependant upon what type of mix of assets you are using.  An all equity portfolio is the most expensive, followed by a balanced portfolio, then an all bond portfolio is the lowest.  I'll give you the one for a balanced portfolio.  It has a $500K minimum and it's tiered just like AS:
 
First $500K  -  2.10%
Next $500K -   1.85%
Next $1 MM -  1.60%
Over $2 MM -  1.24%
 
Money managers get a 65bps cut up to $1 MM before Jones is paid.  We get a 40% payout on the difference.  Anything over $2 MM the managers get a 45bps cut. 
 
 
Aug 21, 2008 11:20 am
iceco1d:

Mike - we just got a compliance memo at my BD "reminding" FAs that C-shares are ONLY to be used for short & mid term investors, and are NOT to be used to annuitize our books. 

 
 
It's amazing what the compliance and regulator people do that can harm our clients. 
Aug 21, 2008 12:11 pm
iceco1d:

Mike - we just got a compliance memo at my BD "reminding" FAs that C-shares are ONLY to be used for short & mid term investors, and are NOT to be used to annuitize our books. 

 
Spiff - It looks like your fee program is similar to most.  One thing confuses me though - how do revenue sharing dollars get used to help offset the fee?  Rebating 12b-1s, I understand...but 12b-1s would get paid out to FAs; revenue sharing dollars do not?
 
ALL compensation to the firm is rebated back to the client account, including any revenue sharing and 12b-1's.  Jones does not collect ANYTHING other than the fee to the client. 
 
I am not sure how exactly the mechanics of it work, but I am guessing it goes back into the client's investment as a re-investment (into the fund that provided the fee?? )??  I have not looked into it that far.  There may be some industry requirements for how it goes back in to the account (either offsetting fee or reinvestment).
Aug 21, 2008 12:15 pm
Spaceman Spiff:

It's nice to be able to participate in this type of discussion.  Finally.

 
Jones has two fee based platforms.  Advisory Solutions fee schedule is at tiered program.  I'm not sure how the rest of the world functions, but here's it is:
 $100K - $500K = 1.35%
 Next $500K      = 1.25%
 Over $1 MM      = 1%
 
12b-1 fees and revenue sharing dollars are used to offset the fee.  We have Research models put together by CFAs at HQ and we have custom models that advisors can build themselves.  Fees are the same for both.  40% payout across the board.  Payout only gets cut if we discount more than I believe up to 15% on accts under $1 MM and 30% on accts above $1 MM.  If we discount more than that, payout gets cut to 30%. 
 
The second is our SMA platform called MAP.  Fees are higher I would assume because clients are paying Jones and the money managers.  Fees are dependant upon what type of mix of assets you are using.  An all equity portfolio is the most expensive, followed by a balanced portfolio, then an all bond portfolio is the lowest.  I'll give you the one for a balanced portfolio.  It has a $500K minimum and it's tiered just like AS:
 
First $500K  -  2.10%
Next $500K -   1.85%
Next $1 MM -  1.60%
Over $2 MM -  1.24%
 
Money managers get a 65bps cut up to $1 MM before Jones is paid.  We get a 40% payout on the difference.  Anything over $2 MM the managers get a 45bps cut. 
 
 
 
Spiff, you can also discount up to 25% on MAP, but it all comes out of the B/D's cut, not the money manager's (in other words, MM always gets their 65bips for under 2mm).
Keep in mind, SMA platforms generally have higher fees to the client because there are no internal expenses (like a MFD) to compensate the MM.  So the "all-in" expense is comparable to MFD advisory platforms (though tougher to sell to clients, IMHO).  I am also not that impressed with most SMA managers.  Unless you are talking about a taxable account, I don't see the advantage to using SMA's.
Aug 21, 2008 12:17 pm
iceco1d:

Mike - we just got a compliance memo at my BD "reminding" FAs that C-shares are ONLY to be used for short & mid term investors, and are NOT to be used to annuitize our books. 


 
ICE, do you mind mentioning who your B/D is?  Just curious.  The Merrill guys I know well, pretty much use C shares exclusively, in addition to their MFD advisory platform. 
Aug 21, 2008 12:28 pm
B24:
ICE, do you mind mentioning who your B/D is?  Just curious.  The Merrill guys I know well, pretty much use C shares exclusively, in addition to their MFD advisory platform. 
 
Not speaking for Ice, but I think his BD is taking a more hard-lined approach to C shares.  I have used C shares extensively and for diversification purposes, which seems pretty common throughout the industry.
Aug 21, 2008 1:03 pm

B24 - yeah, I always have a little bit of a shock when I see the fees on the MAP program.  Until I remind myself that there are no other expenses.  I've looked at the MAP program enough times to be dangerous with it.  I've never been really impressed with the performance.  I love the tax planning that is possible for someone with a big trust. 

 
As for the RS thing, it is a credit to the account, listed on the statement as Advisory Solutions Fee Offset.  Since the account is charged fees a month in arrears, they can easily look back at the RS, 12-B1, and shareholder acct fees that would have been generated and add them back as a line item on the client statements.  From what we've been told, and from what I've read here, this is fairly atypical in the industry. 
Aug 21, 2008 2:49 pm
iceco1d:

My BD tends to be very conservative about EVERYTHING.

 
 
Not always a bad thing.  Jones is ultra-conservative about many things....sometimes it's a blessing, sometimes it's just a pain in the arse.
Aug 21, 2008 3:23 pm
Mike Damone:

My broker dealer allows us to use C-shares only for investors who have short term time horizons.  If we try to use C shares for the sake of diversification (multiple fund companies) we have to write a 12 page essay.  Greenbacks and Indyone, I take it your b/d is more flexible?

 
The purchase limit is $500 K and the holding limit is $1 million.  The general guidelines indicate that C-shares are for short-term investments and that reps may be asked to justify positions held for more than four years.
Aug 21, 2008 3:31 pm

Indyone:

 
I have yet to be asked by LPL to justify my C share holdings for over four years. Have you? I know they can but have not seen it done yet.
Have to keep that in mind on my next audit.  
Aug 21, 2008 9:28 pm
Indyone:

Under $100K - 1.5% or C-shares

$100K-250K - 1.25%
$250K & up - 1%
 
Indy, at these price points, how many bps does your custodian take?
Aug 22, 2008 7:46 am
Indyone:

Under $100K - 1.5% or C-shares

$100K-250K - 1.25%
$250K & up - 1%
 
Yes, I've bent this schedule in the past, but now that I have a reasonable asset base, I don't see me discounting going forward, except in very rare circumstances/large accounts.



Wow! Most mutual funds cost 2.5 to 3.5% and you add 1% on top of that? I hope you weren't expecting to get into heaven, someday.

Aug 22, 2008 9:45 am

And so your solution is?  Indexing, I'd bet.  ETFs.  Passive money vs managed money.  Can we not have this discussion again please? 

Aug 22, 2008 11:25 am
Vic Mackey:
Indyone:

Under $100K - 1.5% or C-shares

$100K-250K - 1.25%
$250K & up - 1%
 
Yes, I've bent this schedule in the past, but now that I have a reasonable asset base, I don't see me discounting going forward, except in very rare circumstances/large accounts.



Wow! Most mutual funds cost 2.5 to 3.5% and you add 1% on top of that? I hope you weren't expecting to get into heaven, someday.

 
How do you make your living, Vic?