The Derivative Project

What to Make of Pinnacle Advisory Group’s Fee Pyramid: Your Road Map to Retirement Financial Advice Fees

What to Make of Pinnacle Advisory Group’s Fee Pyramid:  Your Road Map to Retirement Financial Advice Fees

What to Make of Pinnacle Advisory Group’s Fee Pyramid: Your Road Map to Retirement Financial Advice Fees

Mr. Kitces tweeted this article today on a recent study done by Vanguard, that contends that an Advisor adds 3 % to an investor’s returns.

Kitces Tweet On Vanguard Study

Are retirement investors at Pinnacle Advisory Group, that pay 3.30% in “advice” fees, actually falling below industry benchmarks, after mutual fund or managed account fees, portfolio turnover, custody costs. 401K fees and Pinnacle’s 3.30% all in advice fee?

The reality is the retirement investor does not know Pinnacle Advisory Group retirement returns after all fees.  Pinncle does not publish their fees on their website, nor are they filed with the SEC, like a mutual fund does semi-annually.  Why have we singled out Pinnacle?  Pinnacle, through its Director of Research, Michael Kitces, is actively promoting on social media that an Advisor can add over 3% “to client’s net returns.”  The Derivative Project simply asked Mr. Kitces to show the returns, after all fees, for Pinnacle’s sub advised Transamerica’s retirement investors.  Mr. Kitces publicly stated on Twitter to The Derivative Project to email him for the returns.  We did and he never responded.  One might find that misleading to say one thing on a social network and then do the opposite ‘behind the scenes.”

Our data clearly indicates that although Vanguard’s research shows “Advisors” may add 3%, their high fees eradicate any identified gains.

If you need a financial planner hire a planner, on an hourly basis.  If you want to have access to top investment performance, go direct to a seasoned professional money manager, saving you redundant intermediary fees. Most retirement investors in the workplace do not need a “customized” portfolio, based on one’s personal goals.  Everyone has the same goal – have the largest nest egg at retirement and the best annual performance, with the lowest fees–that is what matters.

Just as the Department of Labor is requesting comment on a mandate that financial services firms provide corporations a road map to their confusing 401k fees, the Derivative Project and Not On My Nickel are providing the first and only road map for retirement investors for financial advice fees.  The financial services industry refuses to provide retirement investors a clear and easy to follow road map on what their returns are, after all fees.

Is This Not a Pyramid of Fees?  The Not On My Nickel Road Map to Advice Fees

  • Transmerica’s SEC ADV states: “We have contracts with Third-Party Money Managers who are also investment advisors that offer fee-based advisory programs. These relationships were described in Item 4. These Third-Party Money Managers are not affiliated with us and they pay us a portion of the fees you pay to them. This is considered a material conflict of interest. The cost of placing your assets with one of these Third-Party Money Managers may be higher than placing your placing your assets in one of our Advisor or Firm managed advisory accounts.”Pinnacle’s ADV states:
  • “In general, the annual advisory fee paid by TFA (Transamerica Financial Advisors) referred clients will be greater than the annual advisory fee paid by Pinnacle’s other clients by the following amounts: 0.90% for accounts valued at $500,000 or less…” Transamerica’s ADV discloses that:
  1. “Clients pay advisory fees directly to the Third-Party Money Manager and the Third-Party Money Manager in turn compensates TFA. TFA pays a portion of this fee to its Advisors.
  2. The total fee charged to the client by the respective Third-Party Money Manager (including TFA’s portion of the fee) shall not be more than 2.6% annually”, before paying the actual money manager’s  fees and portfolio trading costs.

Pinnacle Advisory Group according to their SEC ADV, charges 1.30% (for assets under $500,000) for selecting investments.  On top of that fee, Pinnacle Advisory Group may enter into a contract with another advisory firm that charges both Pinnacle’s Advisory Fees and their fees for the exact same investment selection service. Pinnacle Advisory Group and Transamerica Financial Advisors have entered into an agreement, that effectively makes the retirement investor pay twice for the same service:

While Vanguard’s soon to be released study may show that your advisor may add an additional 3% of value, with Pinnacle and Transamerica, you are assured to be down 3.30%, as the relevant ADV’s disclose. $500,000 times 3.30% is $16,500 in annual fees. The alternative is transparency and bona fide education, at Not On My Nickel.  You can select a top Balanced Fund portfolio manager, with a 10 -20 year track record of out-performing their relevant index, for $3589, after all the portfolio management fees (mutual fund fees) with published, audited performance.