The f-word is seldom discussed in polite conversations. When it comes up, it can evoke awkward concerns and emotions, but it is on the mind of all parties, especially at the outset of a relationship.
So, I hope you will forgive my indelicacy, but I am going to devote this installment of The Grapevine to the facts of life in financial services…
Fees
Our fees cover a host of services including, but not limited to, goal setting, wholistic plan preparation, advice on your employee benefits, investment allocation, portfolio management, trading costs, client service, tax and estate planning analysis, and collaboration with CPAs and/or attorneys.
As responsible fiduciaries, our fees are (and always have been) transparent, fully disclosed, and of course, reasonable. A discussion about the f-word needs to begin and end with the v-word; value. Without understanding the value you receive, it is impossible to evaluate the cost you pay. At Harvest Wealth, we are now able to deliver even more value than ever in our career.
Vanguard’s "Measuring 'Advisor’s Alpha®'"
In 2001, Vanguard launched a revolutionary initiative to define the “alpha” provided by financial advisors. Practically speaking, alpha is measured to determine the excess return that is NOT attributable to risk. The higher the alpha, the more valuable the subject being measured.
The Vanguard “Advisor’s Alpha” concept was designed to help us as advisors provide value in excess of our fee—without adding imprudent risk.
Our first white paper introducing the Harvesting concept, also written in 2001, was influenced meaningfully by their groundbreaking work.
In the chart below, Vanguard attributes various ways advisors can add value. The three most impactful have been the primary focus of our Harvesting strategy for the past two decades:
Behavioral Coaching (1.5% added value)—Everything we do at Harvest Wealth is designed to help you be responsibly patient. Our bear market survival playbook speaks to planning, sufficient cash flow, cash reserves, quality, diversification, and understanding the role that each holding plays; all of which reinforce responsible investment behavior.
Our move to independence allows us to resume communications like this, which also plays a very important role in encouraging smart decisions in difficult times.
Asset Location (up to .75% added value)—Asset location has always been important to us. At Harvest Wealth, we now have access to interactive planning software that helps us evaluate this important set of decisions with greater clarity.
Spending Strategy (up to 1.10% added value)—The Harvesting strategy is, at its core, a spending strategy. This has been a very important focus of our practice for the past two decades. In fact, we think it’s so important we named our firm after it.
We deliver strongly in the other, less impactful, but still important areas as well. It is nice to see that at least in Vanguard’s eyes, we add a great deal of tangible value that they presume to be worth many times what we charge.
Scott, Vytas and I take our responsibility as fiduciaries very seriously. We have long believed that providing this type of value is our professional mission.
Our move to independence, choice of partners Cetera and Pershing (a.k.a., Bank of New York Mellon), serves to strengthen and expand our ability to deliver on these important (and largely controllable) ways we can add value.
Call us today if you want to discuss the value you are getting for the fee you pay.