Historically, financial advisers have earned money in two ways. The first is by receiving commission on products they recommend, such as insurance. The second is by receiving a percentage of the wealth they are managing for the client.
These two pricing structures cause several problems.
Financial advisers are frequently offered financial incentives to recommend one product over another. This leads them to recommending a product that benefits them more than their client. Over the course of the client’s life, they end up losing tens of thousands of dollars because of this conflict of interest. This study, done by the President’s Council of Economic Advisers shows that in 2015, working class Americans lost $17 billion due to these conflicts of interest. That was just from retirement advice, not any other type of investment advice!
(Sidenote: The Department of Labor adopted a new rule that will make this against the law on April 10th. Unfortunately, it is expected that President Trump will postpone the rule.)
The second way of charging is referred to as AUM, or Assets Under Management. If a client has $10 million dollars in investments, and a financial adviser charges 1% of that amount, they are paid $100,000 a year to manage that money. This works well for individuals that have a great deal of money to invest, but not so well for individuals just starting out. A financial adviser is unlikely to work under this model with someone who has little to no money invested.
At Castle Rock Investment Company, we think financial and investment advice should be available to everyone, even if they are just starting out and have no money already invested. We also believe that our clients’ financial interests should ALWAYS come before our own.
Because of these values, we’re introducing a new pricing structure so we don’t have to rely on commissions or percentages to keep the lights on. We also want to make sure financial advice is affordable to even someone who is just getting started.
We’re calling this pricing structure Onward, because it’s meant to move you onward in meeting your financial goals. It is a subscription based model, where you pay each month for financial and investment advice.
If you are just starting out on your financial journey
Click here to read more about Onward.