Broker Check

Are Performance-Based Fees Right For You?

January 30, 2023

The wirehouses and Ken Fishers of the world want you to believe that they only make money when you make money.

Not true.

Hypothetical Example: 

Let's say you invest $1M dollars and they charge you 1% per year.

They make $10,000 that year.  If your account increases to $1.2M, they make $12,000 that year.

How about last year, (2022)?  Let's say your account lost 20% and is now worth $960k. 

They still made $9,600 last year, compared to you losing almost $250,000!  And they will continue to get paid for as long as it takes for your account to grow again.

Is that fair?

Markets will fluctuate, we all know that.  2022s will happen, and happen again in the future.

How about if you stopped paying fees when your account declines from it's high water mark, and didn't pay another advisory fee until it regained, and surpassed that value?

Sound fairer?

Give us a call to discuss a better way.