40 Clients and Flat, Capped Fees – Why Does It Matter?
6 MINUTE READ
I’m going to tell you how I’ve designed my business to better serve my clients (and my own mental health, too). But first, let’s talk about Andrew Luck.
A week ago, Indianapolis received the shocking news of Andrew Luck’s retirement. After having my phone on silent during a date night with Kathleen, I saw 100+ unread text messages. The majority were in a group thread, from a group of friends processing this unexpected news. And so it began: the raging debate over Andrew Luck’s value as a human for making this decision.
Some took the position Andrew is soft. Some responded with, “good for him.” Others couldn’t believe how much money he had left on the table! Whichever position you take (I lean toward “good for him”), it initiates an interesting discussion about what’s worth pursuing in life and at what cost.
I haven’t been in a position to leave hundreds of millions of dollars on the table, nor have I been an NFL quarterback or a household name. But, I certainly relate to the difficulty of defining your own success when the world is shouting that success means wealth, fame, and winning.
In my post last week, I laid out how my past business model triggered this anxiety. This week, I’ll share how and why I designed Wayfinder to better serve my clients while allowing me to find fulfillment through deeper client relationships.
40 Clients
I believe financial decisions should be driven by matters of the heart rather than numbers on a spreadsheet. Don’t get me wrong, spreadsheets matter. We’ll talk about plenty of those! But, I’ve realized I deliver the best service, advice, and value by engaging in really deep and regular client conversations, ones where we talk about all the taboo topics — money (of course), religion, politics, family drama, mental health, and beyond. All of these variables serve as catalysts or road blocks when making big life and money decisions.
“I believe financial decisions should be driven by matters of the heart rather than numbers on a spreadsheet.”
More than once, a couple has sat across the table from me and joked I’m their marriage counselor. I am in no way qualified to claim that important title, but I know what they mean—being vulnerable about money means discussing our greatest challenges, hopes, and fears. Of course, not everyone wants to spill their guts to me, nor does everyone need the depth of guidance I offer. But for folks that do, Wayfinder is designed to ensure I deliver an exceptional level of responsiveness and attentiveness to their lives and money.
In the past, I worked with hundreds of people, and the numbers were going to keep increasing. As you might imagine, delivering regularly on these in-depth conversations with 100+ families was overwhelming and exhausting, despite my best efforts. At Wayfinder, I’m committed to working with no more than 40 households at a time to ensure I can deliver real value.
Flat Fees
Here’s an over-simplified example of my former model. You might ask me what you should do with $10,000. I have two options that would help me make money:
I could tell you to invest it with me, where you might be charged 1+% of the account value on an ongoing basis.
I could sell you permanent life insurance, where I might make 50% of the annual premium in an up-front commission (with decreasing commissions based on your ongoing premiums).
But what if instead you could pay off debt with that $10,000? Or how about putting it in your 401(k) or investing in real estate? Sure, I often steered clients toward these options, but I was working against my own interests in terms of getting paid, which created a bias toward the first two options. There are plenty of arguments out there for and against any of the options above. I believe that any of the answers could be “right” depending on the situation, but that isn’t the point of this post.
The point is this: I was aware of these conflicts and tried to both ignore them and explain them, but it complicated the client’s decision-making process, regardless of what the “right” answer was. In an already noisy financial world, where everyone on the internet and sitting next to you at work has a different opinion about what you should do with that $10,000, the last thing the client needs is any hint of biased advice from their trusted advisor.
So, I created a simple, conflict-free model to make decisions easier and to save us wasted time on misunderstandings or distrust. Wayfinder fees are designed to be easily understood, published on my website, and to not incentivize me to recommend one thing over another. These fees are my only source of revenue, and I’m proud of that. Here’s how it works:
Wayfinder has fee tiers based on a client’s net-worth and has nothing to do with how many assets are under management. Focusing on net-worth eliminates many of the conflicts of interest traditional advisors face when charging solely on investments.
Net Worth: Annual Fee
$0-$1,000,000: $6,000/year - $500/month
$1,000,001 - $2,000,000: $8,000/year - $666.67/month
$2,000,001 - $3,000,000: $10,500/year - $875/month
$3,000,001 - $4,000,000: $13,500/year - $1,125/month
$4,000,001 - $5,000,000: $17,500/year - $1,458.33/month
$5,000,001 - $6,500,000: $21,750/year - $1,812.50/month
$6,500,001 - $8,000,000: $26,000/year - $2,166.67/month
$8,000,001 - $10,000,000: $31,000/year - $2,583.33/month
$10,000,001 - $12,500,000: $36,000/year - $3,000/month
$12,500,001 - $15,000,000: $42,000/year - $3,500/month
$15,000,001 and above: Negotiable
Net Worth is re-evaluated for fee tier purposes every January so fees will only change once per year at most.
Here are a few other key points:
No AUM (Assets Under Management) Percentage-Based Fees. I manage assets but at no added cost to the flat fee and with no 3rd-party compensation - so that I’m not incentivized to recommend an account with me.
Start and stop any time. Although the best client relationships will be long-term, some might want to hire me for six months, and that’s ok!
A contract that protects you with a no-questions-asked refund of your first six months of fees, if desired.
No commissions or kick-backs.
Fiduciary standard - This means I’m legally obligated to put your best interests first.
Back to that original question: “I’ve got $10,000—what should I do with it?” When answering that question at Wayfinder, my compensation is the same no matter what advice is offered. I might recommend you buy life insurance, and help you pick the provider, type, and amount, while helping make sure the buying process goes smoothly, but I won’t make any money from that and I don’t have any incentive to recommend one company over another. When it comes to investments, I might manage an account for you as one of the many services I provide, but I would charge 0% extra (and receive $0 in third party compensation). And what about that possibility of using that $10,000 to pay off debt or invest in your 401(k) or real estate? I get paid the same for those suggestions, too, and even most fee-only firms who charge AUM fees can’t say that.
You get unbiased advice and I get to provide for my family—those are the basics of Wayfinder and why it’s better for the clients I serve. But honestly, the Wayfinder model is better for me, too.
Less Focus on More, More, More
“So do you think you can make more money doing it that way?” That was the first question I got from someone in the industry when I mentioned my plans for Wayfinder. My answer was, “probably not.” And most certainly not right now. Although supporting my family financially matters, this decision was made with my heart as much as a spreadsheet.
My point is, I deeply believe in that old cliche: Money cannot buy happiness…or at least past a certain point.* This also goes for fame and our culture’s macho man version of success. I will continue to emphasize these points to my clients, and the Wayfinder model is simply me trying to live this out in my own authentic way.
*I recognize I come from a privileged point of view saying this. Of course money can affect happiness and quality of life to a certain point (as mentioned in the linked study). Admittedly, I live beyond that point, as do many of you.
Andrew Luck gave credence to this point of view with his decision to retire, while the ridicule and “boos” he received showed how counter cultural this message still is. All that being said, let the record show I’m not saying my stakes were anything compared to the stakes Andrew faced!
Saying enough is enough on more clients and more money is something that helps me ease tension and anxiety in my professional life. I’m able to pursue more time with family, a more enjoyable life in general, and most importantly to you—more depth, meaning, and value delivered in my client relationships.
Of course, I realize the irony of my message as I strive to achieve some degree of status, recognition, and wealth through the launch of Wayfinder. There’s a balance. Most of us recognize this and strive towards the ideal, but we will still fall short. We need to be transparent with each other and call each other out on our hypocrisy when the time is right. Speaking of transparency, stay tuned and subscribe below for next week’s blog post on this very subject.
Until next time, you can:
RSVP to come to our Launch Event September 19 to celebrate and have some food, drink, and more on me! No catch or expectations.
You might have more questions about my model after you read this. You aren’t alone! Shoot me a text or email with your questions, and I’ll happily answer!
Subscribe below to stay up to date with my blog!