In this episode, Justin and Jared discuss how to evaluate investment advisory fees by focusing on the value received rather than just the cost paid. They explain common misconceptions around investment expenses and why higher fees don’t always translate to better outcomes. The conversation provides practical tools to help oil and gas professionals assess whether their financial advice is truly serving their long-term goals. Throughout the episode, they share actionable insights for optimizing wealth accumulation and preservation through smarter financial decision-making.

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Welcome to Financial Planning for Oil and Gas Professionals, hosted by certified financial planners Justin Brownlee and Jared Machen of Brownlee Wealth Management, the only podcast dedicated to those of you in the oil and gas profession to help you optimize investments, lower future taxes, and grow your wealth.

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Welcome back to another episode of FPO&G Financial Planning for Oil and Gas Professionals.

This week on the podcast, we're going to talk about the idea of the cost versus value equation.

Right.

Specifically with investment financial advice fees.

Justin, before we get into that surprise segment, what you got for me?

I think it's your turn to ask me.

I believe so.

So, Jared, I'm going to ask you a question that I think is potentially impossible to answer, but I'm interested to see where it goes.

So pretend now you've got a young, growing family.

Pretend that you have to pick where your kids will live and raise their kids when they are 35.

So we're going more than 30 years into the future, but you have to pick where they do this.

If you had to pick a location, where would it be?

Okay, interesting.

So it could be another country or you could be picking a state within America.

Obviously, it's extremely tricky because it's not which state or country is doing well now, it's which direction are they going in.

That could be really good in 30 years.

Oh, man.

Yeah.

That's an impossible.

That's an impossible question.

I'll go with Austin.

And I say that because lots to do outside economic vibrancy.

You're right.

What's the probability that my kids can thrive?

Moving their bodies in nature and economically and professionally seems like a good balance of both of those things.

That's a great answer.

And if you think about the composition of their economy, it seems like very tech forward, services forward, which is, you know, if you think about things that are at risk with AI, it's everything.

But I don't know, it seems like a broadly diversified economic base.

I mean, AI is why that question feels impossible.

The speed at which things are changing is just really remarkable.

Yeah.

But I think ideally, you know, my kids have crushed it and they're financially independent by 35, and we can all just have a compound in Mallorca, but.

You know, there we go.

Okay.

Yeah.

Awesome.

Well, Justin, let's talk about cost versus value.

Like, it's funny because I feel like every year we have a different version of this conversation.

And the catalyst for this conversation was thinking about Vanguard announced they're Lowering their fees.

Right.

Again on expense ratios on some of their ETFs and mutual funds, which is awesome.

Love what they've done to democratize it.

But I just feel like every year we still run into people that are thinking about this idea the wrong way or not thinking about it enough.

Right.

So we'll talk about three things here.

Right?

We're going to talk about really the history of this.

We're going to talk about common mistakes we see people make, and then we're going to kind of give you some tools to think about how do I do my own cost benefit analysis.

But before we get into all that, Justin, why is this worth rehashing?

Since we've had conversations that are tangential.

To this before, I think it's critical to think about this topic on an ongoing basis because fees and taxes will always have the potential to erode your future returns.

You know, I think the most shocking piece that's ever been done was a Wall street journal article about 10, 15 years ago from Jason Zweig.

And he was covering really the topic of fees.

But also, Jared, he was covering an SEC research.

Securities and Exchange Commission basically commissioned this giant research study on the landscape of investment fees.

And some of the shocking things from that article, Basically a majority of investors had no idea the exact nature of what fees they were paying.

So a very small minority had an exact picture of, I'm paying these three or four types of fees, and the end result is this amount of dollars per year.

So that was a very small portion of investors had that understanding.

Most investors had a directional kind of awareness that they were paying fees and maybe close to what they were, but they were still pretty far off.

And then, Jared, a noticeable chunk, a minority, but a noticeable chunk of the survey thought that they were not paying any fees at all.

And so this kind of opened the floodgates to say, hey, investment fees were a huge deal.

Vanguard did a study about 10, 15 years ago that showed if you are just paying a 1% investment fee plus fund fees, and you're just getting kind of a passive asset allocation for it, that will potentially erode one third of your returns over the next 30 years.

And so, you know, fees are a massively important deal.

And I think people are becoming more aware, they're becoming more savvy.

So there is an element where, number one, people need to continue to understand what is the fee structure that they have and what fee structure should they be looking for.

But then, Jared, there's kind of a number two that's growing and the Number two issue is, okay, I'm aware of fees.

Now I'm making mistakes because I'm making decisions just looking at, well, okay, I gotta pick the lowest fee.

And that can introduce a whole host of other problems.

Yeah.

I would say there has been a fee renaissance and we'll talk a little bit about that.

And I think that is a net positive.

Absolutely.

And fabric.

But I would say there's an over fixation to where there's not an awareness of value.

Right.

Like, paying 2% could actually be a remarkable deal if you have a small portfolio that's inclusive of tax prep and estate planning and your advisor's going really deep.

Right.

25 basis points could be egregiously expensive.

And if all you're paying for is an index fund that rebalances itself and it owns a bunch of indexes that you can get for 10, 1, 10 of the price.

Right.

So like conventional logic would say, oh, 2%, agree, just 25 basis points is the way to go, but that's just kind of absence of value.

Right.

And I think like, you know, the way we think about our practice and a lot of the decisions we make, we are not necessarily going to be the cheapest with underlying fund expense ratios or even like our fee.

Right.

Like you go to a robo advisor, but we believe you get what you pay for.

But like, it's interesting, Justin, because these, I think both of these things are true.

Investment fees have never been better and Wall street fees are still, still egregious.

You agree with that?

Oh, I like that.

Okay, so investment fees over the course of the last 10, 15 years have gotten way better.

Um, it's helped investors to a tremendous degree.

But Wall street fees still today can be very egregious.

And you know, Jared, it's kind of funny because we, we talk on this topic a lot and I kind of joke, you know, I like to think that we've experienced just this incredible growth because we're so wonderful at in depth planning for our niche for people in oil and gas.

And that's what's really been the engine behind our growth.

And you know, I think that's true.

But if I'm being blunt, Jared, I really think you could make a strong case that the number one reason for our growth is our fee structure.

We, we really were one of the first firms or, you know, one of the kind of initial wave of firms that did a fixed fee when we started, you know, seven years ago.

And so I think our fee structure has been an enormous reason why we've done.

Well, I like to say that I really think we have the greatest fee structure in the world.

But because of what you just said, yes, fees are getting better, but a lot of Wall street fees are still egregious.

This is why it's such a critical topic.

It's funny because like thinking about our core audience, right.

Oil and gas skews energy with skews technical.

Like a lot of our clients or prospects we meet with have already done their own Monte Carlo, right.

And so they have a good idea of what they're paying.

So like you know, going back to the Jason Zweig article, I don't think it's oh, I don't know what I'm paying.

It's no, no, no.

The, the more common issue that we'll get into later.

I'm hyper fixated on what I'm paying, not what I'm receiving.

But I do think it's worth taking a step back and thinking about like just like, like calling out notating, hey, where we are.

Right?

Like there's a, there's a great piece by Ben Carlson and he looks at the just the bid ask spread, right?

The difference between the buy and the sell price for various securities in the Dow Jones over the last hundred ish years.

Right.

That's a cost friction.

So anytime you bought or sold, you could expect a half a percent haircut right off of that.

Right.

And that today is essentially nothing fractions of basis points, the average commission.

So 0.8%.

Right.

So and again one of the big, one of the big problems with that is it was there was fixed rate commissions.

So if you're a small investor, you're paying the same commission as somebody with this is an institution putting thousands of shares to work.

So right.

Like, so that was the average.

So if you were an individual investor, you were probably even, it's probably even worse than that.

Right?

So, so if you think about it, you were paying you know, over a percent out of the gate for one individual stock.

So recreating a diversified fund, you had to do this dozens and dozens of times.

But even wor than that, so you know, so you, let's say, you know, 0.5% on the bid ask spread.07 on the commission, 1.3%.

It's a one time fee.

But the problem with that is it's a One time fee.

So what the advisor would do is they would churn your portfolio, right?

They would, they'd want to rebalance, they'd want to create new positions, they'd want to create more commissions, right?

Which is problematic because it's more cost incurred, more taxes to you.

And so that model is just kind of insane.

And if you compare that to where we are today, right, Like I can buy vbaix, which is one of the funds that had a discount.

Thousands of stocks, thousands of bonds all across the world.

It was 6 base 06% before the fee reduction.

Now it's 0.04%.

Right?

So like if you think about, hey, a 1.5, 1 point a friction in excess of 1% to buy one position in the Dow Jones and now I can buy a globally diversified portfolio with thousands of positions all across the world that are automatically rebalanced for four basis points.

That is remarkable.

Automatically rebalance.

Every time the index changes, they will place the trades to update the index and none of those transactions will have a commission.

Pretty amazing.

And this is evidence of how much better it's gotten.

Jared, it wasn't that long ago where you would review someone's statement and you would quickly find out that their advisor was churning their account because they got paid and the firm got paid every time a trade was placed.

Therefore, firms had an incentive to trade a lot.

And even though that's horrible for the client, that really was the incentive structure and that wasn't that long ago.

And you'll still find some of that today.

But it's becoming extremely rare.

So pretty amazing that you can get a well diversified portfolio for very, very little now.

Yeah, that's right.

But again, that is, that is the investment management piece of the portfolio, right?

Like you can pay for the underlying investment mix and for the advisor, right.

And those two things are different.

One of the reasons people don't quite understand, hey, what exactly am I paying?

Is they haven't bifurcated all of their expenses into the various buckets.

Right.

So we're really talking about, okay, what is the expense ratio of the underlying investments that I'm purchasing?

Right.

It's like a good analogy to think about it.

It is, hey, there is a cook that puts together ingredients in proportion that I think are appropriate for your taste buds.

And then there are the actual ingredients.

There's a chef who prepares it and there's the underlying ingredients.

Right.

So a good way to think about it, expense ratios is probably the underlying ingredients.

Of what, of what's going in.

And you know, the, the cook is essentially the person who's determining the asset mix.

But that's really one part of the equation is, is investment management one thing before I get into this, like, I want to talk about mistakes.

People see mistakes that we see people make.

But like, the big issue here is that this could be one of your expenses in retirement.

Right.

I would argue everyone should care about this.

And depending on how big your portfolio is, this could be the single biggest expense in your retirement.

Right.

So this isn't some nebulous ethereal thing.

This can, you know, like you said in that Vanguard study, a third of the third of the return eaten up.

Right.

This could be your biggest line item expense in retirement.

Right.

And the quote was, if you're an investor and you are still with a large wirehouse or brokerage firm, I honestly think that you're just out of your mind.

And that really was kind of an impetus for me to say, hey, I am either going to get to a fee only firm and work under a fee only firm or I'm going to start my own.

And ultimately I took the latter path, which I'm very happy that I did.

But yeah, it's just.

Jared, there are a ton of people still at J.P. morgan, UBS Merrill lynch, and they've handed them six, seven, eight million dollars and they don't fully understand that they are paying tens of thousands of dollars a year and just not getting a whole lot for it.

Yeah, absolutely.

So before we get into like, let's, let's, let's go a level deeper with that and like, how do I begin to quantify advisor value?

Right.

So like value is, you know, there's, it's, it's, it's really a cost benefit analysis.

Right.

So before we talk about mistakes people make, like what's, how do I think about the value equation?

So the costs I would argue are pretty clear.

But how might somebody.

Right.

And I guess so to, to, to be crystal clear, getting back to that analogy about the cook and the ingredients, what are the, so what is my total cost?

Okay.

What are the underlying expense ratios of my investments?

And then what are the costs of my advisor fees?

Right.

That, that, that is probably easy or to calculate.

How might I think about quantifying the benefits of, of my existing arrangement.

Great question because Jared, I think there's three categories for what are you actually getting for what you're paying?

Category one is a very, very simple arrangement where you are paying for asset management.

I think the purest form of this is probably a robo advisor.

And so you are handing X amount of dollars to Vanguard.

CHARLES Schwab FIDELITY really, any giant asset manager will have a robo advisor.

And you're going to pay a fee for that asset management.

And it's kind of assumed that, hey, your planning is diy.

You will run your own tax projections, you will run your own retirement projections.

They'll probably have some good software to help you.

But, but it's a simple equation where you're paying for your assets to be managed.

So that's number one.

Number three, let's jump to number three.

We'll come back to the middle option.

Number three is full service wealth management.

And Jared, I think the defining mark here is the firm is either doing your tax return in addition to managing your portfolio, or they're at least reviewing your tax return each year.

So they are doing significant tax work.

They might even be doing your estate plan or being a thinking partner in that process.

And they're probably reviewing your insurance policies or at least thinking along those lines.

Their advice is touching into practical tax, estate planning, insurance, as well as managing your portfolio.

So it really is a full comprehensive service.

And so, you know, I think the hope is, let's just call this out with number three.

That's really, if you're paying any substantial fee at all, you need to be getting number three right.

You need to be getting significant advice in all areas pertaining to your financial life and ideally, you know, your tax returns included potentially, or in some regards, it's tight end.

Now let's jump back to number two, because Jared, I think there's this massive middle option.

And the middle option is you're paying for your portfolio to be managed.

And the firm is promising to do comprehensive financial planning.

But comprehensive financial planning can mean a lot of things.

And so, you know, if you're in a fee arrangement where you're paying tens of thousands of dollars a year and they're not looking at your tax return, they're not mapping out your next several tax moves over the next 10, 20 years, but they're maybe doing Monte Carlo scenarios, they're maybe doing retirement income feasibility analysis, they might kind of have a balance sheet for you in E Money.

I would say that needs to be more on the number one fee that needs to be more of a robo advisory fee.

They're not actually doing much.

I think the other thing we're seeing, especially with wirehouses, so kind of a ubs, JP Morgan, Merrill lynch, they are charging significant fees with the promise.

That's kind of a new form of the same promise from 20 years ago that they can invest better than everyone else.

And the current modern day version of that promise is saying, hey, you need to invest with us because we have access to alternative investments.

We have access to the best private equity deals, venture capital, private real estate deals, which, I mean, Jared, that's just completely insane.

And I really think that even highlights how critical it is that you need an independent advisory firm that is not tied to a massive wirehouse that has huge conflicts of interest in the private deals that they're offering.

And I mean, there's just enormous amounts of research that no, you're.

Your JP Morgan guy does not have, you know, better private access than the advisor down the road.

And even if they did, you're the last call.

No offense.

There are so many sovereign wealth funds and family offices and institutional asset allocators that have first dibs, Right.

There are a ton of really remarkable investment funds that are just closed to new money.

Right?

And Jared, I think one thing that's been crazy over the last five years, being in an independent ria, you don't even need to be SEC registered now to have access to Carlisle and some other excellent private investment arms and vehicles.

And so the floodgates have basically been opened and it's just not hard to get access to great private investments regardless of how big your firm is.

I mean, obviously it helps us a ton today that, you know, we manage almost 500 million in assets.

But even if you're a tiny firm that manages 30 million in assets, there are so many ways to get your clients access today that were not available 10 years ago.

Yeah.

Yeah.

So really the first way of.

How do I quantify the benefit to summarize what you're saying is like, it's really just like an activity log.

Like, what have they done for you?

Can I give a 10 second metric that will probably solve this?

Love.

Okay, so if you're listening to this podcast and you want to know, am I getting the actual benefit?

Simplest way.

Has your advisor reviewed your tax return?

Have they asked to see your tax return?

If you're interviewing advisors right now, you're interviewing different firms.

Have they asked to see your tax return?

Have they reviewed it yet?

If the answer is no, you're not getting Full comprehensive service.

Yeah, yeah, I love it.

I love it.

I think another way to kind of analyze the benefit is this is more on the asset allocation side.

But how have my investments done benchmarking, how my investment done relative to whatever market I'm they're most closely linked to, right?

Like, because a lot of people like hey, my advisor has done great over the last 10 years.

Yeah.

So is the stock market, right?

Like how much of that is attributable to actually them doing something meaningfully different or just being in a massive bull market and you know, skimping a little more off the top.

Right.

So like really figuring out hey, what, what are they actually doing there and is it making a meaningful difference?

Right.

And again, asset allocation is one of the lower, lower hanging fruits.

So you know, I, I think it matters a little bit, but not a ton.

But it is important to know, right?

And maybe if they are outperforming the their set quote unquote benchmark or is it because they're taking an inappropriate amount of risk.

Right?

So just having a visibility on that.

I think another one, Justin, is like, I would call this idea like can you show me the recommendations?

Like can you show me the financial impact of recommendations, right?

Show me your work.

Right?

Like hey, you're telling me to do these Roth conversions, but what is the impact?

Like I know theoretically why they make sense, but if I do them, what is the estimated difference in my terminal, the terminal value of my after tax wealth in 30 years if I do this?

Right.

Like we make recommendations and we do the, to the best of our ability, we try to quantify the impact of those recommendations, right?

So like that's another way to quantify the benefit is like an advisor, like your advisor should be showing you their work.

Like hey, if I, if we avoid this, if we avoid this IRMAA bracket, here's the, here's the impact in terms of your Medicare premium, right?

If we do this tax loss harvesting, here's the dollar value in capital gains and if your capital gains rate is X, here's the net tax benefit to you, right?

So like part of the benefit is hopefully having an advisor that is showing their work along their way versus hey, just trust me and let's do this thing.

I think it's a good idea.

Yeah.

You know Jared, I'll kind of give a quick case study on this, a quick example.

So, and this is really relevant at any super major.

I happened to talk to someone from ExxonMobil who was really kind of late in the game in Terms of were pretty advanced in talks with another large brokerage house and was thinking about going with them and you know, I asked the question, okay, so you have this embedded Stock in your 401k.

You need to elect NUA and you need to map out kind of an NUA plan right at the beginning when you do the lump sum rollover and elect nua.

And then you need to map out what should you do with those NUA shares over the next four, five, six years and beyond.

And so, you know, I asked the person, okay, what did this large brokerage house, I won't mention which one.

What did the large brokerage house tell you to do with your NUA opportunity?

And they didn't even look at the NUA opportunity.

They didn't have a recommendation.

And Jared, I kind of think it's.

Now the interesting thing is, you know, this person, I want to say they maybe had 5, 6 million dollars.

And so large brokerage house will probably take maybe 40, 50% of that, manage it in an SMA, may a 0.6% fee.

And so the client, potential clients looking at this, thinking, okay, that's a pretty good fee structure.

I'm only going to pay like 15,000 a year and I have $6 million.

But in reality they have this massive NUA situation that has huge implications.

Jared, if you are comparing a giant brokerage firm that isn't even telling you what to do with NUA to a full service firm that's going to do your tax return, give you a specific NUA strategy and lead you through it, it's almost like comparing you're trying to cross the Atlantic Ocean and you're getting a quote from a company who's selling you a life jacket.

And then you're also getting a quote from a company that's selling you the boat that you're going to take to cross the Atlantic Ocean that also has a life jacket included, the two are not remotely similar.

And so that's kind of a classic mistake of, hey, I'm looking at options and ooh, I know investment fees are a big deal so I need to pick lower cost option, but they're not doing anything that you actually need or what was your analogy?

The Amalfi coast versus a Mississippi river cruise.

Yeah, yeah, yeah.

When we were talking about this beforehand, I was talking about, yeah, so you know, finding somebody like a full service wealth management firm that knows you and what you want is like being retired and taking a cruise to the Amalfi coast, right?

Exactly what you want.

Really good use of time.

And you could.

But you could have saved a lot of money doing other options.

Right.

Compare that to, hey, I'm going to take a cruise and I'm not told where I'm going to go.

And it's along the Mississippi river and.

It'S in one of those, like, Louisiana gator boats.

Right.

And it's by, for all intents and purposes, it is in fact a cruise.

But you get what you pay for.

Right.

And is it a valuable experience?

Did it meaningfully improve the value of your life?

The Amalfi coast, that cruise you're going to be talking about forever, the Mississippi riverboat cruise?

Probably, probably not.

But you, but you saved money and you technically went on a cruise.

And let's go back to the example.

Let's say that you do have five or six million dollars and you're talking to a big brokerage firm and maybe they're going to manage 40% of it and you're going to keep cost to only 15,000 a year.

Jared, you are getting ripped off if you're paying 15,000 a year for a chunk of your balance sheet to be put in their SMA and to be, quote, unquote, professionally managed, that, I mean, it's honestly, that's so expensive, it's insane to pay that amount of money if they're not doing your tax, giving you a specific NUA recommendation and leading you through it.

That's the ultimate example of you would be better paying a 1% fee.

Like that person would be better paying $50,000 a year and actually getting exactly what they need rather than paying 15, 20,000 a year for kind of a quote, unquote, professional management.

Yeah, but I, but I would say that leads to like our next point about, like quantifying the benefit.

Can you point to any examples of.

I didn't think about that.

Right.

Like, the problem is this.

I bet if the client would have explicitly asked, they might have taken a look at it.

But the problem is if, if my, if, if I hire an advisor and their ability to do work for me is contingent upon me asking questions, the ceiling of how helpful they could be is my competence.

Right.

And I'm not in the industry, so it's a very low ceiling.

Right.

So if you have an advisor quantifying the benefit, what things did they think about that I didn't think about.

Right.

Can I, can I name any or even when I'm going through.

You don't even need to be a client of the firm.

If I'm going through their process, they should be giving you examples and strategies and just beginning to diagnose and give you enhancement opportunities.

Right.

Oh, hey, you wanted to do Roth conversions, but what if we use the 0% cap gains bracket instead?

Right.

Oh, hey, you wanted to do this, but.

Oh, actually there's this Irma bracket that you need to be aware of.

Oh, have you thought about the NUA opportunity?

Right.

So really some examples of.

I didn't think about that.

And Justin, I'd say the last benefit is really like financial well being.

Right.

Like this is.

And this is fuzzier.

Right.

Like the, the first four boxes should be checked.

But how do you feel about your arrangement?

Do you have peace of mind?

And do you feel well taken care of?

Right.

And do you think, do you feel like everything is being covered by your advisor?

Right.

Like if, if you go through those first four steps.

Right.

This is why I put this, why we put this question last.

If you feel like you're getting probably those, if you have good answers for those first four, you're probably feeling pretty good.

But number five, but I do think if your intuition is telling you, I never talked to my person, they know nothing about me.

They've never asked for a tax return.

It's probably hard for you to have really supreme peace of mind that everything is being done to optimize your balance sheet in your life.

I love that it's less black and white, a little more fuzzy, but it is important.

You know, Jared, one thing that I do want to mention, I feel like we kind of have these conversations and we inevitably start talking that, man, your wealth management arrangement needs to do all of these things.

They need to do incredible tax planning work, incredible estate planning work that's all aligned with your portfolio and your comprehensive plan.

It is important to remember, Jared, when the numbers get big enough, you know, when you're allocating $10 million, $20 million, and obviously if it's a, you know, taxable estate and it's significantly more, just having excellent asset management is worth a lot over the next 30 years.

And I think, you know, we get in this rut of thinking, well, the 1% fee, which, you know, when the numbers get big enough, they'll give you a little bit of a discount.

Might be 0.6, 0.7.

We get in this rut of thinking that's such a horrible thing.

And that's right.

But it is important to remember that, man, if, if you have $10 million to allocate just the investment management, if it's done at an excellent level for 30 years.

I mean, if you're in a more amicable fee structure, like 0.4 to 0.6 or somewhere in there, depending on total asset size, that's likely worth it.

Not even considering all of the tax and estate planning implications, because properly stewarding that amount of money is worth an absolute fortune over the coming decades.

Periodic rebalancing tax loss harvesting, you know, household asset allocation tax if like distribution and rebalancing.

Right.

Like all of those things make a material difference.

Right.

And even composing it of an investments that are more tax efficient and you know, putting tax inefficient assets in the correct buckets.

Right.

Again, that, that impacts the tax return, but it's actually just a rebalancing activity that happens at the portfolio management level.

So, Justin, I want to pivot for last kind of piece of this conversation.

So we talked about.

Let me summarize real quick.

So how to quantify the benefit.

Okay.

Activity log.

Right.

What have, what have they done for me?

What have they asked for?

Benchmark?

How am I doing relative to the, to whatever market exposure that I think I should be tracking?

Show your work.

Right.

What are some examples of the advisor giving you tangible dollar, estimated dollar values of some of the recommendations they're making?

Any examples of.

I didn't think of that.

Right.

And then also, hey, what is financial well being?

How am I feeling about all of this in light of that, Justin?

What like specifically to oil and gas professionals, you talked about the person having the conversation with the advisor at the big brokerage house that wasn't, you know, wasn't even considering one of their biggest corporate benefit opportunities within ua?

What other mistakes do you see people make as they, as they think about this specifically, you know, in oil and gas?

You know, I think the first one I'll call out.

Jared, how many times have we seen, especially when, you know, you kind of jump from 4,5 million onto 8,9,10 million and above.

How many times have we seen families give an advisory firm 30%, 40, 50, 60% of their balance sheet and then kind of DIY the rest on their own?

Now, I want to start by saying I totally get it.

And they're wise for doing that because they understand the fee equation.

Right.

So they understand that, hey, if I DIY this portion, I'm literally saving $35,000 a year.

That's probably a smart choice, but it kind of goes back to why in the world are you not in a fixed fee arrangement where you have a transparent reasonable fee that you and the advisory firm agree on and Then they get to work and they're a fiduciary on everything.

Like it's just totally nonsensical to reach financial independence.

Be a DECA millionaire and then you're just kind of like piecemealing diying a part of your balance sheet as you continue to age.

Yeah, yeah, yeah.

Having 20% managed and then the 80%, that's really uncoordinated and suboptimally managed.

Right.

Again, if all of your.

The only value proposition of your advisor is asset management and it's like low level asset management that could be done by a robo.

The fee savings are worthwhile and it makes sense, but right again, what you really need is you don't need to gatekeep aum, you need somebody coordinating your entire balance sheet.

And what bucket do I pull from when a bunch of decisions have consequences to asset management?

Roth conversions means more taxes, which means more distributions, paying off a home, doing private investments.

All these things reduce aum, but could be beneficial to you and your balance sheet.

Right.

So really having an advisor who's looking at the whole piece and kind of optimizing your balance sheet versus trying to increase their market share of your balance sheet, it's just a very different, very different dynamic.

Justin, what else would you say?

You know, I think we could also just go into only paying for asset allocation or.

Jared, I think another.

I mentioned three camps of advisory firms.

One is just asset management.

Number two is they're promising comprehensive planning, but it's really just kind of simple Monte Carlo analysis that hey, 30 years ago before everyone was savants with Microsoft Excel, it was valuable.

Today it's not as valuable.

You could probably do that planning on your own.

And then number three is, you know, really excellent comprehensive wealth management.

I think it's pain for kind of that number two where you think you're getting comprehensive management but they're not doing your tax return or reviewing it.

I think that's a big one.

What do you think?

Yeah, no, I totally agree.

Yeah, if you're paying for something that is automated that a robot could do, it's like you shouldn't be paying that.

You're just, you're eating cost friction.

Right?

There's, there's ETFs that automatically rebalance.

Right.

So like, okay, what is it specifically about you and your situation and why can't a robot do that?

First principles, does a human need to be involved in this or do they have specific expertise on me and my situation that would result in a different portfolio asset allocation.

If the Answer is no, then you're just paying for rebalancing, which you need to stop doing.

And you can do that with an ETF for a fraction of the cost.

I thought of one more.

So, Jared, I think this is a huge deal.

I think about this one a lot, and I think most people miss it.

So, you know, how many times are we on this podcast talking about how critical it is to understand your investment fees?

I want to peel back the onion, though, and change it a little bit.

You should be less concerned about the day one fee.

You should be less concerned about the potential fee in year one, year two.

Instead, you need to be obsessed with the arc of the fee structure.

So you need to be obsessed with what is the fee going to look like year three through year 30.

That's where you will either have a wonderful situation that is really aligned to your best interest, or it's where you're going to see massive returns eroded from your portfolio.

And so it is important to have an understanding.

Hey, what's the cost on year one?

And compare year one cost across different.

Different firms, different options.

But, Jared, far more important is, hey, what's my fee structure in year four, year seven, year 13, year 17?

And what is the compounding negative effect in those later decades?

Yeah, yeah, right.

Like.

Like this advisor is charging me 40 million or $40,000 on my $4 million portfolio.

But, like, what actually happens if your assets 8x over the next 30 years?

And I realize, like, that sounds insane, but like the law of 72, that's three doubles.

Right?

You go from four to eight, eight to 16, 16 to 32.

Right.

And again, that ignores distributions and everything like that.

But let's.

So let's say you're even half of that.

But, but let's say, okay, so that.

So the first arrangement we talked about is 1%.

Okay.

Let's say your advisor's effectively at 60 basis points and $32 million.

That is $192,000 a year.

Right.

That's a down payment for your kid's home every single year in perpetuity.

Every year in perpetuity.

So you could.

You could have 20 kids.

Exactly.

They can all get down payments.

Exactly.

I think we just fixed the birthing, you know, the declining birth rates.

So you're welcome.

Good job by us.

Good job by us.

Jared, one last point on that.

I think one of the best articles I've ever written.

Not to pat myself on the back, but, you know, I'm going to pat myself on the back here.

One of the Best articles I wrote, and this is four or five years ago, was kind of a deep dive into whatever your starting balance is for your net worth assets at retirement.

You need to 4 to 6x that number to understand the lifetime impact.

And so that encompasses the amount of income that you're going to pay yourself from your portfolio plus the legacy principal balance after that's done.

And in basically every scenario of the last 100 years, like every rolling 30 year period, if you're retiring with $8 million, you need to go $8 million times four, times five, times six to understand the actual magnitude of the decisions you're making.

In other words, you're not making $8 million decisions over the next 30 years.

You're making 30 to $40 million decisions.

Yeah, compounding really breaks our brain, right?

So having a long term framework, having the modeling done multi decade, multi generational and thinking in that perspective and having an advisor that plans in terms of that perspective and thinking about the value equation both now and in the future is huge.

Justin, anything else before we wrap it up?

I think this is great.

Yeah, I love it.

I think our clients and prospective clients care because we're kind of nerdy in that way, but I think I would argue everybody should care.

Right.

And with the stakes being as high as they are, you need to have tools to think about, hey, not just what the cost is, because that's much easier to quantify, but what's the value.

So that's where we'll wrap it up.

Love hearing from our listeners.

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