Starting a business is a crazy idea and a daunting task. Each month, about 540,000 individuals launch new businesses and half of them will fail within the first five years. I took a leap of faith a few years ago to start my firm when I turned fifty and so far, so good.
The primary reason I started my business was to remove confusion, complexity, and worry from the financial planning and investment management process. I wanted to offer people an alternative to firms that sold products with exuberant fees. As Jeff Bezos said, “Your margin is my opportunity.” I also noticed that individuals didn’t know what they owned, the risk they were taking, or the fees they were being charged. My goal was to bring these issues into the light.
First, I was tired of hearing stories from people who bought products and services they did not need or want. The products were complicated and expensive, and most of them did not fit in with a client’s financial plan if they had one. The products were sold by brokers earning massive commissions and fees. I wanted to recommend low-cost investments to individuals based on their financial plan.
Second, I wanted to offer a competitive fee. A lot of advisors charge 1% or more to manage a client’s assets, or require a high-fee retainer, or demand exuberant hourly rates. Also, advisors and brokers charge thousands of dollars for a financial plan. Our fee is .5% of assets ($5 per $1,000) to manage investments and a flat fee of $800 for planning. I like to say we’re twice the service at half the price!
Third, I wanted to help individuals with their financial needs regardless of their level of assets. It’s common for investment firms and advisors to have asset minimums of $1,000,000 or more. We work with clients at all asset levels from several million to several thousand. We don’t have asset minimums, and we will work with anyone who wants or needs our help.
Industry experts and advisors tell me my fees are too low, and I need to set an asset minimum. They also encourage me to focus on a niche like attorneys. I disagree. If my firm sets an asset minimum of $1,000,000, what happens if I meet an individual with $750,000? Do I tell them I’m sorry I can’t work with you because you “only” have $750,000? If I only work with lawyers, do I say no to the doctor, teacher, or pilot?
Because my fee schedule is low and I don’t have an asset minimum, industry experts question if my clients are profitable. I have no idea. I don’t treat individual clients as profit centers. My firm, however, is profitable, allowing me to continue to serve clients.
When I’m told to raise fees or asset levels or focus on a niche, I think of the Coca-Cola Company. Coke has been selling beverages to individuals since 1892, and, to my knowledge, they don’t have a niche. Coke products are sold to billionaires like Warren Buffett and Bill Gates, as well as young children around the world. If you’re thirsty, you can buy a Coke product to quench your thirst regardless of your economic standing. Also, Coke products aren’t complicated or expensive.
My model works, and I look forward to helping all those who want or need financial guidance.
Work willingly at whatever you do, as though you were working for the Lord rather than for people. ~ Colossians 3:23
December 10, 2019
Bill Parrott, CFP®, CKA®, is the President and CEO of Parrott Wealth Management located in Austin, Texas. Parrott Wealth Management is a fee-only, fiduciary, registered investment advisor firm. Our goal is to remove complexity, confusion, and worry from the investment and financial planning process so our clients can pursue a life of purpose. Our firm does not have an asset or fee minimum, and we work with anybody who needs financial help regardless of age, income, or asset level. PWM’s custodian is TD Ameritrade, and our annual fee starts at .5% of your assets and drops depending on the level of your assets.
Note: Investments are not guaranteed and do involve risk. Your returns may differ from those posted in this blog. PWM is not a tax advisor, nor do we give tax advice. Please consult your tax advisor for items that are specific to your situation. Options involve risk and aren’t suitable for every investor.