Editor’s note: The following is a guest post by Nest Wealth CEO, Randy Cass.
Canadians have a love-hate relationship with our banks. We love the stability and the way they made it through the financial crisis unscathed, but we hate the fact that they are only stable and unscathed because of how much money they are making off us, their clients. It’s commonly accepted that big banks come with high fees, and in many cases we have no choice but to pay those fees. However, when it comes to investing where high fees dramatically eat away at your potential returns, Canadians are beginning to recognize their options. After all, you invest to build wealth for the life you want to live, right? So why are you giving away up to 40% of your potential wealth in fees if you don’t need to anymore?
Traditionally, banks and other financial advisory firms charge clients a percentage of everything they’re asked to manage. For investors, this means that as your wealth increases your fees do too – for exactly the same level and quality of service. Put like that it sounds pretty ludicrous… and it is.
When we created Nest Wealth, Canada’s first online advisor, our goal was to change the landscape and make high fees a thing of the past. So rather than charging our clients in the outdated way that strips them of a percentage of their money (key word, “their”), we decided to take a hint from the ever-growing subscription economy, and only charge a single flat monthly fee that starts at $20 and is capped at $80 – no matter how large your investments grow.
You are probably familiar with the subscription economy. If you’ve ever had a gym membership, a Netflix subscription, or even a subscription to the Dollar Shave Club, you understand the dynamics of how it works. You have one single fee that secures you great service (and/or products), and you don’t have to worry about anything else – it’s such a logical fit for the high-stress investment industry. Here are three reasons why using a subscription-based advisor makes life better for our clients:
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Complete transparency.
The subscription model is a transparent monthly expense that puts the focus on affordable and accessible financial advice. Now clients don’t have to wonder how much investing new money will cost them, and they don’t have to call up to ask how much they are paying in fees either. When life changes, our clients know that regardless of what changes they have to make to their investments as a result, our price will remain the same. Complete transparency, complete comfort, and complete flexibility – it’s all included in the monthly fee.
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It’s about you, the investor.
When it comes to investing, a subscription-based model carries certain expectations. Our clients expect the product and service provided to continuously improve. This is different from the status quo where someone invests in a fund, and that’s the beginning, middle, and the end of the story. The focus of a subscription model means a giant shift in attitudes (from trying to convince you to give us more money so we can make more off it, to always focusing on what is best for you, the investor). This shift in focus, from product to relationship, allows for a real advisor-client relationship to grow. There is no conflict of interest because we put the best interest of our clients ahead of our own – something every investor (regardless of wealth or experience) I have spoken to about this appreciates.
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You keep more of YOUR money.
Finally, and perhaps most importantly, investing via a flat fee subscription-based service lets you keep more of your own wealth. What does that mean? Well, over the course of an investor’s life, the average mutual fund in Canada could take away over 40% of their potential wealth in high and hidden fees. Doing this kind of damage to your clients should be outlawed… but it’s not. Providing this subscription alternative to Canadian investors delivers access to a progressive, even visionary, choice that allows Canadians to keep over 95% of their potential wealth. The difference can be hundreds of thousands of dollars by the time you retire. So, if you’re still paying a fund a large percentage of your assets to provide a fixed solution, it’s time you asked “why” and started looking for a better alternative.
Advancements in technology and software-as-a-service (SaaS) have laid the groundwork for this new investing model and just at the time Canadian investors need it most. Rather than shelling out ridiculous amounts of money in fees, we are able to provide an alternative that can make their lives vastly better.
The only way to truly see the benefits of a subscription-based investment solution is to try it yourself. If you’re interested in building your wealth and freeing up some of your time for the things that money can’t buy, send us an email (join@nestwealth.com) with the subject “BRINGHOMETHEBACON”, or give us a call and mention you want to BRINGHOMETHEBACON, by April 15, 2016 to get your first TWO months of management free.
You make some very valid points here. It’s important to remember that when you make purchases and financial commitments like you mention above, you do become an investor, and you do have to recognize what is working best for you. This post is awesome! Thanks so much for sharing!