Terry Bork CLU ChFC, President   |   Aurum Insurance Services   |   D: 440-605-7230   |   C: 440-666-6032   |   tbork@auruminsurance.com   |   www.auruminsurance.com

Excessive Fees

”Investing isn’t free”.  But while fees are inevitable, excessive fees are a major drain on future asset values and potential cash flow.  Fees should be transparent, reasonable for the value received, and evaluated over the asset's life.

Portfolio Management

The traditional Portfolio Management process has two basic costs to consider:  Fund Expenses and Advisor Fees.  These fees are commonly a percent of assets, and increase as the asset grows. There may be additional costs to pay as well, depending on services provided.

Fund Expenses

Let’s start with fund expenses, whether mutual funds, ETFs, or private money management.  The big question:  Active or Passive Management?  Active managers spend a lot of time and money on analysis and research, to find securities they hope will outperform.  Those costs are passed on to investors in the form of higher fund expenses.

Unfortunately, there’s little evidence to support the idea that active managers have beaten the market consistently over the years.  In fact, most do not.  The question to consider is; what value is received for paying higher expenses to active fund managers, rather than buying low cost ETFs or index funds that track the markets for a fraction of the cost?

Advisor Fees

The second part of the equation is the advisor fee.  The typical investment advisor charges between 0.50% and 1.50% per year on assets under management.  This cost is determined by the amount being managed and services provided.

The advisor's role is to determine the optimal mix of stocks bonds and cash based on investor risk tolerance, as well as money manager evaluation, selection, monitoring, and ongoing reporting.


Fund Expenses and Advisor Fees, are a percent of assets, and can grow significantly over time, negatively impacting future asset values and cash flow.  As a result, great care should be given both to assure they are transparent and reasonable for the value received.

Accumulation Designed Life Insurance (ADLI)

Accumulation Designed Life Insurance (ADLI), when added to the asset allocation, is a cost effective “Alternative Asset Strategy” focusing on the living benefits of life insurance, including maximizing policy cash value.

Minimizing Policy Expenses

To maximize cash value, policy expenses, which are transparent and easily identifiable over the life of the policy, must be kept to a minimum.  Each policy is custom engineered to individual specifications with that goal in mind.

There are several factors that contribute to minimizing policy expenses, but since policy expenses are driven to a large degree by the level of the death benefit, a key design concept is Minimum Death Benefit Design.  This important concept minimizes policy expenses, and allows a higher percent of the premium to be directed into cash value.

Fixed Fee Schedule

In addition, the way policy expenses are structured can provide a major advantage over time.  Rather than the customary percent of assets, which increases total fees as the asset grows, policy expenses are fixed with the majority occurring in the first 10 years, providing a hedge against increasing fees under the percent of assets approach.

In later years, when values are the greatest, fees are extremely low or nonexistent.  For assets with a long time horizon, such as retirement assets, this schedule can result in total expenses being a fraction of the traditional percent of assets structure.

Value Received from policy Expenses

Expenses should be evaluated on their total impact on cash value as well as the value received.  The value received by the fees paid in a life insurance policy is very clear.  They provide death benefit protection, especially during the early years of the policy, and are most often completely recovered when the policy matures.

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