Rick Ferri, the low-cost financial advisor and champion of index funds, is back. Three years after being frozen out of Portfolio Solutions, the firm he founded in 1999, by a new partner whom he subsequently sued, Ferri has opened a new firm.
He had to wait until a noncompete clause had expired on April 7 following an arbitration decision that ended the dispute and awarded Ferri more than $3 million.
Ferri Investment Solutions offers offers hourly, customized investment advice for individual investors; model portfolios for financial advisors, retirement plans, fund companies and other institutions; and consulting services for investment advisors, financial planners, or representatives of financial firms.
Ferri charges $450 an hour for investment advice to restructure or create long-term customized portfolios for individual clients but has a special introductory offer of $500 for a 90-minute session that is prorated if the session runs shorter. “You only pay for the time you need,” he says.
He connects to individuals by phone, Skype or online and rarely in person — “I haven’t found anyone who wants to do it in person” — and customizes portfolios based on what the client needs, starting with a conversation about how much they know about investing. All they have to do is email him through his website, then schedule a time slot after he responds with his calendar.
Ferri doesn’t do financial planning but will refer clients to a planner or advisor if they want one, excluding those advisors that charge high fees, which in Ferri’s view is usually an advisor that charges more than 25 basis points for accounts of $1 million or more.
“I find advisors all over the country that will take clients for 25 basis points from $1 million and up,” he says. “There are a lot of them.”
Ferri, who is a chartered financial analyst and fiduciary, is on a mission to unbundle advisor fees, for investors to pay for the services they need, such as financial plan or asset allocation. Citing a study by Michael Kitces, he notes that the cost of a financial plan is around $2,500 but advisors who get paid on retainer charge twice as much for a standalone plan — and advisors who charge a percent of assets under management continue to collect fees when the plan is already done.