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Assumptions and Disclaimer

The figures referenced in this disclaimer and assumptions section relate to pre-populated figures for the default setting in the calculator. Those figures can and will change to the extent someone makes changes to one or more of the input boxes in the calculator. Actual fees and expenses and other figures may vary based on advisor used, among other factors. This is presented for informational and illustrative purposes only and is no guarantee of actual amounts or results an investor may pay or receive.

Maycomb Wealth charges this hypothetical client a fixed advisor fee of $7,500.00 per year.[1] This hypothetical assumes that Maycomb Wealth charges a 2.00% cost of living increase every year to the fixed advisor fee.[2] We do this because the AUM advisor essentially has a cost of living increase built into his or her fee structure.  Actual clients of Maycomb Wealth must agree to any cost of living increase by signing a separate written agreement before any proposed increase would become effective.  Such a proposed cost of living increase may or may not be charged annually and may be 2.00%, or may be more or less. 

Also, this client’s portfolio is comprised of funds that cost the client .15% of the portfolio value per year to own.[3]

Another hypothetical advisor charges their client an advisor fee based on the amount of assets the advisor manages for their client (“AUM”). That advisor charges based on the following tiered schedule: $0-$1,000,000.00 : 1.00%; $1,000,000.00-$2,000,000.00 : .85%; $2,000,000.00-$3,000,000.00 : .75%; $3,000,000.00-$4,000,000.00 : .65%; $4,000,000.00-$5,000,000.00 : .65%; more than $5,000,000.00 : .50%.[4] 

Also, this hypothetical client’s portfolio is comprised of funds that cost the client 0.5% of the portfolio value per year to own.[5]

Both portfolios increase at a rate of 5.8 % per year.[6]

[1]  Member/client households of average complexity can generally expect to pay $7,500.00 per year as of 2020 (plus a 2.00% annual cost of living adjustment) regardless of the amount of assets they invest for ongoing comprehensive financial planning and investment management services. Households with unusual complexity should expect to pay more, and could pay up to $18,000.00 per year for the most complex situations. Member/clients may be asked to pay in initial planning fee to compensate us for additional work that may be required in the first year of working with a new relationship household. Complexity can be driven by a variety of factors, including but potentially not limited to, number of accounts, existence of trust(s) or conservatorship(s), legacy tax, annuity, or other positions, and/or potentially more complicated sources of income and assets such as family partnerships, family businesses, among others. See also Maycomb Wealth’s ADV Brochure, which is accessible here. 

[2] See “Vanguard Market Perspectives: December 2019”, suggesting an inflation target of 2.0% or less. 

[3] Maycomb Wealth targets an expense ratio of .15% or less for portfolios it manages for clients. Some clients could pay more or less. Clients will also pay custodial and other fees and expenses that are not discussed in these hypotheticals. See also Maycomb Wealth’s ADV Brochure, which is accessible here. 

[4] See https://www.kitces.com/blog/independent-financial-advisor-fees-comparison-typical-aum-wealth-management-fee/, citing to Inside Information 2017 Planning Profession Fee Survey finding the following median advisor fees and related breakpoints after surveying nearly 1,000 advisors: $0-$1,000,000.00 : 1.00%; $1,000,000-$2,000,000.00 : .85%; $2,000,000.00-$3,000,000.00 : .75%; $3,000,000.00-$4,000,000.00 : .65%; $4,000,000.00-$5,000,000.00 : .65%; more than $5,000,000.00 : .50%.

 [5] That same survey cited in footnote 4 above found a median expense ratio of .50%. 

 [6] We assume the same rate of return of 5.80% for the two hypothetical portfolios in the charts based on a 30-year return time period for a hypothetical globally-diversified portfolio of 60% stocks and 40% bonds. See BlackRock 30-Year Capital Market Assumptions – December 2019. There is no guarantee that any actual portfolio will obtain these results. Actual results could be similar, or lower, or higher. We assume the same return for both hypothetical portfolios based on data from SPIVA and others suggesting that the majority of active managers do not outperform their passive manager counterparts, particularly over time. See “SPIVA Around the World (large cap equities)” and “SPIVA Persistence Scorecard (equities and fixed income)”.

 

 

 

 

 

 

 

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