Support our online development, and advance our onground research initiatives in free market economics, as we seek to showcase the brightest Next-Gen minds.
THE ME-P DISCLAIMER: Posts, comments and opinions do not necessarily represent iMBA, Inc., but become our property after submission. Copyright © 2006 to-date. iMBA, Inc allows colleges, universities, medical and financial professionals and related clinics, hospitals and non-profit healthcare organizations to distribute our proprietary essays, photos, videos, audios and other documents; etc. However, please review copyright and usage information for each individual asset before submission to us, and/or placement on your publication or web site. Attestation references, citations and/or back-links are required. All other assets are property of the individual copyright holder.
Dichotomy Not Unlike Values Based Healthcare
By Dr. David Edward Marcinko; MBA, CMP™
[Editor-in-Chief]
According to Charles Jaffe, a Dow Jones Columnist, it’s one thing to say you want to do the right thing, and something altogether different to actually do it.
Actually, I contacted Chuck early in my journalistic career, about a decade after receiving my certified financial planner designation, and right before he commenced matriculation for same.
The ME-P Position
For years, we at the ME-P, along with some enlightened physician-investors, and a few financial advisors, have suggested that mutual fund managers be paid only when they make money for shareholders. Yet, when a fund company establishes a performance fee and puts its money where its mouth is, the idea gets shot down in the marketplace.
Otherwise, a pure assets-under-management fee schedule approach encourages “asset gatherers” [aka: salesmen/women]; not true asset managers.
IOW: Industry performance standards are quite low, yet we paradoxically pay managers to “beat” the averages, but measure them based on those same “averages.” And, we still pay regardless of outcomes; in one way or another.
Assessment
Some of the fault, of course, lies with SEC rules and regulations as well as some investors. But, as funds like TFS Capital kill off the most aggressive performance-based fee structure in the performance based business, it sends us all notice that true performance-based fees may be dead
Link: http://www.fa-mag.com/fa-news/5227-performance-based-fund-fees-near-dead.html
Conclusion
And so, your thoughts and comments on this ME-Pare appreciated. Is this like the concept of values-based-healthcare, where the doctor is paid on outcomes, not CPT® codes? What I achieve, not what I do. As a doctor, patient, financial advisor or investor, what do you think the golden rule should be in theses two industry sectors? Then, subscribe to the ME-P. It is fast, free and secure.
Link: http://feeds.feedburner.com/HealthcareFinancialsthePostForcxos
Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Medical Executive-Post – is available for seminar or speaking engagements. Contact: MarcinkoAdvisors@msn.com
OUR OTHER PRINT BOOKS AND RELATED INFORMATION SOURCES:
DICTIONARIES: http://www.springerpub.com/Search/marcinko
PHYSICIANS: www.MedicalBusinessAdvisors.com
PRACTICES: www.BusinessofMedicalPractice.com
HOSPITALS: http://www.crcpress.com/product/isbn/9781466558731
CLINICS: http://www.crcpress.com/product/isbn/9781439879900
BLOG: www.MedicalExecutivePost.com
FINANCE: Financial Planning for Physicians and Advisors
INSURANCE: Risk Management and Insurance Strategies for Physicians and Advisors
Share this:
Filed under: "Advisors Only", "Doctors Only", Alerts Sign-Up, Ethics, Investing, Quality Initiatives |
The Leading Business Education Network for Doctors, Financial Advisors and Health Industry Consultants 
FO Approach
While performance-based fee structures are on a decline, the “fee only” approach continues to gain in popularity.
In this structure, a percentage of assets under management is usually paid to the advisor. The main advantage of the fee only approach is that it removes conflicts of interest. The advisor does not get paid more to recommend one investment choice over another, so he is able to place a priority on the best interests of the investor.
Brian J. Knabe MD, CFP, CMP™
LikeLike
8 Bad Excuses for High [Financial or Investment] Advisor Fees
Low-fee investment advisor Rick Ferri knocks down excuses for high investment advisor fees. The real reason other investment advisors are able to charge such high fees is that their clients let them.
How did it feel to you?
No excuses needed. Investment advisory service is a luxury good. Luxury goods don’t compete on price.
http://www.rickferri.com/blog/strategy/8-bad-excuses-for-high-advisor-fees/
Stuart
LikeLike
What the Consumer Press Says About Financial Advisors’ Fees
Increased payment options bring increased client questions
http://www.advisorone.com/2011/12/12/what-the-consumer-press-says-about-advisors-fees?ref=hp
As well they should; but ME-P readers know better.
Dr. David Edward Marcinko MBA CMP™
http://www.CertifiedMedicalPlanner.org
LikeLike
Make sure you add up all the fees!
There seems to be confusion (deliberate perhaps?) in the investment management industry when presenting “management fees” to the general public.
The physician investor might be led to believe that an advisor’s fee is the only fee that is being charged. Often this is not the case. Many pundits will describe a low fee as being under 1% and a high fee as being in the 3% area. So a physician that is checking out a new advisor and is told that the fee to manage his or her assets is 1% might believe that is in the reasonable realm. If the advisor is using mutual funds or an outside money manager however, that fee is what we call in the industry a “wrap fee” and not a true money management fee.
In other words, there are also the underlying fees of the true portfolio manager that must also be included to determine the true total cost. I have seen advisors tout their “low fee” of 1% or 1.25% to only find out it is a wrap fee and that the portfolio manager or mutual fund expense fees add another .75% to 2% to the total fee.
The median net expense ratio as reported by Morningstar for a No Load Moderate Allocation Fund was 1.00% in 2011 (1.2% for the Load Funds).
http://news.morningstar.com/articlenet/article.aspx?id=311379&t1=1343843343
Of course, you will not get professional personal advice on your personal situation or regular reviews with a qualified professional typically included in paying this fee. So if you can find a qualified advisor that will also do a good job managing your money as a portfolio manager and give you complete unbiased financial planning (without sales commissions) in this range then I would say you are getting good value for your money.
There are physician investors however that are paying a 1% “wrap fee” to their advisor with a 1.2% underlying management fee for a total of 2.2%. These same physician investors are also getting occasional advise from their qualified advisor that sometimes will sale them commission/front load funds/loaded variable annuity products/loaded insurance products such as life and disability income insurance (additional fees that you must figure out the cost and add to your true total cost). With commissions included these physicians may be paying north of 3 to 4% annually for an advisory that is “only charging 1%.”
David K. Luke MIM
Certified Medical Planner™ candidate
http://www.CertifiedMedicalPlanner.org
LikeLike
Why Most Financial Planners Will Soon Be Forced To Lower Their Minimums
The growth of CFP certificants – especially in the past decade – has not only outstripped the growth of all financial advisors; it has also dramatically outpaced the growth in the number of affluent households that financial planners typically serve.
The end result according to Mike Kitces CFP, MTAX, MSFS, CLU, is that we are rapidly approaching the point where there are so many CFP certificants that there aren’t enough available half-million, millionaire, or wealthier clients available for them to serve.
http://www.kitces.com/blog/why-most-financial-planners-will-soon-be-forced-to-lower-their-minimums/
Hence, lower fees; just like healthcare.
Hope R. Hetico RN MHA
LikeLike
Time to Kill the AUM Fee?
http://link.email.financial-planning.com/52b27501c16bcfa46ff04f4e2g4k5.l6v/VRwCl8Pow3zxfDVSA3550
How Should Advisors Be Charging Now?
http://www.financial-planning.com/news/ria/how-should-advisors-be-charging-now-2692363-1.html?utm_campaign=daily-apr%201%202015-C&utm_medium=email&utm_source=newsletter&ET=financialplanning%3Ae4111637%3A86235a%3A&st=email
Congrats for talking about these issues for more than a decade.
Ethan
LikeLike
Firms Flee
Did you know that UBS and other “wealth management firms” owned by big banks have had less success cross-marketing capital-raising and investment banking services to wealth management clients who own businesses?
This reflects in part distrust between stock-brokers and investment bankers who typically command higher compensation.
Lucas
LikeLike