Before 2000, I entered financial planning with yahoo recruiters from Primerica Financial Services who shouted “Buy Term and Invest the Difference” because whole life insurers drained family savings. Still appalled by fees in 2025, two elderly tax clients paid over $20,000 in assets under management fees for conservative (bond heavy) portfolios managed with little labor or successful risk taking. These non-deductible fees exceeded 20% of the clients’ yearly incomes! How can middle class SLV investors get the advice they need to thrive with longer lifespans and higher healthcare costs?
Financial Planning on Commissions
Whole life insurance was the financial plan for 1950’s clients who paid appalling commissions for confusingly jumbled policies, which challenged comparison with affordable term insurance or superior mutual funds. The 2024 ACLI fact book shows that 60% of insurance policies issued and 28% of face value are still permanent policies—with only 40% in affordable and transparent terms.
Nerd Wallet writes: “…typically, life insurance agents receive as commission 60% to 80% of the premiums you pay in the first year. They collect smaller commissions in subsequent years. Added up, 5% to 10% of all the premiums you pay over the life of the policy could go to commissions.”
Banks hide fees with interest paid far below interest earned on credit cards and auto loans. Without delivering Alpha gains, stockbrokers made 1950’s trades, but sometimes churned for extra commissions. CFP Kemp Fain declared: “Long term to them was 5 P.M.” E-trade lowered stock trading prices and its CEO, Mitchel Caplain, writes: “It was $100 a trade a few years ago….And now all of us are converging at $10 or so…”
Mutual Funds essentially began in 1924 but charged loads (commissions) that typically drained 5% from savings. Deregulation in 1975 fostered no-load and exchange traded funds (ETFs) and average actively managed fund expenses dropped under 2%, with lower expenses fairly charged on bonds and passive index funds. Commissions may serve spendthrift investors who depend on others’ constant judgements.
Assets Under Management (AUM) Fees
After 1981, better PCs enabled independent financial advisors to help more clients in fewer hours with potentially lower fees. LDAs and Legal Zoom competed with lawyers on estate planning while Turbotax and Enrolled Agents competed with business-trained CPAs on individual and trust taxes and IRS representation.
The CFP Board applauds any fee structure that serves the consumer well: commissions, assets under management or retainer fees. CFPs typically charge assets under management fees, usually around 1% with sliding scales. This structure introduces potential biases against realty, loan repayment, commodities, business or even company-managed retirement. CFPs may bypass client-centered comprehensive planning for lucrative asset management. And elderly people with bonds typically pay far more than if they had paid retainer fees. AUM fees work best for clients with larger, more aggressive, portfolios and long-term planning challenges.
Penny Wise; Pound Foolish?
I applaud planners’ pro bono work but know this won’t grow a well-educated, exam-tested, fiduciary-pledged, financial profession to better people’s lives. Robo-advisors may do well with asset management categories, but it is not clear that they can do the psychological work of understanding penny-wise client’s inner feelings, fears and aspirations to help break bad habits, inspire parsimony and prevent panic. Without systematic financial education, amateurs may fearfully avoid risk with CDs or gamble on passing fads like cryptocurrency. The financial risks of self-help are greater than those from driving self-repaired cars.
Affordable Financial Planning for the Middle Class
Fee only planner Roy Dilberto asks if anyone would hire doctors who work solely for fees on drugs sold? If physical therapy, for instance, were a better solution than drugs, would these doctors favor it? The Garrett Planning Network in 2000 envisioned “a service provided on an hourly, as-needed, fee-only basis.”
Financial plans can be drawn up for under a thousand dollars but regular updates and portfolio balancing justly merit further costs for planner time. This CFP Fiduciary ideally acts in the clients’ best interests with affordable fee structures that avoid biases of commission and AUM charges against real estate, business or bond investing. Can lower fees and fewer biases foster the wisdom of financially-literate mountain rams in middle class Ben Lomond?
Robert Arne, EA, CFP, MS, of Carpe Diem Financial Life Planning, gives holistic financial advice as his client’s fee-only fiduciary. He serves mostly Santa Cruz Mountain dwellers. These articles must not be read as personal financial, mortgage, tax or investment advice; consult appropriate professionals. Learn more at www.carpediem.financial.
