Frequently Asked Questions
Below are some of the most frequently asked questions by prospective clients.
Why are your fees only half (or less) those of the average investment advisory firm?
In a study by AdvisorIQ in 2023, the average fees of investment advisory firms that charged assets under management fees was 1.02% at the $1m of AUM level, 0.84% at the $5m of AUM level, and 0.59% at the $30m of AUM level.
In contrast, Scholar Financial, LLC’s fees under its wealth advisory program (which combines portfolio management and financial planning services) are 0.5% at the $1m of AUM level, and 0.29% at the $5m of AUM level.
Each investment adviser firm provides different services, and clients may incur additional fees and costs depending upon the types of investments utilized and the amount of trading involved. For example, Scholar Financial, LLC mainly utilizes low-cost mutual funds and exchange-traded funds, along with (for some clients) individual fixed income securities. By using strategic asset allocation with periodic or targeted rebalancing, we keep trading and transaction costs low.
We keep our fees low by: (1) keeping our overhead expenses low (we don’t maintain an expensive office, and access software and other technology solutions utilized in our practice through our membership in the XY Planning Network); (2) accepting as new clients who have financial assets of $1m or greater (this minimum is subject to waiver in Ron’s discretion); and (3) providing essential financial planning services, as needed or desired.
What is a “fee-only” financial advisor?
A fee only financial advisor is paid directly by the client for financial and investment advice. Scholar Financial, LLC is fee-only.
Fee-only means the financial advisor and her/his firm receive no commissions, 12b-1 fees or other payments from third parties that could cloud their judgment or create a conflict of interest between the advisor and the client.
How are you different from other investment advisers?
There are many excellent investment advisory firms in the U.S. Some possess similar investment philosophy to that of Scholar Financial, LLC (see #4 below). Others offer similar financial planning services. Our distinctiveness may lie in the combination of services and expertise provided:
- A relatively conservative investment philosophy grounded in evidence-based investing (including but not limited to factor-based investing);
- Adherence to the prudent investor rule in the design, implementation and management of investment portfolios (unless the client directs otherwise), a higher standard of due care than the “reasonable basis” standard typically adhered to by most investment firms;
- Low total fees and costs, relative to most other investment and financial planning firms;
- A strong emphasis on getting to know each of our clients, and a focus on assisting them to discern and then seek to achieve their lifetime goals; and
- Holistic financial planning services provided by a Certified Financial Planner™ who teaches courses in financial planning and investments to university students, and provided in a customized manner in which each client’s planning needs are prioritized and then addressed in a systematic fashion.
What is your investment philosophy?
As an academic Dr. Ron Rhoades has extensively studied “what works” and “what does not work” in the field of investing. There are two approaches, in Ron’s view, that work over time.
The first approach combines very-low-cost mutual funds and exchange-traded funds (ETF), in a tax-efficient asset allocation across various types of accounts, that invest in the “total market” of U.S. stocks, foreign developed markets stocks, emerging markets stocks, REITs, and fixed income investments. Using this approach is possible without the aid of ongoing investment advice. However, a good financial planner can be of substantial assistance in establishing a strategic asset allocation, taking advantage of opportunities for tax-efficient saving and investment, and then annually assist you with portfolio rebalancing, tax-loss harvesting, etc.
(For those nearing or recently entered retirement who desire the foregoing “largely-go-it-alone” approach but with some assistance from a fee-only Certified Financial Planner™, I recommend my professional colleague, Dr. Chris Brown, and his fee-only advice-only financial planning firm, Birdie Retirement Planning.)
The second approach, utilized by Scholar Financial, LLC, employs factor-based investing. Essentially, through the use of selected factors (price factor, size factor, profitability factor, etc.) and by undertaking extensive due diligence in choosing low-cost mutual funds and ETFs that effectively employ such factors, there exists (in Ron’s estimate) an 80% or greater probability of outperforming “total market” equity funds over any given 20-year period of time. Factors are explained in more detail in Ron’s forthcoming book, Mastering the Science and Art of Investing: Multi-Factor Strategies for Portfolios Both Prior to and During Retirement, due to be published later in 2024.