An Examination of Effective Fees
And how it benefits you

   “The purpose of these small but important changes is to decrease the effective fees that our clients pay and pass those savings directly into our client accounts.  We continue to work harder & smarter to preserve your wealth and grow your assets."
- Shon Flaharty   CEO, CFP,  Flaharty Asset Management.  

Change # 1 :  Efficiency within investable asset classes

Examine the graph below of two investment choices.  Ask yourself one question… which would you rather own?  This seems like an obvious choice but too often there are mutual funds that consistently underperform their benchmark all while taking excess risk.  Flaharty Asset Management was a pioneer in adapting to the use of ETFs with the sole goal of lowering your expenses and increasing the efficiency of your investments.  78% of mutual funds underperform their respective ETF; on average by 1.8% per year. 


Change # 2 :  In House Research

Flaharty Asset Management has taken the task of market monitoring out of the self-serving hands of the investment product makers and transitioned this to within the practice.  The goal is to have your specific portfolio reflect changes and opportunities in the market.  

  • Market timing does not work; market monitoring does.
  • Investing should be unbiased, objective, and most importantly emotionless.

Change # 3 : Your Anchor

It is common investment knowledge that a diversified portfolio is ‘less risky’.  This is only true if all the pieces do not move in tandem.  Some must go up while others go down.  ‘Your Anchor’ is a way of thinking at Flaharty Asset Management that involves accepting less return on one piece because it greatly reduces your total risk. 

  • Cash is more than sideline money, it is an asset class like Stocks and Bonds but with different characteristics
  •  Own both Sunscreen and Umbrellas, when one isn’t needed the other one probably is (diversification metaphor)

Change #  4 : Lowering your effective fees

 Would it surprise you to learn that you pay 5.62% in effective fees with a traditional financial advisor?  Follow along and we’ll try and prove it.  You will learn how Flaharty Asset Management is saving you 3.92% just in fees (we haven’t even begun to discuss performance yet) and what that really means to your net worth.

  •  Management Fees: The average equity mutual fund charges 1.25% in management fees.  The average ETF that Flaharty & Associates uses charges 0.20%.Savings to You:  1.05%
  • Cash Drag:  The average mutual fund holds 4-7% in cash for the purposes of meeting investor redemptions.  Studies have shown that this ‘cash drag’ reduces performance by 0.83%.  ETFs are tradable securities just like stocks and exhibit no cash drag. Savings to You:  0.83%
  • Turnover:  The average fund buys and sells securities within their fund and charges those hidden expenses to the shareholders.  Studies have shown the average effective expense for turnover is 1.44%.  Flaharty & Associates focuses on products with very little turnover, and all trading cost are paid by the firm.  Savings to You:  1.44%
  • Tax Effect:  Mutual fund shareholders are required to pay tax on gains within the fund regardless if they sell their particular shares.  Tax is only realized for ETF products when an investor sells their specific shares.  This early tax cost is estimated to be 1.10% for the average non-retirement account. Savings to You: 0.85%
  • Advisory Fees:  The average advisory fee charged is 1.00%.  Flaharty Asset Management charges 0.90% on the average client account.  Savings to You:  0.10%


An initial investment of $100,000 compounded for 20 years at a rate of growth on the investment of 6.5% will grow to $330,858.

With a savings of 3.92% in effective fees, the same $100,000 growing at a 10.42% return will grow to $657,517.