All-In Service at an All-In Fee
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Case Study: Ty & Rachel
Case Study: Ty & Rachel
(Note: These case studies are hypothetical, do not involve an XYFP client, and should not be construed as a guarantee.)
Situation
Age: Mid Thirties
Stage: Mid-career with young children
Income: $165,000
Investment Assets: $135,000
Financial Professional
Firm: Southeastern Mutual
(Insurance-Based Financial Services Company)
Professional: Josh Anderson, CLU®
Expertise: CLU®: Chartered Life Underwriter™
(Life Insurance Expert)
Products & Services Purchased
Using simple software, Ty & Rachel are educated on their financial picture at a basic level. They are given an 80-page binder as their financial plan.
Josh Anderson proposes permanent life insurance so they can rest easy knowing that one will be taken care of if something happens to the other but fails to propose an alternative solution of term insurance complemented by investing.
Josh Anderson recommends A-Share mutual funds. Since he does not have enough licenses to help clients invest in Exchange Traded Funds, he sells investments with an up-front fee and receives a 5% commission on a 5.75% fee charged to the clients. Josh defers ongoing management to the mutual fund manager.
Other Services Purchased
Because Southeastern Mutual does not provide all essential services, Ty & Rachel needed to go elsewhere to get these.
Ty & Rachel seek out an attorney to provide the basic estate documents. Future amendments will cost $250 each. They must schedule another meeting with their financial professional to align the beneficiaries with their estate plan.
They employ a CPA to prepare their tax returns each year for $250. Each year they must try and triangulate their CPA and their Financial Professional to ensure everyone is on the same page. Tax planning is not included in their $250 fee.
Total Cost
Ty & Rachel end up paying a lot for their services. Many of these fees are recurring fees.
Their first year cost is $19,212. Their ongoing annual cost will be $10,405.
Financial Professional Compensation
A flat fee to pay the professional to explore all areas of finance.
$7,200 in annual premium at a 70% commission rate.
$135,000 at a 5% commission rate.
Results:
Plan: $2,000 | Premiums: $7,200 | Investment Charge: $7,762.50 | Tax Prep: $250
Plus $2,000 for the Will. A trust would have been $8,000 with the attorney.
Josh Anderson will earn $13,790 from this one client in the first year, mostly due to exorbitant commissions. He will also earn ongoing fees and commissions every year after.
*Firms and financial professionals vary widely in their services and costs.
Case Study: Sarah & Mike
Case Study: Sarah & Mike
(Note: These case studies are hypothetical, do not involve an XYFP client, and should not be construed as a guarantee.)
Situation
Age: Late Thirties
Stage: Sarah recently changed careers, with young children
Income: $175,000
Investment Assets: $135,000
Financial Planner
Firm: XY Financial Planning
(Independent Fee-Only Fiduciary Financial Planning Firm)
Professional: Benjamin Gibson, MBA
Expertise: MBA working under CFP® Professionals
(Masters of Business Administration working under
Certified Financial PlannerTM Practitioners)
Services Received
Using sophisticated software, Sarah & Mike are educated on their entire financial picture. They are given a One-Page Financial Plan with succinct recommendations.
While Sarah & Mike still need life insurance coverage, they are not convinced that a high-premium, permanent life insurance policy is the right solution. A term life insurance policy will suffice. Ben receives no commissions as he works for a fee-only firm.
Sarah & Mike discover the 5×5 investment model. It’s the first time investing has made sense to them. They commit to it. The model has historically returned 10% before fees, though future performance is uncertain. They are free to leave anytime as nothing is locked up behind up-front fees and commissions.
Other Services Included
Because XYFP offers an all-in model, Sarah & Mike will receive estate planning documents, tax prep, and tax planning included in their all-in fee.
Sarah & Mike get their essential estate documents, including a trust to avoid probate and delays, with their financial plan. Signed, sealed, and delivered. All beneficiaries are coordinated and aligned without any extra effort from Sarah & Mike since it is all completed in-house.
Tax Planning strategies are estimated to save Sarah & Mike $210,000 in extra taxes over their lifetime. XYFP also prepares and files their taxes each year. Because their professional already know everything that is going on, tax season becomes quick and painless for the first time ever.
Total Cost
Sarah & Mike get everything for $300 per month (with a minimum of 12 months) all-in, including investments. Their portfolio is charged on XYFP’s standard all-in fee schedule (below).
Because their portfolio would generate $2,025 per year in fees, which is less than the $3,600 minimum, they can choose to pay $131 per month out of pocket or have the difference charged to their investment accounts.
Financial Planner Compensation
XYFP’s fee goes to paying the salaries of the advisors and staff at XYFP to compensate them for providing all these services.
Results:
Planning, Investments, Tax, Estate, and everything else: $3,600.
All Financial Planners and Staff at XYFP are salaried. There are no commissions and no sales quotas. They get paid the same regardless of what is recommended to the client. Thus, all recommendations are in Sarah & Mike’s best interest.
*All our services are charged according to our fee schedule or $900 per quarter, whichever is greater. Clients with less than $240,000 will be subject to our minimum fee. All-In Services are charged quarterly and require a four-quarter commitment. After 12 months, you may continue with our All-In Service or switch to Investment Only and pay 1.5% of invested assets (minimum $150 per quarter). See the Financial and Investment Planning Agreement for more details.