|Evanson Asset Management|
Specializing in index and passive management.
Low cost, fixed annual retainer fees.
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Updated May 2013
Fees and Services
Evanson Asset Management (EAM) is a fee-only advisor and receives no compensation other than from our clients. We charge a fixed quarterly retainer fee based approximately upon the total number of hours required to service a family's accounts. A typical family will have three or four accounts, both taxable and tax-deferred. Typical fees run from $500 per quarter or $2,000 per year to $1,250 per quarter or $5,000 per year. We manage some smaller accounts for less and a few very large family accounts with multiple trusts and objectives for more. This means our typical client is paying between 0.05% and 0.15% annually on assets when their fixed fee is calculated as a percentage of assets. We have promoted and offered low fixed quarterly retainer fees since 1995.
EAM employs passive and index strategies and constructs portfolio asset allocations based upon quantitative historical data, though we do discuss fundamental, technical, and macroeconomic issues when planning allocations. We do not practice tactical asset allocation and market timing. The overwhelming empirical case against active management strategies is described in "Active and Passive Investment Strategy Comparison" found elsewhere on this site and the failure of market timing in "Tactical Asset Allocation". Our models offer substantial outperformance of the S & P 500 and active management, low cost, simplicity, and tax efficiency in taxable accounts.
We recommend that prospective clients be familiar with passive and index investing, and read the materials on this site and/or one or more of the books listed below under recommended reading. To implement portfolios, we make use of DFA funds, Vanguard funds, ETF's, maturity laddered bond portfolios and other passive investment vehicles. Each client's investment portfolio is customized and designed to meet their particular investment needs and preferences. Appropriate pre-existing active holdings may be incorporated and accounts not managed by EAM are often included during allocation planning. EAM's approach to investment allocation and the research supporting it are described in detail elsewhere on this site, particularly in the papers on "Portfolio Design", and "Risk and Return Data."
Our quarterly fee usually covers all accounts for one family. We view our services as those of expert consultants who are compensated for the approximate number of hours we spend on your accounts per year, not as money managers with esoteric skills who deserve a percentage of your assets whether you make or lose money. EAM has been in business and working with DFA funds and passive and index models since 1995 and manages over $3.0 billion in assets as of Spring 2013.
EAM is a full-service investment advisor. No services are omitted and access to consultations is not restricted. Our services include interviews, preparation of an investment plan, financial planning if indicated, implementation, trade placement, quarterly reviews, "on call" consultations as requested, and rebalancing and tax-loss harvesting if indicated. Quarterly reviews include a detailed computerized analysis of performance, rates of return, and allocations, cost basis, and narrative comments. In addition, clients receive a quarterly market commentary and a prepaid envelope for payment of their management fee. Although we will do so upon request, we have long discouraged the industry-wide practice of management fee sweeps directly from client accounts and in the last five years the SEC has warned at least twice about hacker frauds committed because of them. Clients can request an allocations analysis and consultation whenever they wish and also track daily portfolio values and performance on websites offered by the broker/custodians we use. We do not place trades unless we have a plan in place and approval for specific trades has been received from the client.
EAM's recommended account minimum is $500,000, although exceptions may be made. Each account is individually designed and managed to match the particular investment needs of each client. Some may emphasize equity growth in taxable or tax-deferred accounts, while others may be constructed to generate taxable or tax-free income. Factors such as years to retirement, taxable exposure, income, risk tolerance, probable rates of return, and total asset allocation are considered. Particular attention is given to the probabilities and uncertainties of predicting future risks and returns from historical data in order to assure that expectations and allocations are reasonable and prudent.
We receive many comments and questions about EAM's fee structure. We began using low fixed annual retainer fees in 1995 because it seemed the most professional and fairest way to receive compensation for investment management services. It was a move motivated by idealism. Although passive and index managers hold a wide variety of opinions on allocations and other matters, no empirically based claims can be made that proprietary trading systems, special skills, or knowledge will enhance performance in passive and index portfolios. Markets, not managers, produce returns. Since the idea of charging a fee based upon a percentage of assets stems from the realm of active management and the mistaken belief that active managers can add value by outperforming markets long-term, it seemed wholly inappropriate to us to apply their percentage fee model to passive and index investing.
In addition, charging a percentage on assets penalizes investors with larger accounts. In most cases, it doesn't take much more time to provide services for a $5,000,000 account than for a $500,000 account. Passive portfolios gain much of their advantage from lower fee structures. When advisory fees of 0.50%, 1%, or more are added on top of the expense ratios of various passive and index vehicles, much if not most of the advantage of passive over active strategy is negated. When our fixed fee is calculated as a percentage on assets, most of our clients are paying between 0.05% to 0.15% on assets under management.
EAM is available to take care of client needs on short notice. However, passive and index portfolios seldom, if ever, require urgent action, unlike active portfolios. EAM has an experienced administrative and clerical staff, various part-time consultants, and three advisor associates in addition to the founder and owner, Steven Evanson, Ph.D.. EAM is familiar with estate, tax, real estate, and insurance matters but strongly recommends that clients choose appropriate professionals in these areas and in the client's location. We often work jointly with other professionals. We have no add-on fees to a client's quarterly fixed fee with one exception. We have a Certified Financial Planner on staff and if a client wishes a full CFP prepared financial plan, one can be prepared for a modest hourly fee of $135 per hour. Typical plans take 3-5 hours to prepare. EAM carries errors and omissions insurance.
The process for becoming a new client is simple. We recommend you familiarize yourself with our investment strategy from various articles on this site. Then, contact us and schedule a time to discuss your specific investment needs and we can determine if there is a good advisor/client fit. If we proceed, we then email you all necessary materials for establishing a business relationship and setting up, transferring, or linking investment accounts. Along with the broker/custodians we use, we oversee all account set-ups and transfers and take care of administrative tasks for our clients.
EAM's business objectives are to offer realistic proven investment strategies, personalized objective advice, the best possible service, and very low cost fixed fees. In addition to the SEC required ADVII, references from current clients are available upon request. Further information about our EAM's services and strategies is found elsewhere on this site under "Frequently Asked Questions". In summary, EAM offers passive and index investment advisory services within a unique low-cost fee structure, and includes all the services an investor may require from an investment advisor. We may be contacted at 1-800-624-1015, 831-333-2060, or email@example.com
Bernstein, W. "The Intelligent Asset Allocator" McGraw-Hill, 2001
Bogle, J. "Common Sense on Mutual Funds" Wiley, 1999
Murray, G. and Goldie, D. "Learn to Manage Your Money and Protect Your Financial Future"; www.theinvestmentanswerbook.com (2010).
Swedroe, L. "Winning Investment Strategy" Dutton, 1998
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