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Fee Based Fee

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Nov 20, 2008 12:24 am

Given that some of our and our colleagues’ accounts are fee based and down 40%, has there been any aggrevation noticed over the fee that appears on their statement?

  I imagine some clients aren't happy over the fee.   
Nov 20, 2008 12:27 am

Yes, but not so much about the performance, just the fees itself.  One client pulled out his fee-based account and went brokerage instead.  He’s one of those who like to micro-manage and decided that he’ll take charge of his portfolio from now on.  So, he cashed out and thought that he wouldn’t want to pay the fees while his portfolio is sitting in cash.  Good for us and perhaps good for him.

Nov 20, 2008 2:35 am

I think it depends on what you originally told your clients, and how the returns compare to the same allocation of indexes…

  Most of my clients don't have a problem with the fee, but I stay in touch with them and show them why I am worth my fee.... I think people get mad about the fee, when they don't understand why they are paying it(service, returns, emotional stability.... whatever you told them originally)
Nov 20, 2008 5:01 pm

The toughest part about a fee, is that you generally earn it in the worst of times.  If you can save a client from doing something stupid at a time like this, you could theoretically save them 10, 15, 20% in losses over time (from peak to peak).  But they are angry because of paying 1%.  Hell, look back at your clients, fee based or not.  I bet many of us have instances where we have taken clients out of the 100% emerging market portfolio into something a bit more balanced.  What do you think that saved them?  I have a client that was a in 100% aggressive equities (SMA’s).  60 yrs old.  I moved him from that into a 30/70 split (30 stock/70 bond) a year ago (no, I did not assum this was coming, I just knew he was way too aggressive, and had also seen a lot of gains the past 4 years).  He is down 15%.  I still have his Morningstar report loaded from his portfolio he brought to me.  NOw, of course his broker may have made changes, which we will never know.  But he did tell me that his broker NEVER called him, and NEVER made changes.  So I tend tho think he would have done nothing.  He WOULD have been down 45%.  Assuming my client would have prompted some change on his own amidst the downturn, lets just say he would have lost only 30% instead of 45%.  That’s still a 15% positive delta on $900,000 (that would be 135K).  So, realistically, I SAVED this guy 135K on the downside.  Tough to swallow that I lost LESS, but in reality, the only things UP in his portfolio was a LT govie fund, a ST govie fund, and an int’l bond fund, which are all BARELY positive (we also have some MMKT and a fixed annuity).