The Irreverent Economist

New England Advisor Waives Fees for Clients Who Donate Them

by Jed Horowitz at Advisor Hub

On a Sunday night in mid-March, Karen Parker Feld thought about the massive government relief being provided to businesses and industries struggling through the coronavirus crisis and decided she wanted her financial planning firm to participate, on a more personal scale.

She e-mailed Paladin Advisors’ approximately 70 clients that she would reimburse any amount they donated to individuals, small businesses and local service organizations needing immediate help, up to the level of their first-quarter advisory fees, if they responded by April 15.

“I wanted to see if I could get them to focus on people in their communities who needed the money right away, and I wanted to get people in the financial community to start thinking about giving in a new way,” said Parker Feld, a fee-only certified financial planner in Kensington, NH, whose firm oversees about $295 million. “Everyone was probably in a better financial position than the average American.”

About 90% of clients responded to the campaign she had dubbed “Valor Added,” including about 70% who donated the entire fee, for a total of $298,000 (rising to $340,000 through matching contributions). Paladin encouraged them to fund their contributions with cash rather than drawing down their portfolios as markets were tanking.

Parker Feld says she did not run spreadsheets or make extensive calculations before deciding to make her offer. Unlike many financial planning firms, Paladin has a rainy-day fund built as insurance against the loss of a major client or big market setback.

She also is holding back her own compensation to keep her six-person practice operating as usual, though she said the firm’s value-investing bias has helped it weather the first quarter’s volatility because portfolios already strongly in cash have been in a “very defensive position” since the beginning of this year. (She’s beginning to see opportunities in emerging markets and even in oil, she said.)

Paladin asked clients to document their contributions “in some fashion,” according to a blog on its website, “as we want to make sure that funds are getting out of the financial system and into the hands of those who need it.”

Parker Feld, who began her advisory career in 2008 after heading foreign exchange research at Harvard Management, Wellington Capital Management and Chase Manhattan Bank, said clients appreciate being prompted to do something positive at a fretful time.

“You have pushed us to think outside of our realm,” one wrote her. “Once again, you have outperformed, maybe not in the traditional sense, but in the most meaningful and heartfelt sense.”

Another client said he was motivated to donate $14,100, higher than his quarterly fee, to people in his community struggling with unemployment, rent payments and family support.

Zung T. Nguyen, a financial advisor and former colleague of Parker Feld’s when they worked at Athena Capital Advisors, used set up a fund that bought gift certificates at local restaurants to front-line workers at a local hospital in New Jersey.

Parker Feld, who also founded a nonprofit financial planning consciousness-raising group called Wealth of Wisdom, is hoping that others in the advisory community will devise creative responses to the coronavirus situation.

The Financial Planning Association has developed a list of qualified planners who are offering pro bono consultations to low-income individuals and families and other underserved populations (military personnel, domestic violence survivors, people experiencing serious medical crises, among them).

To qualify, FPA members must be certified financial planners and complete a pro bono training course. Clients are asked to complete a letter of engagement that defines the relationship with the advisor. Sixty-three advisors in 26 states, listed alphabetically by state, were on the list as of Monday morning.

“A lot of people who are well off feel insulated from ordinary Americans,” said Parker Feld, who refers to herself as a bleeding-heart libertarian. “If you want free markets, you have to remember your responsibilities.”

 

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