By Scott Ronalds

In the third installment of our series marking our 5th anniversary, we look at the concept of rewarding client loyalty with lower fees.

At the end of this month we’ll be rewarding our earliest clients with an additional fee rebate, as our first tenure discounts come into play. Clients who hold our funds for 5 years receive an additional 7% reduction on their total fees. This discount is in addition to any rebates they receive based on the size of their accounts with Steadyhand. The tenure discount will apply every year until investors hit their 10th anniversary as a client, at which time their fee rebate will be upped to 14%.

We offer both the loyalty and asset size discount in recognition that:

  • The costs of servicing our long-standing clients are typically less than our newer clients, as they require less up-front assistance in setting up their accounts and establishing a portfolio of funds. They also have become familiar with and know what to expect from our reporting and communications. And they buy into our investment philosophy, meaning they stick to their strategic asset mix (SAM) and don’t trade too much.
  • Large accounts do not cost us any more to administer than smaller accounts.
  • Lower fees lead to higher returns.

While our base fees are amongst the lowest in the business, we recognize they are not the lowest. For long-standing clients who entrust sizeable assets with us, however, our fees are pretty much untouchable.

As far as we know, we’re the only investment firm in the country that rewards clients for their loyalty. Although, perhaps the Deferred Sales Charge (DSC) could be considered a loyalty program of sorts. Under this plan, which is offered by fund companies that charge back-end sales commissions, the fee that investors are charged to exit a fund is reduced each year, usually over a period of seven years, until it reaches 0%. A different definition of loyalty, I guess.

Surprisingly, client loyalty is poorly rewarded in many industries. Consider the telecom and cable businesses. Providers offer sweet deals to attract new customers, but as an existing client, forget it. You get the rack rate, even if you’re renewing a contract.

At Steadyhand, the ‘Client Since’ field on our statements actually means something, in dollars and sense.