Derive Wealth

Flat Fee Financial Advisor

Finances Are Complicated Enough. Your Fees Should Not Be.

There is probably no other industry that makes their fees as clear as mud as the financial industry.

Lucky for you, I founded Derive Wealth to change the way financial advice is delivered.  That means not only how I provide advice, but also how you pay for it.

Take a look at how working with a flat fee financial advisor stacks up against the competition.


Don't Fall into the percentage Trap

Your Fees Should Not Go Up Just Because You Are More Successful

Flat Fee Financial Advisor

Think about it.  How many things do you pay for that are based on the amount of money you have?  

Not many, if at all. However this is the most widely accepted terms of engagement if you work with a financial advisor.

Fee-Based Advice

Working with a financial advisor under a fee-based agreement means your total fee fluctuates based on any of the follow factors:

  • Value of your invesments
  • Household income
  • Net worth

Fee-based means you pay a percentage, often charged at 1% annually, based on the values above.  This works out great for your advisor.  As you become more successful in the following areas, their fee increases as well.

But that doesn't mean they actually are the ones responsible for your success.  They are just the ones getting paid for it.

A quick few examples is all you need to realize this does not make sense.
 

FEES BASED ON YOUR INVESTMENTS

 *For illustrative purposes only.

*For illustrative purposes only.

Let's say you start with a $500,000 investment account and your advisor charges you 1%.  Your fee would equal $5,000.

As your investment grows, the next year your account balance is now $550,000, leading to a $5,500 fee.  Your advisor says you would not have seen that increase in value without their expertise, so you justify it was worth it.

Then you receive an inheritance and decide to invest it as well.  Your total investments are now $800,000, leading to a $8,000 fee.

That is a 60% increase in fees!  Let me share with you a little secret: there is no difference in managing a $500,000 investment portfolio vs. a $800,000 investment portfolio. Yet there is a 60% increase in fees.

Worse yet, say you go with it. You pay your advisor at this level. Then you want to take money out for a down payment for a home.  

Do you think your advisor is going to be happy with going from $8,000 in fees down to $4,000 in fees?  Let me tell you, this conflict of interest is real. 

 
“Don’t fall into the trap. You should pay based on the advice you need, not the money you have.”
— Derive Wealth
 
 

FEES BASED ON YOUR INCOME OR NET WORTH

You can apply the same logic to your net worth and total income.  You do not want to pay more in fees based on the following:

 *For illustrative purposes only.

*For illustrative purposes only.

 *For illustrative purposes only.

*For illustrative purposes only.

AVOID THE TRAP

The percentage trap is so prevalent, you will definitely get push back.  You'll hear excuses like:

  • "This way aligns are interest.  If you do well, so do I.  If you suffer, so do I."
  • "I'm doing so much other work for you, like financial planning."
  • "I'm not selling you any products or working on commissions."

Avoiding the trap is easy.  Before you meet with an advisor, just ask if they are fee-based or flat fee.  It is that simple.


Don't Fall Into The Commission Trap

The Good Ol' "There Is No Cost To You" Pitch

Flat Fee Financial Advisor

There is a group of people that feel financial advice should be free.  The financial industry knows this and has created the perfect solution.

Instead of charging clients directly for financial advice, why not provide access to a financial advisor for "free" as long as that advisor recommend the company's products?

Bingo.  The creation of "free" financial advice.

Commission-Based Advice

Here is how it works.  

At the end of the day, the commissioned financial advisor gets paid by selling company products.  Whatever your issue is, the advice you will receive will be heavily geared towards buying a certain product.

Here are the most common products that involve commissions:

  • fixed annuities
  • variable annuities
  • index annuities
  • universal life insurance
  • whole life insurance
  • variable life insurance

Pretty much anything with the word "annuity" or "insurance" in it.  These products, by themselves, are not bad at all.  But used in the wrong manner, and it could lead to disastrous results.

 
“You see your advisor as professional help. Don’t let your advisor see you as a dollar sign.”
— Derive Wealth
 

 

HOW IT IS "FREE"

Company's are able to pay financial advisors a commission as in exchange, they put restrictions on the money you are giving them.  These restrictions are called "surrender charges."

Surrender charges are the length of time the company gets to keep your money.  Usually based in years, the surrender charge is labeled as such that you are accessed a penalty if you want to withdraw your money early.

Surrender charges are important as it allows the company to pay the advisor a commission while still having enough time to make a profit.

Working on commissions can be very lucrative.  The percentages below are an example of how much your advisor could make based on the amount of money you give them.

 

 *Illustrative Purposes Only

*Illustrative Purposes Only

So how much does your "free advice" really cost?

Let's say you have $500,000 to invest.  Your commissioned advisor recommends an annuity with a 7-year surrender charge.  There is no cost to you, you just can't touch your money for 7 years.

At that level, your advisor could receive a commission of 9% of your investment, or $45,000.

 

WHAT'S REALLY THE PROBLEM WITH THIS?

The main problem is this: every issue you have will be solved with a product to buy.

I call this the carpenter syndrome.  Give a hammer to a carpenter, and everything they see starts to look like a nail.

If you compensate a financial advisor by selling products, every client looks like a dollar sign.


The Flat Fee Approach

The Way That Just Makes Sense

Flat-Fee-Advisor-1.png

Sometimes it is good to know what you are missing out on to appreciate what you have.

Derive Wealth is not the first to charge a flat fee pricing model.  But I can confidently say we are at the top of the list when it comes to providing value.

One Flat Monthly Fee

There are three flat fee pricing levels you can choose from.  There is no percentage fee or commission products to buy.  The fees are structured around the advice you need and the complexity of your financial situation.

Best part, you can feel confident knowing the advice you receive is conflict free.  

Want advice to cash out all your investments and buy a home?  Or rather invest in real estate than the stock market?

These situations would be deal breakers for fee-based or commissioned advisors.  At Derive Wealth, you fit in our sweet spot.

LEARN MORE

Working on a flat fee basis has additional benefits.  Checkout how financial planning works, our flat fee investment portfolios, and the benefits of working with a fee only financial advisor.