How
We Do It
How
We Work With Our Clients
Defining Your Objectives
How
We Receive Compensation
How
Advisors Get Paid
Are Asset Management Fees Tax-Deductible?
How
We Work With Our Clients
We can help you analyze your
financial situation and assist with determining the best course of action
for you.
Assess Your
Needs
First, we will identify your
investment objectives by asking you about your financial goals. We will also
explore such issues as your risk tolerance, your tax situation, your
investment time horizon, and whether or not you want to take current income
from your portfolio. We help you to determine your goals by:
Helping you sort out your
priorities
Helping you become focused on
the top of the goal list
Helping you clarify your
desired goals
Helping you determine the
strengths, opportunities, and dangers
Establish A
Plan
Next, we will help you develop
an investment plan designed to achieve your goals. Included in the plan may
be your expected investment returns, your ideal asset mix between stocks and
bonds, and the general types of securities that are suitable for you. We
help you develop a personalized path to goal attainment by identifying your
important core value including your feelings and experiences
Implement The
Plan
We will be responsible for the
day-to-day management of your investment portfolio, choosing individual
securities or mutual funds that meet your objectives, and executing trades
on your behalf.
Monitor Your
Investments
We will watch your portfolio
and make adjustments as necessary. In addition to your regular investment
account statements, you will also receive periodic updates to tell you how
you are doing. We measure and monitor your success along the path by
providing answers to:
How are you doing?
Will you have a comfortable
retirement?
Will you run out of money?
Will taxes consume your
children's inheritance?
Defining Your Objectives
The following factors influence
the way your investment portfolio is managed:
Risk
Tolerance
Risk and return usually go hand
in hand. The more you hope to earn, the more risk you must be willing to
take.
Time Horizon
How long you plan to leave the
money invested will determine your investment strategy. Generally, a
long-term strategy is more flexible and may result in more consistent
returns.
Income Needs
We will need to know if you
plan to draw income from the portfolio.
Tax Situation
We will want to know your tax
situation so the tax consequences of transactions can be minimized wherever
possible.
Personal
Preferences
If you would like to place any
restrictions on investments based on your values, such as tobacco, alcohol,
or any other concerns, please be sure let us know.
How
We Receive Compensation:
Unlike full-commission brokers,
whose compensation is tied to trading activity or the sale of investment
products, fee-only investment managers provide customized advice designed
to help you meet your financial objectives. You and your advisor have the
same goal: to help increase your net worth and achieve your overall
investment objectives.
Because the advisor is the paid
by assets they manage their incentive is to grow the account instead of
generating new clients to sell products. Fee-only advisors will work
hard to maximize your portfolio performance because they receive more income
as your account grows.
The benefits of fee-only investment management:
No conflict of interest
No pressure to buy and sell
investments
Personal, ongoing relationship
the the advisor
You and your advisor have the
same goal: the achievement of your objectives
The following is our
compensation schedule:
$100,000
- $149,999 1.5% /year
$150,000 - $499,999 1.0%
/year
$500,000 - $999,999 .85%
/year
$1,000,000 - $1,999,999 .75% /year
$2,000,000 - $2,999,999
.70% /year
$3,000,000 - $4,999,999
.60% /year
$5,000,000 and above
.50% /year
We bill your investment account
1/12th of the above percentage each month based on your account balance.
The
question is simple. Thanks to the tax code,
the answer is complex.
One of the
many benefits of investing in a fee-based
investment program is that you pay no
commissions. Thus, you avoid a common
conflict-of-interest that often exists when
working with financial advisors.
An asset
management fee is based on the value of your
account. Advisors who use this method want
your account value to rise, just like you
do. Having such a shared goal is an
essential basis for an effective long-term
partnership.
Can you list
the fee as a deduction on your federal tax
return? It’s a simple question, but the
answer is complex. Blame the Internal
Revenue Code.
For
Taxable Accounts
An asset management fee is a tax-deductible
expense. List the fee on your Schedule A
under the section called “Certain
Miscellaneous Deductions;” you can clearly
see where the IRS allows you to deduct
investment expenses.
However,
your ability to enjoy tax savings via
Schedule A depends on two factors. First,
Schedule A provides tax savings only to the
extent that your deductions exceed 2% of
your Adjusted Gross Income. Furthermore,
Miscellaneous Deductions are a “tax
preference item” for purposes of calculating
the Alternative Minimum Tax. If the AMT
applies to you, some or all of these
deductions could be disallowed.
For IRA
and Other Tax-Qualified Accounts
Tax professionals debate whether an asset
management fee is a deductible expense for
IRA accounts. Many agree that the fee is
deductible, just as it is for regular
accounts. Some tax preparers disagree,
however, and suggest that the fee is only
deductible if the IRA generates taxable
income for that year.
Many also
suggest that you pay the fee with money
outside the IRA. If you do that, do those
funds constitute an excess IRA contribution?
The answer is murky. Although Section 219 of
the Internal Revenue Code says commissions
must be paid from IRA assets, the code says
nothing about fees. However, an IRS Private
Letter Ruling (PLR 200507021) says IRA fees
can be paid with outside funds. Be aware,
though, that PLRs are not binding on the IRS
except to the individual taxpayer for whom
the PLR is written.
For more
information about the deductibility of asset
management fees, talk with us.
