Updated June 2024
FEES AND SERVICES
Evanson Asset Management®® (EAM) is a fixed 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 we estimate will be required to service a family's accounts, not assets under management. A typical family will have three or four accounts, both taxable and tax-deferred. Typical fees run from $625 per quarter or $2,500 per year to $2,000 per quarter or $8,000 per year for very large and complicated accounts and our fee covers all accounts for one family. If calculated on a percentage basis our typical client is paying between 0.05% and 0.15% annually on assets though we use a fixed fee that doesn't change as the value of assets changes. Overall, our average annual client fee is 0.08%, below one-tenth of one percent annually.
EAM employs passive and index strategies and constructs portfolio asset allocations based upon quantitative historical data although we do discuss fundamental, technical, and macroeconomic issues when planning allocations and discussing risk. We do not practice tactical asset allocation and market timing since research indicates they are unlikely to add value. 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".
We recommend that prospective clients familiarize themselves 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, age, risk tolerance and other factors. We do not use "off the rack" portfolios. 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 website, particularly in the papers on "Portfolio Design", and "Risk and Return."
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 unlike the services provided by a C.P.A.. We do not view ourselves as money managers with esoteric skills or alleged brilliance who deserve a percentage of your assets whether you make or lose money. C.P.A.'s and attorneys who do estate and probate planning do not charge a percentage on clients assets and we don't believe financial advisors should either. Wall Street and the financial industry came up with the idea of compensation based on client assets under management, AUM, rather than hourly or fixed retainer fees. EAM has employed low fixed retainer fees and been in business and working with DFA funds and passive and index models since 1995. As of December 2023 EAM manages about $4.8 billion in assets.
EAM is a full-service investment advisor. No services are omitted and access to consultations is not restricted. We begin by assisting you with setting up, transferring or linking your accounts to us with a broker/custodian. We then spend as much time as necessary developing an investment allocation plan for you. After the plan meets your approval we implement it, sometimes in steps and sometimes all at once. We won't make changes or place trades in your account without your approval.
We are "on call" for consultations on any financial matter during the quarter and review and report to you each quarter. We do not encourage tax loss harvesting but will do so if you request. This is discussed elsewhere on our website in "Tax Loss Harvesting". Our quarterly reports include a statistical analysis of your portfolio and its performance, a narrative commentary with comments on whether your accounts are in line with your allocations plan and what changes are needed, if any, a broad based market and economic commentary, and a prepaid envelope for payment of your advisory management fee. Alternatively, you may request to have your advisory fees paid from one of your managed accounts through the industry-wide practice of sweeping advisory fees directly from client accounts. Our clients can request an allocations analysis and consultation with EAM whenever they wish and also track daily portfolio values and performance on broker/custodian websites.
EAM's recommended account minimum is $500,000. 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 during retirement. Factors such as years to retirement, taxable exposure, income, worst case acceptable decline, probable rates of return, and total asset allocation are all 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 about the future and allocations are realistic 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. 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 and allocations, 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 a 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 that 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 and the effect on returns is minimal.
EAM is available to take care of client needs on short notice. We value prompt service. However, passive and index portfolios seldom, if ever, require urgent action, unlike active portfolios. 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 and can provide referrals to professionals if needed. 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, typical plans start at $800.
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. Our recommended broker/custodians are Schwab and Fidelity.
EAM has a succession plan in place. We have four SEC registered representatives who have been with EAM for ten years or more. We all follow the same strategies and use the same funds and can back-up or take over for each other. We also employ several individuals or outsourced companies who handle administration, paperwork, IT, portfolio software, and compliance.
EAM's business objectives are to offer disciplined proven investment strategies, personalized objective advice, the best possible service, and very low cost fixed fees. 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.
Bernstein, W. "The Intelligent Asset Allocator" McGraw-Hill, 2001
Bogle, J. "Common Sense on Mutual Funds" Wiley, 1999
(2010). www.theinvestmentanswerbook.comMurray, G. and Goldie, D. "Learn to Manage Your Money and Protect Your Financial Future";
Swedroe, L. "Winning Investment Strategy" Dutton, 1998