Fee for Comprehensive Financial Planning

Trail Financial Planning is a fee-only financial advisory firm.  That means that we only receive fees directly from our clients.  We do not receive any revenue from outside sources such as commissions or kickbacks.  Table 1 presents the typical fees for comprehensive financial planning.

Table 1.  Fee for Comprehensive Financial Planning

The actual fee will be established between client and advisor at the outset of a relationship.

Planning fees may be subsidized by investment management fees depending on the amount of Assets Under Management (AUM) as follows.

• If the AUM is over $500,000, then all planning fees, including initial and ongoing fees, can be subsidized through Investment Management fees.
• If AUM is between $250,000-$500,000, then ongoing planning fees may be subsidized through Investment Management fees.

How Fees are Paid

Investment Management Fee Model

Our standard investment management advisory fee is based on the market value of the Assets Under Management, or AUM.

Assets Under Management, or AUM, are defined by any and all assets that are included in a separate Investment Management contract, and for management of which the client pays a fee to the Advisor. Investment management fees may be negotiable.  They are pro-rated, based upon time of management, and paid in arrears on a quarterly basis. The advisory fee is a blended fee and is calculated by assessing the percentage rates using the predefined levels of assets as shown in the above chart, resulting in a combined weighted fee.

For example, an account valued at $1,000,000 would pay an effective fee of 0.75%. This is determined by the following calculation: ($500,000 x 1.00%) + ($500,000 x 0.5%) = $7,500.  The AUM is based upon the last open market day of the calendar quarter. No increase in the annual fee shall be effective without agreement from the client by signing a new agreement or amendment to their current advisory agreement.

How fees are assessed and paid

Advisory fees may be directly debited from client accounts, or paid by check or electronic funds transfer, per client’s choice.  An investment management agreement may be terminated at any time with written notice. Accounts initiated or terminated during a calendar quarter will be charged a pro-rated fee based on the amount of time the Client-Advisor Agreement was valid during the billing period.  Upon termination, any unearned fee will be refunded to the client. When advisory fees are deducted from Wealth Management client’s account(s), the Adviser will provide an itemized invoice that includes a description of the work completed, the date the work was completed, and the fee for the work which is compliant with requirements set forth in WAC 460-24A-135 (Washington state Administrative Code). Members of the same family may combine account values (for purposes of fee calculation) if their finances are enmeshed in such a way as to allow for one Investment Policy Statement and Advisory Agreement to cover all accounts.

Other Types of Fees and Expenses

Our fees are exclusive of brokerage commissions, transaction fees, and other related costs and expenses which may be incurred by the client, and may be the result of our investment recommendation. Clients may incur certain charges imposed by custodians, brokers, and other third parties such as custodial fees, deferred sales charges, odd-lot differentials, transfer taxes, wire transfer and electronic fund fees, and other fees and taxes on brokerage accounts and securities transactions. Mutual fund and exchange traded funds also charge internal management fees, which are disclosed in a fund’s prospectus. Such charges, fees and commissions are exclusive of and in addition to our fee, and we shall not receive any portion of these commissions, fees, and costs.

Hourly Fee Model

Services delivered under the hourly fee model are based on time worked, and the current hourly rate.  Fees may be negotiable based on client and advisor discussions.

How hourly fees are assessed and paid

At the end of each month, the Adviser will prepare and send an invoice to the client that includes a description of the work completed, the date the work was completed, and the formula used to calculate the which is compliant with requirements set forth in WAC 460-24A-135 (Washington state Administrative Code).  Clients may opt to make partial monthly payments to pay off the account balance over time.  Financial planning services may be terminated at any time by written notice. If the planning agreement is terminated, client will be billed for work done, but not yet paid for.  If payment was received, but work was not done (such as an initial deposit was received, but the client decided not to proceed with services), a refund will be provided to the client for the amount of payment received less any work completed. Fees may be paid by electronic funds transfer or check.

A General Note about All Fees

All work will only be invoiced after the work is completed, with the exception of an initial deposit. An initial deposit may be requested to secure a spot in advisor’s schedule.  This deposit will be less than $500. If such a deposit is paid, then the amount paid will be credited towards future planning services.  Trail Financial will not bill an amount above $500 more than 6 months in advance.

A note about excessive fees

As fiduciaries to our clients, we research and discuss the effect of fees on long-term financial health.  We aim for our advisory fees to be between 0.5% and 1.0% of Assets Under our Management. However, we recognize that some of our clients without significant Assets Under our Management would be paying a higher fee as measured by “percent of Assets Under Management.”  Within the industry, a “reasonable maximum advisor fee” is considered to be less than 2% of Assets Under Management. However, a client may receive value from our financial planning services apart from the investment management service.  Thus, they may wish to engage our services despite the fact that our fees would appear excessive as a “percent of assets under management.”  In such a case, where a client is paying a fee higher than 2% of Assets Under Management, we will inform the client of the fee, and disclose to them that it may be possible for them to find another advisor or advisory firm where they can pay less in fees than our firm charges.