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A Behind-The-Scenes Look At Our Services Thumbnail

A Behind-The-Scenes Look At Our Services

By Trent Derrick, CMT

When Tom’s truck started showing the check engine light, he didn’t think twice about taking it down to the local dealership to get it looked at. While he was there, he was informed that the vehicle he brought in was going to need $4,500 worth of work, and he was invited to tour the lot for a replacement instead. 

Tom wasn’t really interested in purchasing a new rig, so he brought the truck to his brother-in-law instead for a second opinion. A $100 part and 30 minutes of time taught Tom a valuable lesson. Not all professionals are equally fair and honest.  

Similarly, not all financial advisors are alike, and not all of them are equally motivated with your success in mind. Let’s pull back the curtain a little bit on how advisors make money so you can know which kind of advisor to look for. 

What Success Looks Like

Obviously, financial advisors want to be successful, just like everyone else. The question to ask is if they have your best interest at heart as they plan to become successful themselves. 

An advisor can make money on flat or annual fees, or they can use a percentage-based fee that pays them based on the value of the account. The moment an advisor receives a check from a client, they have succeeded in their goal of making money. This often precedes any money-making on the part of the client.

If an advisor is charging you a flat fee or an annual fee, they are not necessarily bad advisors or unscrupulous business people. But they have taken some of the motivation out of helping you succeed because they are succeeding already. 

Let’s suppose that the cable company worked in a similar way. You pay them 1 year in advance, but for a year you only receive quality service 1 day out of 3. You can complain, but they have little motivation to make things better for you because they already have your money. By way of contrast, let’s say that the cable company only got paid every month if you gave them a 5-star service rating. Their success is now determined by your satisfaction.

This is exactly why I have chosen to have my compensation earned solely on a percentage basis. I am paid 1% annually on accounts under $1,000,000, and generally 0.75% for accounts over $1,000,000. This is in line with the average for percentage-based fees. (1) The larger the account, the more of a break I am willing to negotiate. For example, for companies that would like to set up a SIMPLE IRA plan with me, the fee is only 0.25% for participants’ accounts.

All my incentives are based on mutual success. 

When my clients do well, I do well. However, it’s important to note that when they do poorly, my fees decrease as well. I have to take the good with the bad because, at the end of the day, I want to be held accountable entirely for my clients’ experience.

Motivated By Money

A percentage-based advisor is going to be highly motivated to help your account thrive, because if you don’t have gains, then they don’t have gains. Not only that, but they are also going to make protecting your assets a high priority. If you have a loss, then they are going to take a hit as well. This equates to a self-motivated situation, where stopping losses is the highest priority and taking advantage of gains is a no-brainer. 

For me, I have chosen to make the highest priority protecting my clients’ assets first. A good advisor is always going to be highly interested in avoiding risky assets in order to preserve value. I want to appreciate the value of a portfolio, but not at too great a risk. 

One other great byproduct of being compensated exclusively by the 1% fee is its self-governing nature. No amount of steak dinners or golfing trips could bribe me to use an underperforming mutual fund, so I don’t take part in any of the schmoozing junkets. I am only interested in holding the best funds for clients, because that is what is going to provide the best return for them, and subsequently me.

More Than Money

It is important to note that a percentage-based fee adds more value than just extra cash incentives. For one, my clients don’t ever have to cut me a check. I save them time and headaches just by the nature of the compensation. 

Additionally, this compensation model strongly discourages laziness. You can count on your advisor to be watching the market like a hawk looking for hazards and opportunities. This allows you to spend your time working on growing your business or spending time with your family. And when the market does take a wild swing or an investment fad comes along, this advisor is going to be temperate and avoid jumping on bandwagons. 

Finally, and possibly most importantly, this fee model allows for availability. Unlike some business models where you are afraid to call because you are charged by the hour, any time you have a question or concern, you have access to the expert help you need.

Someone On Your Side

Truly, the fee structure I use means I am able to completely get behind all of my clients for their best interest. If you are ready to get someone on your side of the table for your investment needs, I am ready to help you too.

To get started today, book a consultation with me here or email me at trent@legacywm.com.

About Trent

Trent Derrick is a Financial Advisor and Chief Market Technician at Legacy Wealth Management. Trent is passionate about the value small businesses bring to their communities and specializes in serving small business owners by providing seamless financial advisory services tailored to their financial needs, including tax planning, cash flow management, retirement planning, and bookkeeping. Trent has a bachelor’s degree from the College of Charleston and studied economics at the University of South Carolina, Columbia. He is a Chartered Market Technician® (CMT). Trent serves as a guest lecturer for the College of Charleston’s MBA program and acts as chairman of the Market Technician Association’s Charleston chapter. When he’s not working, Trent, a proud Eagle Scout, enjoys volunteering with the Charleston Animal Shelter’s outreach program. Trent and his wife love to cook international cuisines and host dinner parties with their friends. To learn more about Trent, connect with him on LinkedIn.


(1) https://money.usnews.com/financial-advisors/articles/financial-advisor-fees-and-costs