Preliminary Request for Public Comment on Proposed Fee Table for State-Registered Investment Advisers

February 7, 2018 - Michael F. Greco

Subject: Proposed Fee Table Comment
From: Michael F. Greco
February 7, 2018

To Whom It May Concern:
I have read the proposed rule that the Division is considering regarding a proposed fee table.  While I understand the rationale behind this idea, I do not believe that it will achieve the elimination of confusion amongst clients and proposed clients that the Division hopes to achieve.  In the example provided, there is a notation as to what is provided (asset management and financial planning), but the definition of financial planning becomes rather hazy in an ongoing client relationship, and frankly, so does investment management.  Does the advisor render management of client assets held elsewhere - such as rendering advice on 401k allocations?  Does financial planning include not just the typical ideas of Retirement and/or Education planning, or if the client calls twice per month seeking advice on leasing versus buying a car, refinancing a mortgage, ramifications of purchasing a 2nd home on the existing retirement plan, or any other number of “non-typical” planning engagements?  Has the inclusion of “financial planning” in the fee table obligate the advisor to anything that the client assumed was financial planning as paid for work?
I could find dozens of other ways in which to further complicate this idea - all of which would need to be rectified via additional disclosures or addendums that takes a simple fee schedule and turns it into a 20+ page document.  Further, in my own firm and from personal experience, we discount and/or amend our standard fee structure very often to reflect the nature of the work involved in each client relationship.  We all (advisors, regulators, clients) want to state and acknowledge that each client is different; however, we want to standardize and apply a streamlined standard of fees as though each client isn’t really any different.  These concepts are incongruent.  In order to maintain the fairness and integrity of our firm’s fee structure matching to the genuine nature of each individual client relationship, we would need to asterisk the fee table with a note that the advisor retains the right to discount the fee schedule at their discretion.  In so doing, we would adhere to the Division’s regulation; however, it does nothing but adhere to regulation as we would then in turn actually customize the fee schedule to each client - flatly ignoring what’s on the actual fee table.  This will not achieve the goal of transparency and confusion.
Further, Financial Planning is a far encompassing term.  A retirement plan for one individual may be fairly straightforward, whereas it may be a truly complicated scenario for another individual based on their unique life circumstances.  One client’s financial planning engagement may amount to 5 hours time, whereas another’s might be 50 hours.  Many firms such as ours prefer to work on a project fee basis for financial planning (as opposed to hourly) so that the client knows with certainty what the cost of the engagement will be.  This can only be calculated by the advisor and communicated to the client AFTER sufficient understanding of the nature of the work and complexity of the case.  It is simply not possible to communicate this numerically in a fee table.
As RIAs, our fees are transparent. Unlike commission-based relationships, client fees are front and center.  Additional disclosures about 3rd party fees (i.e. custodian transaction charges) should allow the client to fully understand how much they will pay.  Understanding what services the fee encompasses is a valuable idea; however, I am concerned that an attempt to standardize a non-standard situation will not achieve the objective put forward by the Division.
Michael F. Greco, CFP, ChFC