Frequently Asked Questions

Buchanan Capital Management, LLC is set up in a way that caters to account sizes of $1,000,000 or more. However, we will not turn away potential clients that take their finances seriously, have a long-term investment time horizon, and are open to professional guidance in wealth creation. If there is a concern about investment minimums, please give us a call and we can determine if we are a good fit for you.

The fiduciary standard was established as part of the Investment Advisors Act of 1940 and it requires advisors to put their client’s interests above their own. In other words, the act stipulates that an advisor must place his or her interests below that of the client. The act encourages nonbiased investment advice, free of conflicts of interest such as choosing investments with higher commissions.

This is a much more stringent standard than the suitability rule regulating registered representatives of Broker-Dealers. The suitability rule has two components: (1) that the product is suitable for the customer, and (2) that firms and investment professionals fully understand the products and transactions being recommended. Instead of being required to act in the best interests of the client, the investment professional must only have a reasonable basis for believing the transaction is suitable for the client.

The term “fee-only” refers to the way an advisor is compensated for the services he provides. Fee-only advisors receive their compensation as a percentage of the asset base of their client’s account. The account is debited on either a monthly, quarterly, semi-annually, or annual basis.

For example, let’s take a look at a $150,000 account with a management fee of 1.00%. If the advisor were compensated monthly, they would receive $125 per month ($150,000 X .01= $1,500, $1,500/12= $125) regardless of how many transactions they placed in the account. The only way the advisor can increase their monthly income would be to make their client’s account grow. This fact aligns the interests of both the client and the advisor.

In the compensation model where advisors charge a commission on each transaction, potential conflicts of interest may arise. This is because there is no direct correlation between the growth of a client’s account and the amount the advisor is compensated. In this model, an advisor could earn higher commissions one year over another, based not on the performance of their client’s account, but on the size and frequency of transactions in the account. All too often, compensation can determine behavior, leading to an unpleasant client experience.