If financial planners want to provide impartial advice to their clients, they should truly be fee-only, instead of charging additional fees on the assets they have under management. So says H. Jude Boudreaux, the founder of Upperline Financial Planning in New Orleans.

“I think that AUM creates a conflict of interest,” he said, because it encourages advisors to tell their clients to keep assets in investments, even if that is not the best choice overall.

Boudreaux has been a financial planner for several years but just started his own firm last year. Instead of charging his clients a percentage of their assets under management he charges only a fee based on their adjusted gross income.

Historically many financial advisors have found charging based on assets under management more attractive than other types of fees because those charges seem like less money to the client, Boudreaux said. To many people, “1% of one million dollars sounds like less than [an annual fee of] $10,000,” he said. “But it’s a ton of feathers or a ton of bricks.”

Another concern for advisors is that “if we’re that much more transparent about what we’re charging, then we have to be worth it,” he said. When clients know exactly what they are paying a planner, upfront, that means someone like Boudreaux is “going to have to work a lot harder to earn my fee.”

However, Boudreaux says he sees himself more as “a life planner” and charging just a fee frees him to advise clients in a broader and more holistic way. This also allows him to work with younger clients who may have a large income but may not yet have accumulated a lot of investment assets. In fact, some of these younger, high-earning professionals may be more focused on paying down debts, such as those from medical school, than saving. And that might actually be a better choice for them.

The point his, he says, that “the best investment in the world isn’t going to do you any good if it’s not supporting who you want to become.” Clients need help making choices that go beyond choosing investment options, such as whether or not to pay off their house, or if it’s worth it to them to take a extended vacation every year but forestall retirement.

Some clients are surprised by the idea of paying based on their income, mainly because they are often not aware of how much many investment professionals make through charges on assets under management. But Boudreaux is happy to explain the inner workings of how financial planners make money to his clients, because, as he said, “with disclosure comes awareness.”

Boudreaux said the financial planning industry is a victim of its own success. Planners have convinced clients that their purpose is to provide investment management, and so that’s what clients expect to pay for. For many advisors, “the dream for a long time was to have a hundred million under management,” he said, but that may not be the best thing for clients.

Boudreaux actually outsources his investment management to partners, who can provide all the products his clients need and more. “I’m very passive about the markets in general,” he said. “Being active is a loser’s game -- and it’s an expensive game.”

“You can be an expert in the clients or an expert in the money,” he said, “or you’re going to be at your office until two in the morning writing trade tickets.”

At this point, Boudreaux said, he does not know very many other planners who charge the way he does. But he thinks there is a really strong opportunity here to serve clients, especially younger clients, with more transparency and a broader view of their life plan. Instead of focusing on investments and returns, he talks to his clients about topics like budgeting, and how to balance their desires to do and buy things now with their goals for the future.

Boudreaux said that he hopes to keep his firm small, and never have more than 120 clients.  “I’ve designed a business that will allow me to have the life that I want, giving me enough income to do the things I want to do with my family,” he said, and ultimately, that’s what he wants to help clients do too.

He says, “Your money is where your values intersect with your life.”



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