Three Ways a Retainer Fee Structure Works in Your Favor

Fees. Arguably no other topic in wealth management has been amplified in the past decade more than fees. Surprisingly, the true impact of excessive fees is widely unknown. The most common way financial advisors charge is by taking 1% of your account balance every year. While 1% sounds like a small, reasonable amount, it can easily erode 30% of your returns over the coming decades.

So, why do I like charging a flat retainer instead of Wall Street’s standard 1% of assets fee?

  1. For a retiree, a flat retainer fee structure saves them tens of thousands in the short-term and potentially millions in the long-term.

The standard 1% asset management fee is drastically higher than it appears. Throughout my career, I have had (quite literally) thousands of meetings with families seeking financial advice. While managing a book of client assets totaling around $350 Million, ~90% of the families I met with looked like this:

  • 1-10M in assets

  • A complex array of benefits from their Oil & Gas or Chemical company (stock plan, pension, 401k, etc.)

  • Children or grandchildren that would eventually inherit some of their estate

  • An enormous opportunity to save them, and their estate, a small fortune through proper tax planning

Like any bell curve, not everyone met those parameters. I’ve worked with clients with far less than one million in assets. I’ve worked with clients with more than ten. Not everyone was retiring from an energy company (if not from a large Fortune 500 company, most of the others were small business owners).

Let’s take a typical example and pretend we’re discussing a family with about $3 Million in total assets. The common Wall Street experience for such a family meant that they were paying the standard 1% advisory fee per year.

This 1% fee is the single greatest marketing tool Wall Street has ever created.

Our brains are wired to work in a certain way. Many times, it’s logical and helps us in our everyday decisions. Other times, it makes no sense at all. For example, I have spent way too much time driving out of my way to rack up my Chick-fil-A app rewards. Meanwhile, I’ve gone years without comparing insurance policies on my home or cars. I spend my time and headspace driving to a Chick-fil-a to save $1.39 on french fries and haven’t given attention to the $1,000’s I’m paying in other areas!

Wall Street knows this. The standard 1% fee on assets works so well because, even though it appears innocent, very few actually calculate how much 1% every year means for them.

Back to our example, the family with $3 Million. There’s a great chance they received a discount or price break due to their impressive amount of assets. They might only pay 1% on the first million, then .9% on the second million, and .8% on the third. Thanks to this gracious discount, they are now paying…$27,000!


Let’s get even more uncomfortable. That’s not the only fee this family is paying.

If they have individual stocks, every single time a trade occurs, that triggers a cost. For the majority of investors, they’re in mutual funds. Every single one of those mutual funds has an additional fee. It’s very hidden. Their quarterly statement isn’t going to show them. However, when you look up each fund, the average expense is somewhere in the ballpark of .5-1% per year. Let’s be extremely conservative and go with just .5%

That’s an additional $15,000.

We are now at $42,000! Every year! That is more than a Wheels Up (private jet) membership. That’s more than a Ritz Carlton global vacation membership.

At Brownlee Wealth Management, this family would pay a $15,000 annual retainer. Also, as you read in my article on our investment philosophy, we strictly examine every fund in our portfolios. We ensure that the funds we use cost a fraction of the .5-1% that the typical investor pays. I can do this because I receive no commission or kickback from any third-party investment company. What does this mean for you? It means you’re saving about $24,000 every single year. 

Financial Planners love to talk about compound interest. I love compound interest. However, compound interest also works in the negative. So, this family is not just saving $24,000 each year. They’re potentially saving millions over the course of their 20-30 year retirement.

2. A retainer aligns your advisor to work in the areas that matter most to your wealth.

If I could go back and tell younger me the most surprising thing I’ve learned in financial planning, one thing comes to mind. Investments might be the least important aspect of a family’s financial life.

There are two reasons for this. First, investments have been commoditized. If you want me to show you how to get a world-class, evidence-based, academically-defensible portfolio for next to nothing in cost—call me, and I’ll show you how in less than 5 minutes. I’m happy to do it.

Why am I happy to do this? Because of the second reason. The other areas of financial planning-retirement planning, insurance, and especially the last two—estate planning and taxes, have a far more significant impact on your bottom line and your family’s future. Let’s think back to my experience with the typical family in North Houston, an energy retiree with $3 Million. It is possible for someone in that position to be able to save hundreds of thousands in taxes with proper planning. The vast majority of similar families miss this. It’s also common that their estate plan is either non-existent or more than ten years old. It’s often set up to wreak havoc on their family if and when something happens to the primary breadwinner.

There is no investment I can point you to that guarantees hundreds of thousands in gains. Properly navigating the tax code can save you a tremendous amount. Managing an excellent portfolio will not lower your stress and give you peace of mind. Excellent advice around your estate plan, your insurance policies, and how to pay for kids’ college can do that. Removing the stress of worrying about the market or where next year’s income should come from can do that.

If you’re paying 1% strictly for investment advice, there’s an excellent chance these other areas are being ignored. I would encourage you to send your most recent tax return to your advisor and ask them questions around your tax situation. If they answer that you need to talk to a CPA, I would question why you’re paying tens of thousands of dollars every year in fees to them.

3. A flat retainer fee means the advisor can work with someone under age 55

This has long been a big problem in financial planning. I love working with families in the 50-80 age range. I have excellent experience working with them. I know their needs and struggles. I know precisely how to clarify their financial life, lower their taxes, and grow their wealth.

However, I’ve almost felt like a doctor to the healthy. Our entire industry is set up this way. If the financial services industry had a billboard offering financial help, it would read something like this. “Spend 40 years cleaning up your financial life, figure out everything on your own, and after you’re already in great shape, come pay us to help you!”

In addition to this, I can make a great argument that the 30-50-year-old couple with children has more pressing financial needs.

They have decades left in their earning years. The right investing habits and behavior can give them millions more than they would otherwise have. Avoiding bad investments or insurance policies can do the same.

They often have complicated stock plans with tax implications. They rarely have time to study them.

They also have massive stakes when it comes to appropriately protecting their family through insurance and estate planning.

I’m the first to know this. Just a couple of years ago, I walked into our bedroom and told my wife Lauren that I was diagnosed with cancer. We did not see it coming. Our third child, Peter, was napping a few feet from us when I told Lauren. Pete was two weeks old at the time. Thanks to proper planning, we could focus on beating cancer instead of finances while I was away from work.

Where does a flat retainer fee come into play? The 1% fee structure heavily dominates even the best wealth management firms. They’re not allowed to manage (and bill) your 401k. So, this means there is almost no way for most 40-year-old families to work with them. Even if you make $500k/year and have a substantial nest egg in your 401k, you’re not eligible.

This has meant that the only avenue for advice for younger families has been the financial predators in our industry-primarily insurance agents and other brokers. Receiving poor advice can wreak havoc on your financial future. Purchasing a whole life insurance policy or commission-heavy mutual funds when you’re 35 isn’t just expensive then. It can cost you millions you would otherwise have if you avoided the conflicting advice that led you to those decisions.

At Brownlee Wealth Management, we want to remove the veil that Wall Street has constructed. Offering a flat retainer fee removes conflicts of interest and enables me to give advice that brings clarity to your financial life. Find our fee structure on our Work With Us page!