COLUMNS

Arbor Wealth: ‘Fee-Only’ and Fiduciary Advisor Model Gaining Traction

Staff Writer
The Destin Log
Arbor Wealth Management is located at 8955 Emerald Coast Pkwy #104 in Miramar Beach.

“Fee-only” investment advisory firms, where advisors serve as a fiduciary to clients, represent a fast growing model in the investment advisory business. So we asked syndicated economist columnist and Arbor Wealth Management firm founder Margaret R. McDowell, ChFC®, AIF®, about this trend.

Question:  Why are more investors choosing to work with “fee-only” advisors?

Arbor Wealth: Many investors who are interviewing potential advisors know that they want a “fee-only” investment advisor who will serve as a fiduciary to them.  Investors want an advisory relationship where their best interests are the advisor’s only concern. And savvy investors who are interviewing potential advisors often begin with the question, “Are you a fiduciary?” 

Question:  What is the difference between a fee-only and fee-based advisor?

Arbor Wealth: A “fee-only” advisor accepts no commissions of any kind, from any source, and is compensated solely by his/her clients. Unlike a “fee-only” advisor, a fee-based advisor can place client assets in a parent-company mutual fund and receive a sales commission, in addition to his/her management fee.

Another basic difference is that “fee-only” advisors do not sell products of any kind. A fee-based advisor or stockbroker may sell annuities, life insurance policies or other financial products that generate additional commissions. 

Question:  Talk about custom-creating portfolios vs. utilizing models.

Arbor Wealth: All our clients’ portfolios are custom-created. Some clients desire income generation from their investments, some don’t. Some prefer an emphasis on growth.  Some lean most heavily toward capital preservation and prefer more conservative investment strategies. Each client is different; each set of financial goals is unique.  So each of our portfolio strategies is unique.

Question:  If “fee-only” advisors don’t sell products and don’t accept commissions, how are they paid?

Arbor Wealth: “Fee-only” advisors are compensated solely by their clients, based upon an agreed-upon annualized percentage of the client’s account value, charged monthly in arrears. The best way to express the relationship between client and advisor is, “If you prosper, we prosper. If you suffer, we suffer.” The client and advisor share the same financial boat. 

Question: Why do you think the “fee-only” investment model is gaining such popularity?

Arbor Wealth: It puts clients and advisors on the same side of the table. Our clients prefer this model enthusiastically. We believe it’s easily the cleanest and most transparent model by which clients can contract for professional wealth management services and is overwhelmingly recommended by leading investment experts. 

Question: What else distinguishes your firm?

Arbor Wealth: We view each client’s financial picture and goals from a holistic financial planning perspective.  We are very tax sensitive and perform a tax analysis on every security in a new portfolio to establish a cost basis for all securities that might be sold. We have an attorney on staff who reviews and makes recommendations on estate planning documents, wills, trusts, and business agreements. We prefer dividend-paying equities that sell essential items, stocks that provide income generation for clients who desire to get paid from their investments on a periodic, systematic basis. For clients nearing or in retirement, for whom capital preservation is paramount, we tend to look for investments that provide downside protection. For clients whose primary aim is growth, we adjust the portfolio’s holdings to reflect that goal. 

Lastly, we establish and maintain a very personal relationship with each client. When you meet with us, you are meeting with the team that actually manages your money, rather than meeting with a salesman or simply a relationship manager.

WANT TO GO?

Syndicated economic columnist Margaret R. McDowell, ChFC®, AIF®, of Arbor Wealth Management, a “fee-only” registered investment advisory firm, will host a “Portfolio Management and Retirement Seminar” on Wednesday, Sept. 24 at 10 a.m. in the Arbor Wealth Conference Room.  The seminar will include an overview of custom-created portfolio strategies (including those designed primarily for growth and those designed primarily for income), examine income generation and inflation issues for those in and nearing retirement and outline income generation techniques, and provide a current market analysis.

Refreshments will be served.  Please call 850-608-6121 to reserve seating.

Margaret R. McDowell, ChFC®, AIF®, a syndicated economic columnist, is the founder of Arbor Wealth Management, LLC, (850-608-6121~www.arborwealth.net), a “Fee-Only” and fiduciary Registered Investment Advisory Firm located near Sandestin, FL.  This column should not be considered personalized investment advice and provides no assurance that any specific strategy or investment will be suitable or profitable for an investor.  Arbor Wealth’s income and growth strategies are most appropriate for investors with $500,000 or more of investable assets.