I believe the answer to your question depends on the size of your investment portfolio, "how" your advisor is investing your money, your return expectations and whatever additional services your advisor may be providing. 1% is pretty standard for the management of a diversified mutual fund portfolio funds. If your portfolio is greater than $500,000 or $1,000,000, some advisors will charge less. Some advisors will also charge around 1% for the management of an individual stock portfolio.
However, if your advisor is employing a more complex strategy that demands more time, research and costs on his end, and if his objective is to outperform the S&P 500 over a full market cycle net of fees (and if he can actually accomplish that goal, then 1.5% or even more is not unreasonable.
At our firm, we start at 1% for the management of mutual fund portfolios and our fee goes down when the client's assets under management reach certain breakpoints. We also charge more for more complex individual stock strategies where our goal is to outperform the S&P 500 over a full market cycle with less risk and volatility than the index. However, we also pay all the trading costs.
Hope this helps.
At first glance it looks high to me. But the answer depends on the total package of services you're actually receiving from the advisor and whether it's valuable to you.
A few questions you'll want to consider:
1) Does the advisor only provide portfolio management and nothing else? Some advisors charge a fee for assets under management, but then also provide routine financial planning and consulting services at no extra charge.
2) Does the advisor actually manage your portfolio? In other words, do they take "discretion" where they carry the responsibility to buy and sell investments without first consulting you? The weight of discretionary management is worth more than non-discretionary advising, where the advisor merely makes periodic portfolio recommendations to which you say yes or no.
3) Is the advisor managing your portfolio using strategic asset allocation or tactical asset allocation?
Strategic asset allocation divvies-up your portfolio to different asset classes based on a model portfolio and then provides some periodic rebalancing. There's no attempt to side-step market downturns or deliberately take advantage of underpriced assets.
On the other hand, tactical asset allocation attempts to avoid large draw-downs in the financial markets. In such cases, the manager may reduce weighting (even to 0%) on asset classes that are overpriced relative to historical averages or overweight asset classes that appear to be a bargain. Tactical allocation is much more difficult than strategic allocation and, if the advisor is any good at it, deserves a higher fee.
Coming full circle now . . . .
• If you're only receiving basic portfolio management using strategic asset allocation and nothing else (along the lines of planning/consulting), then the fee you're paying is highway robbery. You should be able to find that level of service for 0.50% annually, give or take.
• If you receive basic portfolio management PLUS financial planning/consulting, I still think the fee is a bit high. But you have to be the judge of whether or not value has been delivered. I think you should be able to find good service along those lines for 1.0% to 1.25% annually or a comparable flat retainer fee negotiated with the advisor.
• If you receive tactical portfolio management and your advisor is good at it, then the fee is probably fine. And all the more so if you receive any financial planning/consulting along with it.
Hope that helps. All the best.
That's a hard question to answer. I would generally expect an avisor to charge between 1% and 1.5% for personal management. Whether it's too much depends upon performance of your portfolio, and any added services s/he might be providing for you, along with the performance based upon your risk tolerance. In addition, with what the investment expenses are within your existing 401k.
Sounds high to me. Most advisors charge less. Check out a few web sites to compare fees. As the other answers state: a lot depends on what the advisor is doing for you in addition to basic investment advice. A true advisor should give you a copy of his government ADV or something similar as it gives you lots of information.
It's high, especially if you are only receiving investment management services (no financial plan). For that portfolio size we would charge 1.35% and that would include a full financial plan, which is arguably the more important part of the ongoing relationship. If you like your advisor it can't hurt to ask them to lower your fees. Feel free to reach out if you need more info.
The only thing that I can add to all the answers you received is. If you are paying 1.5% and advisor only buys individual stocks, then its one thing. However if he/she is purchasing mutual funds, then you have to add the expense ratios of the funds on top of that. In addition to that he might be getting 12b-1 fees back or commissions for selling the them. you could be paying north of 2.5%. What I would suggest you do is contact an RIA, not an independent Planner because they are still able to get compensated for selling products, but contact a Registered Investment Advisor, RIA, we legally not able to accept a commission or get compensated for positioning of certain products. They will run a cost analyses of your portfolio for you and you will know if you are paying anything above 1.5% annual fee. Let me now if you have any questions, best of Luck.
That sounds high to me, but as others have suggested, are you getting your money's worth? Maybe or maybe not. You've taken the first step by asking if you are indeed paying too much. It never hurts to get a second opinion or portfolio review by an experienced advisor and see how your current advisor compares with the competition. This will also keep your advisor on his/her toes to provide the level of service that he/she should be providing.
David. For nearly half a million dollars, It is too high, period! Whether it is discretionary or non discretionary, Whether strategic or tactical, its all too high. If someone says for instance you should pay more because Im going to attempt to protect you from market downturns or turmoil, then you should run away from them, because they cannot do it (no one can without constant luck), and they are trying to sell you something you dont need.
What you pay us for in the financial planning industry is the quality of our advice based on the education, training and experience we have to help guide you towards your particular goals. Managing a portfolio is only part of this guidance. I say it is too high because that is not where the market is now, and you can find plenty of quality professionals that will do as good or better of a job for less. I think its time you started interviewing new financial planners.
The 1.5% for that size portfolio is fairly typical. Without a further breakdown, I don't know what the additional $750 could be for.
Fees are only an issue in the absence of value. While your question seems straight-forward enough, my guess is that the advisor may be providing services (in addition to portfolio managment). Still seems a little high.