We get paid by charging a flat annual asset management fee. Our standard management fee is 1.10%, and the fee decreases as the account we’re managing becomes larger (see the fee schedule below). Please continue reading to see a hypothetical scenario which illustrates how, and why we use the fee-based model.

Hypothetical example

Mr. and Mrs Jones bring Five Pine Wealth Management $100,000 to invest. As fee-based advisors, we get paid by charging a flat 1% asset management fee. This fee is an annual fee based on the value of the account, and is billed to the client’s account monthly. On $100,000, the 1% annual fee would be $1000 for the year. Since the fee comes out of the account monthly, $1000/12 months would equal roughly $83 per month. The $83 fee comes directly out of the investments and clients never have to write a check or actively make a payment.

We use the fee-baseed model because it aligns our interests and puts us on the same side of the table as our clients. If we can grow Mr. and Mrs Jones’ account from $100,000 to $150,000, Mr. and Mrs. Jones are happy because their account has grown by $50,000, and we as the advisors are happy because 1% of $150,000 is more than 1% of $100,000. At $150,000, our compensation is $1500 per year, or $125 per month. Because we do better as our client’s account does better, we have incentive to choose the best performing funds while keeping investment costs as low as possible.