Are you paying the right price for financial advice? Join Ben, Michael, John, and Tommy as they break down the complexities of financial advisor fees and the real value behind them. They’ll reveal the “all-in” costs clients face and explain why fees aren’t always comparable, shedding light on what makes a financial advisor worth their price. Through this episode, you’ll learn to assess the true worth of specialized advisors and why experience, like that of a seasoned CFP or CPA, might demand a higher price tag.
Discover how Mason & Associates structures their fees, what “assets under management” means, and why transparency in costs matters. They also provide insight into the behind-the-scenes costs of running an efficient business and explain why clients have the potential to benefit from paying for quality expertise.
Listen to the full episode here:
What you will learn:
- The true cost of running a business. (3:30)
- Why you want to pay for an expert with credentials. (5:00)
- The benefit of a specialized firm. (7:15)
- How Mason & Associates gets paid. (11:30)
- What “assets under management” means. (13:25)
- Why we want to be transparent with you. (21:45)
- The behind-the-scenes of running an efficient business. (27:00)
- Why we always try to bring new things to the business. (31:00)
- How to ensure you’re hiring the right financial planner. (37:00)
- Why you would want to pay someone to help you with your finances. (42:00)
Ideas worth sharing:
- “Do you think you’re going to pay a heart surgeon more than you would a general practitioner? It’s the same thing as when you hire a CPA, CFP, or someone with 20-plus years of experience in the industry. These things are valuable, and they raise the price.” - Mason & Associates
- “So much goes into running an efficient business.” - Mason & Associates
- “We prepare our business so that when an emergency or something unexpected comes up, we are never in a fearful state of mind. We’ve positioned ourselves so that we have a clear head no matter what comes at us.” - Mason & Associates
Resources from this episode:
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Read the Transcript Below:
Congratulations for taking ownership of your financial plan by tuning into the Federal Employee Financial Planning Podcast, hosted by Mason & Associates, financial advisors with over three decades of experience serving you.
Tommy Blackburn: Welcome to the Federal Employee Financial Planning Podcast. Thank you for being with us today. Today you've got the entire crew here again. We've got Ben Raikes, CFP, EA. Michael Mason, one of the founders of Mason & Associates, CFP, CLU, and I think CHFC. And John Mason, president of Mason & Associates and CFP, as well as myself, Tommy Blackburn, CFP, CPA, and PFS (Personal Financial Specialist.)
It's a pleasure to have everyone here, again, after another episode. And, today, we want to talk about comparing all-in cost of financial advisors and not just focusing on the all-in cost. We want to talk about the value and trying to compare value as clients or potential clients are thinking about, who should they hire?
And it's not always necessarily an apples-to-apples comparison. And so trying to drill down and evaluating that and also add some transparency, which we think we do a great job of. Before we get into this episode, we're going to call this episode. Understanding Financial Planner Fees: The True Cost of Expertise for Federal Employees.
So before we jump into it though, fellas, how are you doing? It's great to have us all together.
John Mason: Tommy, it's awesome. Today's September 18th. We're recording episode two. So I think we've let the audience know we typically record two or three episodes at a time. This is going to be a fun episode because we're going to talk about value.
We're going to talk about cost. We're going to talk about things like—Yeah, I wrote down, this is what I charge. And it's I didn't ask you what you charge. I asked you what the total cost is, right? So there's so many little nuances here that we're going to be able to unpack. I think we're going to carry over some themes from the last episode, which was like, it's really hard to always make the right decision.
It's hard to, when you're just constantly beaten down with, ‘Should I eat the potato chip? Should I pay that life insurance premium? Should I buy this? Should I eat that? Should I continue paying my advisor? Whatever these things are, it's really hard. So I think we'll have fun talking about that too. When should I start paying an advisor?”
All of these things come to my mind is a way to unpack this episode and hopefully share some value for our audience.
Mike Mason: Yeah it's exciting for me to do this as well. I've already thought of a story, it's hard for federal employees to understand the true cost of running the business.
There's this helicopter engineer at Fort Eustis one time that was interviewing us, and he's, “Oh, the financial plan itself is $2,500?” And he started making comparisons that he doesn't get paid that per hour. And my instant response to him was, when you drive up to Fort Eustis, and those guys are opening the gates, guess what?
“You don't pay for those gates. I pay for them. You don't pay for those guards. I pay for them. When you pick up a wrench, I pay for it. But when you call my office, we've paid for those folks.” So you can't compare what you get per hour versus what we charge. We're running a business; the government's not running this business, and it's hard to comprehend paying for not only great advice, but the business itself and all the people that we employ.
Tommy Blackburn: We have to account for kind of gross revenue versus there's a lot of expenses and things that go into that. John, I love that of not what I chart or what's the total cost here that we're talking about? And as we begin to, I think, outline our costs, which Mike, I love that you threw in the $2,500 initial plan fee.
So that's one of the costs of being a new client with us. I led with maybe not even intentionally going through everybody's credentials, at least to a degree. And I think that begins to take us down this path of when you go to a heart surgeon, do you think you're going to pay a heart surgeon more than you would a general practitioner to work with you?
It's the same thing of when you have a CFP, a CPA, an EA, a charter life underwriter, people with 20 plus years of experience or so, I mean you combine us all, I forget what the number is, the firm's been around for more than 40 years I believe in some shape or form. Definitely correct me if I'm wrong there, Mike, but these things are valuable, and they immediately raise the price versus when somebody who has no credentials.
And maybe no experience, maybe they do have experience, but when they're not an expert in the field, they start out at 1%. So you would expect immediately that a specialist and somebody with expertise and a lot of credentials behind them and studying and blood, sweat, and tears that have gone into the profession.
They're going to charge more. And so I guess as we go down that path I want to throw it back to you guys and see where you want to take it there. I think we should outline our fees a little bit more. We began kind of began to, and just take this further of the value that you're paying for there.
Mike Mason: Let me get the number right, 1987 is effectively when I came into a version of the financial planning business, and Mason & Associates is specialized with federal employees is probably 1990 but just as a lead in, to this.
1990, that's still 34 years if I get my math right. And folks, if you pay somebody by the hour, how is it that you account for the brand new financial planner that wants to answer your question as a federal employee and they have to go to OPM and they have to research for 10 hours or you could ask any of the four of us and in a minute we can answer it because of all that experience.
I don't get a minute's worth of compensation because I knew it in a minute, I should be compensated for knowing it over 30 years versus the guy that's going to invest 10 hours and may still not have the nuances, right?
Tommy Blackburn: And if I may, Mike, I just want to expand on that slightly. It's not even just you, Mike Mason, right?
You've got a firm of specialists here. So we probably know the answer off the bat individually. If we don't, amongst us, we probably know the answer or have experience and know, and if we don't have that, we know where to go find it. Very quickly in between us all, we're going to get to the right answer.
So that's that I think just even further that benefit of that specialized not only Planner advisor, but a specialized firm
Ben Raikes: Tommy and Mike, further to your point, it's not only can I answer that question effectively, know the right answer, and I've got a team of people behind me that can also answer that question, and I know where to go. It's using that 30 years of experience to understand, this is the question you asked me. Here's what I think you really need to ask me. Here's the direction that this conversation needs to go.
And by the way, based on that question you asked me, I've got five more questions for you that are going to lead us down a completely different path. Because, hey, not only have I worked with you before, but I've worked with hundreds, if not thousands, of federal employees, and here's the things we need to look out for.
I think that's even more important than—the guy that's just starting out with a year of experience wants to answer your question and have you be on your way. The experienced advisor says, “I've got the answer to that, end.”
John Mason: Wow. So much to unpack, y'all. So much to unpack from this, and you're, so we're fee-only financial planners.
We specialize with federal employees. We've been paid every way you can get paid. We were a commission-only shop at one point. We were a hybrid shop at one point where we did commissions and fees. And now as of 2020, we are a registered investment advisor fee only, which means the only people who ever pay us are our clients.
So that's big when we launched that in 2020. We think that it eliminates a lot of conflicts of interest, Tommy, so that I think that's important. And as I reflect on everything y'all are saying, it's when your credentials, you get paid more. That doesn't mean that there are non-CFPs out there who can't do good planning.
There are plenty of non-CFPs who do wonderful financial plans, but at the end of the day, we're held to a higher standard as certified financial planners on this podcast than we would be if we weren't CFPs. Everything from Code of Conduct to Continuing Education. The question is not what do I get paid? What's John Mason’s salary or what's John Mason's cut of the revenue?
The question that we should be asking if we're a consumer is “What is my all-in cost?” Just if you're buying a car, do you want to know what the out-the-door price is? What's my out-the-door price for your financial planning services, not what you want to show me on the front end, and then throw in a doc fee and a handling fee and a pin striping fee and all these things.
Give me the out the door price. I want to know it. And if the baseline's one, and the baseline is one for a non-CFP, and the baseline is one for somebody who doesn't have a firm, and the baseline is one for people who don't specialize, then naturally you would assume, as a consumer, if Mason & Associates provides a premium service.
Meaning, we hire somebody to answer the phone. That is infinitely more expensive than hiring a service to answer the phone. We have real financial planners who really do the work here in the United States of America. That costs more than having people from outside of this country do our work, do our paraplanning, do the data entry.
So all of these things cost more. So it's a higher service, we're more credentialed, we specialize. And because of all of these things, we are creating a really unique, wonderful client experience. And that will always cost more. Or maybe it doesn't. Maybe it doesn't. How do we get paid? We charged $2,500 Tommy for that initial plan.
And at the end of that initial plan, if you, the potential client wants to implement that on your own, have at it, go for it. Good luck. We provided a lot of good advice and a lot of value. Chances are is once you've seen that value proposition, 95% or more of the people that go through that initial plan on board as an existing or ongoing client.
And then our AUM, Asset Under Management Fee, It's a blended structure. So just like tax brackets, you pay through the tiers. We pay one and a half percent on the first million, 0.75% on the second, and then 0.5% on anything above that. So if your assets are a million, you pay Mason & Associates 1.5%.
If your assets are 2 million, you pay us 1.1%. If your assets are more than that, you pay less than 1.1%. That's the easiest way, Tommy, that I think we can explain that blended structure is that 1.5 at a million, 1.1 at two, and then it continues to go down from there.
Tommy Blackburn: Yeah, I think that's a great way.
Mike Mason:Unlike tax brackets, the more you have, the less you pay. Tax brackets, the more you make, the more you pay as you go through those brackets.
John Mason: The rate goes down, so it's inverse rather, so tax rates go up, our fee goes down. Yes.
Tommy Blackburn: Yes. The more you earn with taxes, your effective rate continues to go up.
And it's the opposite. When you work with us, it comes down the more we manage.
Ben Raikes: And feel free to back me off of this, too, if we're going too far down the rabbit hole. But that's not the client saying, “Hey, John, hey, Ben, Tommy and Mike, here's the fee. Here's your check for this quarter or for the year.” Maybe somebody could talk a little bit about how that fee is actually pulled, how we go through that entire process.
Mike Mason: Go ahead.
Ben Raikes:So that fee, so if it's one and a half percent on a million dollars, that's $15,000 a year. That's not you writing a check for $15,000 a year and handing it to us. The way that we pull our fee is on the assets that we manage for you. So Assets Under Management. AUM is what Assets Under Management means.
Typically, the way that this works is, let's say that you're heading into retirement, you've gone through the initial plan, and you say, “Hey, I really want to work with you guys long term.” You've got a million dollars in TSP, and we roll over, a tax-free roll over that TSP into an IRA. Once it's in the IRA, we put it into our proprietary models where we manage it.
With our investment expertise, we'll rebalance four times a year, and we're consistently monitoring the account. And what happens is we take one-quarter of that one-and-a-half percent, and that is pulled directly from your IRA four times per year. That is an ongoing fee that's charged for as long as you want to become a client of Mason & Associates.
Mike Mason: Yeah, and the beauty of that which we don't talk enough about, the Uncle Sam gives you the ability to hire financial planners that charge like Mason & Associates and those distributions from the IRA—remember you put it in pre-tax—it's grown tax-deferred, and those distributions are not a taxable event.
So effectively, it's 1.5 less your state and federal tax bracket.
Tommy Blackburn: I think one, maybe a couple of things. I just also wanted to shed a little bit more on there, and I don't want to hopefully spend more time on it, but if we need to, is Ben mentioned Assets Under Management, and he sketched out a good example there.
We do occasionally get the question of so you're going to bill me on my net worth, and it's no, it's the accounts under our management that’s the key part there that are at our custodian that we're managing. So we're not billing you on your entire net worth there. Another thing I don't, I thought I heard rebalancing X number of times of years.
That's a goal. I just want to make that clear. You may not always see that amount of rebalancing. We have our discretion as to when we think a rebalance of an account is appropriate and you'll probably see that many but that's not like a hard and fast rule. So just wanted to clarify that briefly.
So we've gone through I think wonderfully what our AUM fee is and that large, that's how Mason & Associates gets paid. That's how we get paid. But another thing we wanted to talk about today was, as John said, the out-the-door price. John, Mike, Ben, if one of you want to layer in a couple other pieces there that we think is important for folks to be considering and when they think about the out-the-door price.
John Mason: So your out the door price on a vehicle. I think if nobody's gone to watch the CarEdge podcast , I think those guys are fun. I think they do a good job. But the out-door-price is the price for the car, plus dock fees, plus handling fees, plus pin striping fees plus, and then at the end of the day, you're like, how'd this $45,000 car cost $60,000?
You overpaid for the car is the long and short of it. So what's the out-the-door price? So what goes into the out the door price of a financial planning relationship or an asset under management fee? And hopefully I don't leave anything out, but you have the advisor fee, the firm fee, right?
So the advisor fee, we're charged one and a half percent. Somebody else may say, “I'm Joe. I work at XYZ company. I only charge one. I can't believe Mason's charging one and a half. That's 50% more.” That's what Joe's charging. Does Joe's firm also have a cost on top of that? Is he just quoting you his fee or is he quoting you the firm fee?
So when we say one and a half, that is the entire Mason & Associates fee, 1.5. The advisor, our beautiful team who does a wonderful job, it is the all-in fee. Then you have the expenses of the funds you own. For us, our portfolios typically come in around 0.1% to about 0. 15. That can go up or down based on the positions that we have, but we work really hard to keep those low.
And then you have whatever custodial fees. So these are what we would call the in-your-face, not always in-your-face fees, at least the advisor fee. is in your face. Maybe there's a custodial fee that's in your face, but those fund fees are hidden. Commissions can be hidden. Revenue sharing on certain mutual fund positions can be hidden.
So what is the true all-in cost? The example at Mason & Associates is we're one and a half. Our custodian Axos charges a maximum of 0.05. And let's just say our average expense ratio on our funds for easy math is 0.1. So we're all in at 1.65% for the big fees out-the-door price to hire Mason & Associates to do all the things you wanted to do and more.
Joe, if he says one, we have to ask for the out-the-door price because chances are one is not one, specifically if they're buying a share mutual funds or there's higher fees or their broker-dealer has a platform fee on top of their one. We continue. Sorry for being so long-winded, Tommy.
I've been at this for 14 years. And when I was 27 years old and people asked how much we got paid, the answer was 1%. And then our previous broker-dealer would charge 0.35%. And then TD Ameritrade limited what funds we could use. I wasn't being dishonest, but we've learned better how to communicate the out-the-door price than I did at 27 years old.
I was not fictitious or lying when I said one before, but it wasn't the out-the-door price.
Mike Mason: We can compare because I think we've been clear on how we get paid in the out-the-door price, right? And you've compared another world where the underlying investments are more expensive, and then the broker-dealer needs their share.
And then there's these ridiculous people that advertise index annuities. That say things like, there's no cost whatsoever. Get stock market returns without the stock market pricing. And now you know they're getting a commission. Nobody works for free.
And Tommy, you were in the Outer Banks last week. I was in the Outer Banks last week. If any of our clients ever call in and say, “Hey, can we get Mike?” And they say Mike's in Hawaii on a cruise or something, our clients will never have to wonder, “Did the investments they bought last year pay for Mike's cruise?”
It's not happening. The income made my own income, but there's not an insurance company or a commission base I didn't win a contest that's paying for that. You know exactly what you're getting on the out-the-door price.
Tommy Blackburn: And Mike, to further your example a little that I thought was in there is you getting in a team.
So not only is it transparent how Mike's getting paid or Mason & Associates, but even if two of us are on vacation, there's three other planners here. There's a whole operations team here. So that's what you're also in addition to the expertise, the advice, the skill it's that it's not a one-man shop that when we're gone you're just tough luck until we're back.
You've got that skill team. You've got redundancy in place.
John Mason: Redundancy is such a great word. Disaster recovery plan. If I fall off a chairlift next year snowboarding, all of our clients are going to be okay. My spouse, my son, they're going to be okay cause I have the right life insurance.
Our clients are going to be okay because we have buy-sell insurance. Everything is going to work because we're doing the right things every day. We're making the hard decisions every day. So two questions or two, maybe one statement and then one question. One statement is what is the why behind this podcast episode?
And in my opinion, the why hopefully we're not coming across mean, hopefully we're not coming across daggone it, I'm telling you why we're worth this amount of money, and by golly, you should be excited to pay us. That's not the point. The point is, we get questions and we have people calling our office, submitting requests for introductory phone calls and want to engage.
And we want you to feel supported, empowered, educated, and motivated. So we want transparency. At the end of the day, the whole goal for this podcast is transparency. This is how we're paid. You are now an educated consumer because you can either hire us or somebody like us. And when you do those interviews, you'll be more educated and empowered to make the right decision for your family.
So know that we're not getting a lot of questions on this. Know that we're not like upset about anything. We just are very passionate. We have had two potential clients recently who have said, “I've heard that y'all are expensive.” And it's well, we're not the cheapest. We're not the most expensive, but if you can find somebody who provides the same level of service we do in every area and charges less, you should probably hire them.
But we don't think you're going to find that. And so that's one statement. I'm curious, did either one of you heat your pool while you were in the outer banks? Tell your owner that “Hey, I wanna pay that heated pool fee.” Did anybody do that?
Mike Mason: I think my guy did. I went down with a friend and he organized the pools. So yes, we heated the pool.
John Mason: So why did you heat the pool?
Mike Mason: Because it was comfortable. Felt good. We didn't wanna jump in the cold.
John Mason: And you could use it, right?
Mike Mason: Yeah.
John Mason: Would you have used it if it wasn't heated?
Mike Mason: Probably not.
John Mason: And if you did use it, would you have instantly regretted that decision?
Mike Mason: It would have been less comfortable. There's no doubt.
John Mason: It would have been less comfortable.
Tommy Blackburn: I hear this whole thing about cold plungers. So maybe the cold pool has some health benefits to it. It's funny you tell the story, John. So I didn't even realize Mike and I were down there at the same time.
We had a pool as well. We did not heat the pool. I will put the caveat that it was my understanding that the house we rented was not available to be heated this time of year yet. Because I definitely looked at the brochure of the ad and saw there's an option, but we weren't in the week for it because I think I would have paid for it knowing what I know.
Anyway, our pool was too cold that week to fully enjoy unless you just really liked cold water, which our daughter seems to be immune to. So she still had fun in the pool, but we experienced the heated pool while we were down there. Cause one of her friends was also down there and their house had it.
And when we went over, yeah, night and day difference. We got full utilization out of that pool.
Mike Mason: At the end of the day, really where you're going, John, is what value—does it really even cost you anything? We know there's a fee, right? And we've often said, there's advice we've given sometimes instantaneously that pays for a lifetime of fees.
The advice is so good it pays for a lifetime of fees. And maybe we'll discuss some of those. But you hit something very important that, we talk about our staff, we talk about, we have to have a building, we have to have internet, we have to have insurance, right? And, but you talked about the life insurance, the buy-sell agreement, if the president of the company or the chairman of the company or any of the others face death or disability, how does that affect the four or five hundred clients of Mason & Associates?
It affects them because we lost that person, but the firm doesn't go south for the winner. We live in a world, what's the old statement? The mechanic with the worst car on the road, or the cobblers, kids have no shoes.
We know that some of the worst culprits in the financial planning business are the ones that sell you on the need for whatever. And then at the end of the day, when push comes to shove, they don't have it. So it's just my point is it's another cost of doing business and another reason why a firm needs to charge a fee that makes it, that pays for the success of the firm, that pays for all the things we're doing to make sure we're there for you when stuff hits the fan.
John Mason: So we run appointments typically the first week and the fourth week of each month. And so Tuesday, Wednesday, Thursday, first and fourth week. I know clients listening, I know many clients listen to this podcast. Today's September 18th. Other than respond to some emails this week, I haven't done any client work this week.
And last week I did not do much client-facing work other than maybe respond to some emails. So what am I doing? I'm running a business and the easy thing, so if you're a consumer and you're saying, okay, what's the out-of-door price? Tell me about the mechanics of the firm. Tell me how you're going to serve me.
What happens if you get hit by a Nubra car? You start asking all these questions, and then it's okay, so how many clients do you serve? We serve less than 400 families between five advisors, which allows us to also run a really effective business and work really hard on the business, not just in it.
So I guess my point is there is no magic number of people that you can serve, but if you're only focusing on doing client service or you're only focusing on growing the number of clients, then something has to give and it's going to be the effectiveness of your organization, whether it's training new talent whether it's continuing to provide education and empowerment for existing team members, like so much goes in to running an efficient business, and that's why you know if you're a potential client and you call us and you're like, “How come Tommy's not available for a month?” There's other stuff to do other than just only client service.
Client service is a high priority, but we just want, I think, Tommy, everybody to know that there's so much more to why our experience is different than most because we're so thoughtful about all of this running the business type stuff behind the scenes.
Tommy Blackburn: It's intentional, it's organized and thoughtful, which I think is a plus.
It's not just by the seat of our pants. So there's a lot of structure behind how we do things. And a fun thing, anecdote is, we have some close client relationships, and some of them, when we get together for our strategic planning meetings, they excitedly asked me, “What are you guys working on now?”
Cause they know we're always doing something to try to enhance the firm, enhance their experience, just be better. And so it's fun that clients even see that and ask, “What are you guys up to now? I know you're all, you've always got something that you're changing and working on.” So maybe that adds a little anecdote to your story.
I wanted to also go back to the heated pool because we took that a good direction, but another theme I heard there was value. And it was to say that if we were to compare, let's say Mike and I paid the same amount for our beach houses, both had pools, but Mike has now paid more for that heated pool.
I would argue Mike had more value, even though he paid more. That heated pool cost him more out the door. That was a much more pleasant experience. So cost more but the value exceeded that cost. That's at least a theme that I was hearing.
John Mason: Absolutely. And thank you for saying that. And you just, so what are you working on now?
And what's so fun is we always break something every year it feels sometimes we break things and we're like, we shouldn't have done that. That was bad. We should unbreak it. Other times we're like breaking it was great. So yes, we always break something from the business on purpose to continue moving forward.
But there's this whole idea that AI is going to take over, that humans are going to go out of business, and this whole idea of fee compression, which means firms like ours won't be able to charge what we charge into perpetuity because there's going to be fee compression. Here's what's happened over the last 14 years that I've been doing this.
Mike and Ken trained me extremely well, and I provided a lot of value to our clients when I was 22, 23, 24, 25. It would be a false statement to say that I'm providing the same value 10 years ago that I'm providing today. So what are we working on now is a twofold thing. Yes, we're always working on the business.
Yes, we're trying to improve. Yes, we're always trying to be better there. But two, it's like, how can we offer more services to our clients without increasing the fee? And we've done that for every year for 14 years, we have increased our level of service that we provide to our clients. And I don't know that we can say we've never raised a fee because we have raised fees on clients previously, but generally speaking, we're doing more today for the same fee that we were doing 14 years ago.
So we're not seeing fee compression. We're actually seeing more value for the same amount of dollars. And that is something when our clients say, “What are you working on now, Tommy?” That's what we're trying to do. There's a reason why we're networking. There's a reason why we go to conferences. We want to do more for the same dollars paid.
Tommy Blackburn: Absolutely. I think about this and the value part and we talked about the 1%. I didn't know if it would be valuable to now layer in the 2017 study just did and we realize it's a little dated at this point but it's the most recent one we could come up with about what typical all-in-costs are and hopefully bring that back to what we've been talking about the infrastructure, the value, the expertise that we bring needs to all be put into comparison there.
So perhaps because I started us down this road, I should just go ahead and finish it and then you guys can pivot us a different direction.
John Mason: Please do, because I don't remember the numbers. Okay.
Tommy Blackburn:So the 2017 study, it's referenced in a Kitces article, by Kitsie. But he pulled it from a guy, Bob Veres, who's also somewhat of a thought leader in the advisory space. And so what they found when they did their study, and it was all about this 1% proverbial fee, is they're like, yes, that tends to be many advisors’ advertised fee. And then of course with credentials and so forth, it goes up or down. But when we look at the true cost in this study, what they found was that for portfolio, I'll just start with the million dollar portfolio was 1.65%. We didn't pick our all-in cost to match with this study. It's just how it's come out.
So what they're saying is that when they surveyed and they looked at what's the advisor fee, what's the custodial fee or platform fee? What are the expense ratios? What is that total cost? Even though they advertise 1%, it's really more like 1.65. It's 1.5% for portfolios over a million, 1.4% for those over two, 1.3% for those over three, and 1.2% for those over five.
So as we think about that study, at least, and again, we realize we haven't found one that's more recent than 2017. It may exist, we just haven't found it. We're daggone competitive. When you look at those numbers so that's where we would say, Hey, we're transparent and we're telling you our all-in fee.
And we've tried to minimize many of those other costs to justify the rest of our fee, our value, but we're coming in at about the same amount. And we would say we're probably providing more service, higher quality advisors. There are some great other advisors out there. We're friends with many of them.
So we're not saying that we're the best, but we would say we're probably second to none and we're cost competitive when you think about everything you get and the expertise that's brought into it.
John Mason: Thank you, Tommy. That's, so we're competitive. We're not the cheapest, but we're competitive. And here's another reason we're doing this video, is, or this podcast recording, is that there are people who are just now listening, who, we have different kinds in the audience.
Returning listeners, new listeners, there's people that listen to this podcast that would never hire us or any other financial planner out there. Point blank. Period. End of statement. Will never hire a financial planner. That's great. We would like you to be an advocate for us because you have friends, you have family, you have co-workers, you have colleagues who do want to hire a financial planner.
And the last thing we want you to do is say, “Hey, the Federal Employee Financial Planning Podcast, Mason & Associates are awesome. They're just really expensive.” We don't want you saying that. We want you to say their podcast is great, they provide tremendous value, and they charge a premium fee for premium service.
And when you really peel back the layers of the onion, their costs may not be much different than what you're hearing from Joe across the street who doesn't do any of the things that they do. So that's another goal of this podcast is basically we don't want you telling all your friends, colleagues, and family members that we're great at what we do.
We're just crazy expensive. We want to level set these expectations a little bit so we have more advocates. I think that's hopefully a big takeaway and an action item for our audience.
Mike Mason: I want to, 1.65 and Ben you'll get up after me because you were ready to go. 1.65 is a blend in the industry.
What you don't know from that, remember ours is 1.5 to the firm and the other, 15 basis points goes to the custodians and other places but us running a business and thank God for our President John, us running a business that is so well run to minimize expenses, 1.5 can drop to our bottom line, to pay for our employees and the insurances we've talked about and whatnot.
We can get there because of the time we spend running the business. We'll do 400 strategic planning meetings between April 15th and the end of May, and we'll send out two or three emails. And because we don't have to have somebody on the phone calling those folks the electronic within a week to two weeks, 75% of those appointments are set.
Why is that important to you? It's important to you because we don't have to ratchet up what comes to the bottom line because we run a junkie business and we overpay for things. It's very important. You mentioned Tommy and then I'll shut up. You mentioned in that survey 1.85 for $250,000, I think was the number.
You have to believe that 0.85 is going somewhere other than to the advisor. So the advisor is making 1%, or the firm is making 1% on $250,000 which is $2,500. Folks, when you begin to build that math, if that person's not running the kind of business that we're running here at Mason & Associates they can't afford $250,000 clients.
That's why firms have minimums, you can't afford to do those things for that number and our number is a million dollars, it's a little flexible depending on your situation down to $700,000 but you have to make enough money to run the firm. You can't underserve a million-dollar client because you're trying to over-serve a $600,000 client if that makes sense.
John Mason: Another potential thing that you could do if you're going to vet a financial planner.
And I know nobody probably would ask this question, but what's your balance sheet look like? You talk about putting money into an index annuity. It's what's the balance sheet look like of Allianz or Northwestern or whoever? Is it good? Is it solvent? Are they going to be able to pay their obligations?
And similar in a financial planning relationship, it's okay, so y'all have 400 clients. You charge this fee. You have this amount of net income or profit, what happens when 2008 happens again or COVID happens again? Are you going to have to lay off your staff? Are you going to lay off financial planners? Like what's going to happen?
So a certain amount of the fees we charge and the reason we have the fees set so we can provide the value is also to say when disaster strikes and you need us, we're not going to be in a position where we have to lay people off. We're not going to be in a position where we need to instantly start bringing on 20, 30, 50, 100 new families to pay the bills when 2008 or 2020 happens next time because it will.
And if you're just now listening or you haven't heard us say it before, guess what? The next big drop that's going to happen in the market is going to be the day you retire. And you just need to plan for that because that's what happens. You have bad timing, you will retire and the market will promptly drop 20 or 30%.
We have to be ready for that. We have to be resilient as an investor, as a client, as a consumer, and you need a resilient partner who’s going to be able to hold your hand during that time, not worry about whether or not they're going to be able to pay rent. And then we keep saying, we're going to let you talk.
Tommy Blackburn: I got to get one point in where I'm going to go right next is I just had to tag on John, the previous episode, we mentioned people being in a defensive state of mind. And it's the same thing about our business, right? Because we've managed, we manage it in a way so that when life changes, there are emergencies, there are downturns, et cetera, Mason & Associates is not going to be in a fearful position.
We've positioned ourselves so that we have a clear head no matter what comes at us.
Ben Raikes: Guys, I can just keep looking pretty here on the camera if you want me to. It's alright, I don't have to say anything. You guys can just keep going. It's a good flow state for everyone else. I want to take it maybe a slightly different direction.
I think you all have hit a lot of really good points. John, you mentioned do it yourselfers. And particularly with federal government employees, there's a lot of folks that can maybe do it themselves, right? There's a lot of people that could maybe just stay in TSP. They could choose whatever option they want to on their federal pension.
Maybe they do a survivor benefit. Maybe they don't. Kind of wing it and maybe they'll get through it, right? Retirement will probably be okay. Why do you pay a financial advisor? Why do you pay one and a half percent to someone like Mason & Associates? At the end of the day to me, it comes for you are paying for our expertise, but more than that you are paying for peace of mind as you head into retirement. You're paying for peace of mind that a firm that's been here since I think Mike said—tell me the year again, Mike.
Mike Mason:‘87.
Ben Raikes:Since 1987, that's got five planners that exclusively work with federal employees that has CFP, EA, Chartered Life Underwriter. You want to head into your retirement and you don't want to think about, “Oh my gosh, something just flashed on CNN.” I've been doing this all on my own since I've been working.
Now I'm out on the beach and instead of enjoying a margarita with my wife or my spouse, I'm worried, did I make the right or wrong decision? To me, having the planner in your back pocket, that's your advisor, that's your partner in all these decisions. That's why you hire us. And that's why you're paying the fee, so that you can live your life knowing that every financial decision that you've had that you made it with confidence because someone else is in your corner saying, “Hey, I've done this thousands of times. I know exactly what to do.”
And so I think to me, John, you asked a question earlier in this podcast. Why are you going to pay somebody? To me, that's the why—you want peace of mind. And I don't think you're going to be able to find that with a robo-advisor. I don't think you're going to find that do it yourself.
I don't think you're going to find that with the, “Hey, Mr. And Mrs. Client, come here. I'm gonna charge you 1%, and once per year I'm gonna review your investment returns with you.” You're not gonna find peace of mind that way. So I've been rambling for a little bit, but that's why.
Mike Mason: No, you've done a great job and you set up you the next great comment, which we've used for years on the radio all the credentials and the knowledge is 50%.
The experience is the other 50%. And the statement was, you only live, retire and die one time. We've done it hundreds of times through clients. I don't know that there's an event that could happen that we haven't already experienced. And one of the notes I made earlier, when you do it yourself and you call TSP and TSP is going to tell you “We don't give investment advice,” and you call OPM and they'll say things like, “We don't give retirement advice,” but then they'll add a caveat to it.
But I've heard, when it's a survivor benefit question, but I've heard. And the minute the but I've heard comes in, one of these scenarios takes me back to a client that died active duty, federal, and they had an opportunity to buy military time. The gentleman retired military, but didn't take survivor benefits.
And the surviving spouse had the opportunity to add that 20 years of military to the federal pension. And they'd met with two other financial advisors and the other financial advisors just wanted to invest a half a million dollars, and Ken Mason called OPM and said, “What will it cost me or my client to buy those 20 years?”
And the person said it's going to cost X and I think at that time it was $25000 but why would you want to do that? It adds 20% to a $100,000 retirement. That's $20,000 a year. Half of that survivor benefits. That's 10 grand a year for the rest of her life. But if the person that doesn't have this experience calls OPM and says, “Yeah, you can buy it.” “What's it going to cost?” “$25,000.” “Why would you want to do that?”
Boom. The phone hangs up. You can, but you don't want to. So it's you only live, retire and die one time. There are moments in Mason & Associates, we call them Hero Moments and Clearance Moments, where we know we've given you the advice at that moment in time that you can't live long enough at one and a half percent to pay us enough fees to recognize for us to recognize the benefit we gave you instantly.
John Mason: Thank you for sharing that story, Mike, and all of this comes back to something's going to break in your life at some point. Something is going to rupture. Something is going to take you from being the most confident individual to not being the most confident individual. Something's going to take you from being intelligent to not intelligent whether that's permanent or temporary. And there's a lead time to get into a surgeon.
There's a lead time to get into your right doctor. Other practices like there's a doctor in Williamsburg here that has like an eight to 12 month wait list. And luckily I'm able to see that doctor, but like Tommy wants to go see this person. He's been waiting since February, and eventually hopefully he'll get in.
So what I'm getting at is that there's lead time to get us on your team. Okay. And you may be the most confident individual, but one day you probably won't be and you'll need some help. If you pass away, your spouse may not be that confident individual. So we need business continuity plan, we need financial planning continuity between you and your spouse.
And when life breaks, Mason & Associates is not in a position to just instantly help non-clients. When our client's life breaks, I've got two clients on long-term care claim right now. Two. And I was able to visit one at a rehab hospital two weeks ago. And we're going to satisfy the elimination period.
We're going to get them through that and hopefully both of them get better. So when life breaks here, we can help. If you're a non-client and life breaks, it really just is like, where are we in our life and how much could we help? I'm not saying we can't. I'm not saying that we're completely incapable.
I'm not saying we're cold-hearted. But at the end of the day, it takes a couple months to get up and running with us. And you can't just call us a week before something happens and ask for advice and think that we're going to be able to deliver. For all of those reasons, we believe paying somebody a fee, whether it's us or somebody like us makes sense.
We believe that you don't wait until life breaks to go find that relationship. You have that relationship in your back pocket, you have it started, and you have that accountability partner because life's going to beat you down, Tommy. Every single day we are forced with decisions that are hard. Every single day as humans, we make bad decisions. And our hope is that we get to support and power educate clients and an audience of this podcast to make one more good decision because we know we're all going to make bad ones, but hopefully we can make a few extra good ones because we have that accountability partner.
Tommy Blackburn: I love it and I'm hoping I wanted to get this data point out and I think it's going to dovetail well with all of the great stories, examples, and how we have elaborated on the value. And the data point I wanted to reference, just because I think it's again, education for folks as they think about this, is there was a 2018, I believe it was 2018 study by Vanguard, that said, and a good advisor's value is probably around 3% for various things.
That study, and where I think it does tell so well with this, that study doesn't account for the stories you guys just told and the examples we went through. So if that's what Vanguard's coming up for with, for, what, advisor should be doing across the board from like a generalist perspective.
Imagine again, when you have somebody who specializes with you, it's gotta be even more than that 3% that was referenced. So hopefully.
John Mason: Dude, awesome. Because let's face it, that Vanguard study is talking technical baseline, rebalance, do the things you said you were going to do. And on our new website that'll be launching sometime towards the end of this year, early next year, that's a whole big project on itself.
One of our clients, one of the people who's going through this long-term care claim said, “Sometimes I forget that y'all are not just the money guys.” So Vanguard is saying that the money guys add 3% of value by being the money guys. What about the people who know you for you? What about the people who have this in-depth understanding and offer all these other services?
Let's go ahead and wrap this up with a big takeaway for you, the audience, is your financial planner should not just be the money guy, the money woman, the money team. It should be a team that is proficient and does all of those money guy or money person or money woman things well, but hopefully takes it a step past that and delivers massive value in all of these different aspects—financial planning, tax planning, estate planning, insurance planning, and as important as all of that, specialize with you, speak your language, not theirs and by doing that, you will be able to form a better connection with that financial planning team because they're not going to learn how to spell FERS.
If they're trying to learn how to spell FERS, they're not taking the time to learn about you, the client, and everything that you need from that financial planning team. Thanks for being with us on another episode of the Federal Employee Financial Planning Podcast. Remember, we're financial planners first, we do this second, and we're here to support, empower, educate, and motivate you to make changes in your financial plan.
The topics discussed on this podcast represent our best understanding of federal benefits and are for informational and educational purposes only, and should not be construed as investment, financial planning, or other professional advice.
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