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AdvicePeriod. It's that simple.

Your Advisor is Addicted to Your Assets

Your Advisor is Addicted to Your Assets
Financial advisors give all kinds of advice, but it sure is interesting how that advice rarely seems to include letting someone else manage your money.

It’s understandable why an advisor would want to hang on to your assets for dear life: Asset management is ridiculously profitable. If your advisor is managing $5 million of your money, and charging 1% of assets annually to do so, he’s pulling down $50,000 each and every year from you.

But what happens when your advisor knows that the best course of action is to relinquish your assets? Will he be honest with you, given the income that’s at stake? How few advisors will do the right thing? Here’s the good news: AdvicePeriod happens to be one of those very few advisors.

Not long ago, we were introduced to an older client who let us know she’d like to leave $50 million of her estate—money we would manage—to her son upon her death. The son would, in turn, distribute the money to charities over time. A typical advisor would have rubber-stamped such a plan because it would allow them to manage the assets for not just the client’s lifetime, but likely until they were distributed to the charity by the son at some point in the future.

But we believed the client could do better. We advised her to put that $50 million into a donor-advised fund (DAF) today. By using that tax-sheltered charitable-giving vehicle, the client sidestepped a 40% estate tax, saving about $20 million in transfer taxes. Because she decided to use a DAF, her charities will get $50 million rather than $30 million.

Additionally, by making the gift now, she is able to use the tax deduction during her lifetime. In the end, her charity will receive the benefit of the larger gift—$50M—and she will save taxes. Not a bad deal.

However, this is the kind of advice that would make most advisors—if they even thought of this idea—cringe. After all, once our client transfers her assets into the DAF, the fund will take over management duties from us, reducing our assets under management. If we were a typical advisor, charging our clients 1% of assets under management, we’d be kissing $500,000 per year goodbye.

But AdvicePeriod is different: This client’s smart, self-interested decision won’t impact our compensation at all. Like many of the wealthier people we serve, this client pays us a fixed annual fee. That means that we don’t earn money based on assets under management. Translation: We have zero vested interest in keeping her assets “in-house.” Our client is purely buying objective advice from us—and benefitting greatly.

All advisors say that they will give you advice that’s in your best interest. At AdvicePeriod, we don’t just talk the talk: We strive to use the most client-friendly compensation structures available, reducing conflicts of interest and giving clients the objective, difference-making advice they deserve. Do you trust your advisor to give you completely unbiased advice?

Disclosures:
The information provided is for educational purposes only and is not intended to be, and should not be construed as investment, legal or tax advice. The information is subject to change and, although based upon information that AdvicePeriod considers reliable, is not guaranteed as to its accuracy or completeness. AdvicePeriod makes no warranties with regard to the information or results obtained by its use and disclaims any liability arising out of your use of, or reliance on, the information.
In accordance with Treasury Regulations Circular 230, any tax discussions contained in this communication was not intended or written to be used, and cannot be used, for the purpose of (i) avoiding tax-related penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any tax-related matter addressed herein.
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