One of the many regulatory legislations on the investment advice industry is nicknamed “Reg BI”, an abbreviation of the above. The spirit of this legislation is that you, the client, can assume that the recommendations you get are solely in your own best interest and that whoever is providing you with that advice is free from visible and not-visible conflicts of interest. Said another way, your advisor is not benefitting in some other way in addition to the fees you have agreed to.

We will not be entering into a broad discussion here about all elements of Reg BI and the ever-expanding list of potential investments being created by the investment advice industry. Our intent is to describe the scope in which Kennedy Investment Counsel (KIC) operates, and what that means for you.

First off, fees. We charge at a defined rate on the total value of your account, or aggregated value of your relationship at KIC.  These fees start at 75 basis points (.75%) and work downward with increasing account size. We believe this is a fair rate and is aligned with your interests.  The only way KIC will earn more is if the value of your assets being managed increases. Indeed, in recent years your fee would have decreased due to market conditions. That’s also fair.

But the “account level fees” as these are known are not the only fees you are potentially exposed to.  There are numerous investment “products” on offer in the investment advice industry. All have internal fees which you should regard as a second level of fees. Frankly, some of them are large. You ultimately pay every cent of them, and they reduce your potential return.

At KIC, we build your investment portfolio out of individual stocks or bonds and Electronically Traded Funds (ETFs) only.  No other products. Further, we strive to purchase the lowest cost ETFs and those that are managed not to generate capital gain distributions.

How to calculate the overall fee you are paying at KIC?  The “second level fees” in an all-ETF account may add an extra 5-10 basis points (.05-.10%) so an account paying 75 basis points (.75%) would have an all -in management fee of 80 – 85 basis points (.80% - .85%).

KIC does not share in those ETF management fees nor has a relationship of any sort with the companies that create and manage any ETFs selected.

Actively managed mutual funds, target funds, wrap accounts, annuities, private capital, all have much higher internal fees.  We are familiar with all these; we do not use them to construct your investment posture, and for various reasons in addition to the fee issue. If you already own them, we will help to determine an exit strategy if possible or wise.

A word or two about trading fees. Commissions are set by Interactive Brokers (IBKR) and are very low, even by industry standards. Typical is $1-$4 per trade. We do not share in any commissions charged by IBKR. Further, we seek documentation each year that IBKR has been reviewed for best execution by an outside firm. Finally, your transaction fees are kept low simply by the “buy and let work” strategy we practice.

An additional element of Reg BI is the concept of Care. Suffice it to say, each account you established will have an explicit investment objective statement and is measured for investment performance from day one. This data is available to you online, in real time, and any time. Periodical meetings will be scheduled to discuss your investments, investment results and indeed, whether your investment objectives remain appropriate.

These business practices of KIC are embedded in our Policies and Procedure manuals as well as documents such our ADVs (Part A and B) filed annually.