Rusty Redlow has always independently managed his personal investment portfolio. After a 25-year career as a chemical engineer with a large chemical company, Rusty retired and on January 1, 2018, opened an investment advisory business incorporated as R&R Financial Planning LLC. Rusty was eager to share his knowledge and investing experience with people in similar positions to himself; that is, those who have recently retired. Also, Rusty has discovered there is an unmet need for financial-planning advice for people living in rural areas. Through his parents, Rusty has learned that there are many seniors who cannot, or prefer not to, drive to larger cities for financial-planning help. Therefore, unlike other financial-planning firms, Rusty drives to his sometimes-remote rural clients who can be many kilometres from his home.

The first year of operations of Rusty's company was well liked by clients, and he quickly built his client list to 35 (which is the maximum he plans to serve). However, despite success in attracting clients, his firm is losing several thousands of dollars each year. Prior to offering his services, Rusty had investigated client fee structures of several other firms. He discovered that some firms charge clients based on a percentage of the dollar amount invested by the client, some combine a fixed annual fee with a smaller percent of client investment amounts, and others charge an hourly fee only. Rusty wanted to keep it simple for his clients and decided to charge only a fixed monthly fee for each client in the first two years. However, because of an operating loss again in 2020, Rusty is looking for help form you to analyze his financial results and is seeking advice on how structure (i.e. fixed versus variable) client fees in 2021.

Over the past few years of operations he has found that some clients require very little time, while others call frequently and demand regular visits and monthly hard copies of statements. (Many older clients do not have Internet or email access and prefer face-to-face meetings.) Therefore, Rusty is considering a fee structure not currently being used in the industry; specifically, he would like to charge an annual fixed fee combined with a variable portion based on time spent by him and his assistant on each client account (information he has been carefully tracking). He believes this would better reflect the costs incurred to service his 35 clients.

Because most clients are in rural areas, on average, more than 90% of Randy's time is spent driving to and from the client. The firm employs an assistant to help with administrative responsibilities, and this person works 20 hours per week out of Rusty's home office. Rusty also contracted with another local person to help once a month with the preparation and mailing of a monthly investment news and portfolio update. The following is the operating results of R&R Financial Planning for the past full year of 2020.