Cost-Benefit Estimator Results

EMAIL RESULTS TO PAUL
Capital Endurance Group Traditional WM Firm (1) Brokerage Firm (2) Robo Advisor (3)
FINANCIAL PLANNING
Lifetime Financial Projections (4)
Exec. Comp. Maximization (5)
On-call Financial Advice (6) Priceless! Varies None None
PORTFOLIO MANAGEMENT
Asset Allocation (7)
Optimal Fund Selection & Access to DFA Funds (8)
Asset Location (9)
Extra Tax Efficient Saving (10) -120 -120
Coaching Against Biases (11)
TIME SAVING
Value of Time Savings (12) 200 200 100 100
OUTCOME ESTIMATES
Value of Advice $80 $80 $100 $100
Annual Fees (13) $10,000 $10,000 $11,250 $2,250
Net Annual Benefit of Advice $-9,920 $-9,920 $-11,150 $-2,150
Footnotes:
  1. A Registered Investment Advisor (RIA) that advises individuals on all of their financial planning needs, including investments. RIAs have a fiduciary duty to their clients, which means they have a fundamental obligation to provide investment advice that always acts in their clients’ best interests. Capital Endurance Group is an RIA.
  2. Brokerage firms (broker-dealers) provide transactional-based services and accounts from which they earn commissions. Customers are charged a commission for each buy or sell in securities. Brokerage firms may also hold licenses to provide other services, including advisory services and non-advisory product sales. Here I’ve modeled just transactional-based services. A full service Brokerage firm may fall somewhere in between this category and the Traditional Wealth Management Firm category in terms of net benefit to the client, in my opinion.
  3. Robo-advisors are digital platforms that provide automated, algorithm-driven financial planning services with little to no human supervision. A typical robo-advisor collects information from clients about their financial situation and future goals through an online survey and then uses the data to offer advice and automatically invest client assets.
  4. Time spent consolidating your life plan and all financial resources into a probability aware financial plan utilizing Monte Carlo simulation. Updated annually or earlier in case of a change in your financial circumstances or life plan.
  5. Estimated at 10% of intrinsic value of options outstanding and other deferred compensation – could be much higher, depending on your circumstances. Refer to my Learn page for eBooks on options.
  6. Too hard to quantify for you! The value of Capital Endurance Group services is an estimate and can only be ascertained after a consumer has entered into and evaluated an advisory engagement with the firm. But this can be extremely valuable if done prior to decisions on big ticket financial commitments such as permanent life insurance products, vacation home purchases, and requests from friends and relatives for start-up business capital. In the latter situation a good wealth advisor can serve as the “bad guy” on behalf of clients that says “no” to unwise investment proposals from friends and relatives. This kind of service is generally not provided by Brokerage and Robo firms.
  7. Based on 1997-2017 global return data from Morningstar and modeled on a Capital Endurance Group portfolio comprising 20% bonds and cash, 80% equities and alternative investments. I’ve assumed the benefit from Robo is reduced by 25% for each available 401K account, up to maximum of two 401Ks, since they’re generally not covered by Robo service.
  8. Two components: 1) elimination of high cost poorly performing mutual funds and ETFs across entire portfolio including 401Ks. 100% credit to CEG, 75% to other Traditional Wealth Management firms (I can only attest that our fund selection is completely impartial, even though some others may well be too), 0% credit to Brokerages and Robos. The poor performance of Robos is discussed here. 2) use of Dimensional Funds to capture the equity excess return premiums of Profitability, Value, and Size that have been shown to persist through time all around the world. My analysis of 1997-2017 global Morningstar data, weighted by asset category, shows Dimensional Funds added 0.64% on average annually to the portfolio mentioned in 7 above. 100% credit to CEG, 0% to all others. Refer to my ELEVATE Your Plan video series for more detail.
  9. Estimated at 0.10%, but varies widely depending on your financial circumstances.
  10. Tax efficient saving is often overlooked by do-it-yourself investors. For example, even if you earn too much to contribute directly to a Roth IRA, you may still be able to via another approach. Estimate incorporates 6% nominal returns, with half as capital gains, and a 42.25% combined state and federal marginal tax rate. Also assumes any 401K or IRA not being maxed out is getting zero contributions, and the extra savings are all designated as Roth.
  11. Biases are many and varied but here I’ve limited measurement to just returns lost by investors against the indexes in trying to time the market. Estimated as up to 1.14% annually based on Morningstar’s Mind The Gap analysis for 2012-2015, 2017-2018 year reports (2016 unavailable), scaled by asset class in our assumed portfolio mentioned in 7 above.
  12. Calculated as your estimate of your hourly labor rate times the hours you spend each year, or should be spending, managing your finances. Brokerage firms and Robos tend not to take care of all your needs, so I’ve given them 50% credit here.
  13. Capital Endurance Group is an investment advisor. Investment advisors have a fiduciary duty to ensure that the advice and recommendations are in the best interest of clients. For advisory services, we charge an annual asset-based fee based on the assets under management we manage for clients. For more specific details, please review the Capital Endurance Group Form ADV Part 2. My robo-advisor fee estimate of 0.30% is the midpoint fee charged by six of the most popular robos. I’ve assumed commission based brokerages effectively charge 1.5% of account assets, on average. This covers a wide spectrum of firms and associated fee/commission structures.
DISCLOSURES & DISCLAIMERS:Paul M. Delaney, CFA®, CFP® is an investment advisory representative for Capital Endurance Group, Inc. Capital Endurance Group is an investment advisor firm that is registered pursuant to the laws of the state of Georgia. The firm also conducts business in the state of North Carolina. For additional details regarding Capital Endurance Group, please review the firm’s written disclosure statement: Form ADV Part 2. The Cost-Benefit Estimator is for informational purposes only and reflects research into and estimation of the main components of the types of services offered by different financial services firms. There is no guarantee of the accuracy of the data and estimates presented, in that, the data is subject to change at any time. This Cost-Benefit Estimator should not be construed as an offer, solicitation, recommendation, or endorsement of any service, product, or particular security. There can be no assurance of the future performance of any specific investment or investment strategy (including investment strategies recommended or undertaken by Capital Endurance Group, Inc.). Investing involves risks, including possible loss of principal. Consumers should seek subsequent and direct communication with a properly credentialed investment advisor representative before taking any action.