As a Childfree individual, your financial landscape often looks different from that of those raising families. You might be prioritizing non-traditional work arrangements, extensive travel, philanthropic endeavors, or simply living life to the fullest without the financial obligations of dependents. At Childfree Wealth®, we believe in empowering you to achieve your unique financial goals, and for many, that includes embracing the “Die With Zero” philosophy, as popularized by Bill Perkins – strategically spending your wealth to maximize life experiences rather than leaving a large inheritance.
When it comes to choosing a financial advisor, two primary compensation models often emerge: the Percentage of Assets Under Management (AUM) and the Flat-Fee planning model. While both have their merits, understanding their nuances is crucial for aligning with your Childfree “Die With Zero” aspirations.
Percentage of Assets Under Management (AUM)
The AUM model is perhaps the most common. In this structure, your financial advisor charges a percentage (typically 0.5% to 1.5%) of the assets they manage for you. As your investments grow, so does the fee your advisor earns.
Potential Downsides for “Die With Zero” Enthusiasts:
- Disincentive for Spending: While an advisor under an AUM model is motivated to grow your portfolio, this can create a subtle disincentive for you to spend your money, even when it aligns with your “Die With Zero” goals. Every dollar you spend reduces their fee, potentially leading to a conflict of interest as you approach your planned drawdown years.
- Growing Fees in Retirement: As your portfolio ideally grows throughout your working life, your AUM fees also increase. This can become a significant drag on your wealth, especially when you’re looking to deplete your assets in retirement strategically. Imagine paying a substantial percentage on a multi-million dollar portfolio when your goal is to enjoy that money, not preserve it indefinitely.
- Less Focus on Holistic Planning: While AUM advisors may offer comprehensive planning, their core financial incentive is directly tied to asset growth. This might lead to less emphasis on intricate spending strategies, tax-efficient drawdown plans, and other crucial elements of a “Die With Zero” approach.
Flat-Fee Financial Planning
Flat-fee financial planning, on the other hand, involves paying a set fee for specific services or for a defined period of time (e.g., annually, quarterly, or per project). This fee is independent of the value of your assets.
Why Flat-Fee Planning Aligns with “Die With Zero”:
- Revenue is not tied to Assets Under Management: This is the cornerstone advantage for Childfree individuals aiming to “Die With Zero.” Your advisor’s compensation is not tied to the size of your portfolio. This means they may be more aligned with your goal of spending down your assets optimally, without any financial incentive to encourage you to hold onto more than necessary.
- Predictable and Transparent Costs: Flat fees offer clear, predictable costs. You know what you’re paying for, allowing for better budgeting and financial planning, especially as you navigate your drawdown strategy.
- Emphasis on Holistic Life Planning: Flat-fee advisors are incentivized to provide comprehensive advice that extends beyond just investment management. They can focus on creating detailed spending plans, optimizing Social Security, analyzing tax implications of withdrawals in collaboration with your CPA, planning for healthcare costs, and even discussing philanthropic strategies – all critical components of a successful “Die With Zero” journey.
- Cost-Effective for High-Net-Worth Individuals: For those with substantial assets, AUM fees can quickly become very expensive. A flat fee is often more cost-effective, allowing you to retain more of your wealth for your experiences. For every one million you have in managed assets, a one percent fee is equal to $10,000 per year.
- Strategic Drawdown Expertise: A flat-fee advisor may be better positioned to help you create a strategic drawdown plan, ensuring you’re using your money effectively to maximize experiences and minimize tax burdens, without worrying about how those withdrawals impact their own income.
Imagine This Scenario:
Let’s say you’re a Childfree individual with a portfolio of $2 million, aiming to retire at 55 and spend down your assets by age 90, enjoying a rich life filled with travel and hobbies.
With an AUM advisor (1% fee): You’d be paying $20,000 per year in fees just on your investment management. As your portfolio grows, so does this fee. In retirement, as you start spending, the fee decreases, but the incentive remains to keep those assets invested.
With a Flat-Fee advisor: You might pay a fixed annual fee, in 2025 Childfree Wealth® charges $10,000, for comprehensive financial planning that includes investment advice, tax strategy, and – critically – a detailed “Die With Zero” spending plan. This fee remains constant, regardless of whether your portfolio is $2 million or $500,000, allowing you to confidently spend without financial penalty.
Making the Right Choice for Your Childfree Life
At Childfree Wealth®, we encourage you to explore advisors who operate on a flat-fee or hourly basis. This model can provide the comprehensive planning necessary to craft a financial strategy that supports your unique Childfree journey and empowers you to live a life rich in experiences, ultimately dying with zero regrets – and zero unspent dollars.