My financial adviser swears his all-in fee ‘will never exceed 1.75%.’ Does this seem excessive?

Financial Planners


Question: Here is what a potential advisor wants to charge me. Does this seem excessive? It feels high to me. How should I move forward? 

We are paid two ways: 1) Investment advisory fees: We receive annual investment advisory fees (typically 1% per year) on assets that we oversee. There are asset manager fees/platform fees that are determined by whom we utilize to manage the investments. Our promise to clients is that their all-in fee will never exceed 1.75% annually. 2) Insurance commissions: We receive insurance commissions from life insurance, long term disability insurance, long term care insurance, property and casualty insurance that is based on the policy premiums. We do not charge planning fees.

Answer: The cost of financial advisory services varies based on factors such as the complexity of your financial situation, the type of services you require, the expertise of the adviser and the fee structure they employ. But the very short answer is that the all-in 1.75% all-in fee cap you mention is on the high side, pros say, though it does seem to include asset manager and platform fees. (Asset management fees are what you pay for someone to manage your investments and platform fees cover technology and investment platform services which are often passed on from the platform service to the adviser and then onto the client.)

Have an issue with your financial adviser or looking for a new one? Email questions or concerns to picks@marketwatch.com.

“Generally, the industry average for investment advisory fees hovers around 1% per annum of assets under management (AUM), particularly for AUM below $1 million. As your portfolio grows, the percentage often decreases,” says certified financial planner Blaine Thiederman at Progress Wealth Management. 

For Tara Unverzagt, certified financial planner at South Bay Financial Partners, a 1% model for investment advice only is too high. “The 1% is reasonable today for investment advice with financial planning, but if you don’t need a person to hold your hand, go with a robo adviser that will do the investing for you and help you not to do something silly when the market goes crazy,” says Unverzagt.

In other words, you can do likely better than 1.75%, and fees can add up to thousands of dollars. For reference, certified financial planner David Barfield at Datapoint Financial Planning gives this example: 1.75% on a $500,000 portfolio would be $8,750 per year and .25% would be $1,250 per year. “The finance industry knows how to make money, these little fees add up to big dollars and are killing people with and without wealth,” says Unverzagt.

For his part, certified financial planner Derieck Hodges at Anchor Pointe Wealth Management says that while lower fees are available, this 1.75% all-in-max fee might not be too high depending on what you are getting for it. “These fees are reasonable if the client is getting comprehensive planning advice like tax and estate planning and goal planning,” says Hodges.

It’s also worth noting that the adviser does not charge planning fees, which could result in overall cost savings compared to firms that charge separately for financial planning and asset management. Keep in mind that fees should always be judged in the context of overall value delivered. “While advisers tend to all sound alike and many describe themselves as being comprehensive, there are vast differences in the breadth and depth of services they provide,” says certified financial planner Eric Ross at F2 Wealth.

But however this adviser charges, one thing is certain: to ensure you fully understand what you’re getting for the cost, it’s important to clarify with the adviser exactly what services are included. 

The issue with an adviser who gets commissions

More concerning than the level of fees you describe is the potential conflict of interest with the insurance commissions. “When it comes to insurance commission, the practice is relatively common. Still, the potential for conflict of interest exists as advisers could be incentivized to recommend insurance products that offer higher commissions,” says Thiederman. 

“How will you be able to distinguish if an insurance recommendation is being influenced by the commissions the adviser receives? The compensation may be a direct commission or may be to qualify for a bonus or other type of incentive. There’s no need to work with an adviser who has these potential conflicts of interest. Many advisers do not accept any form of commissions, yet are highly skilled at helping clients evaluate their needs for life insurance, long-term care insurance, disability insurance and property and casualty insurance and can help make sure the consumer has the policies most appropriate for them,” says Ross.

How to evaluate a financial adviser besides fees

That said, fees shouldn’t be the only factor in your decision to hire a planner. “It’s crucial to consider the adviser’s credentials, their approach to financial planning and investment management, their transparency, and whether their services match your specific needs,” says Thiederman. If the fee still feels too high, it might be worth seeking out alternative quotes to compare. 

Remember, the goal is to find a balance between cost and value. “Just as the cheapest adviser isn’t necessarily the best, the most expensive one isn’t automatically the most effective or suitable for your needs,” says Thiederman.

You also might want to look beyond the assets under management model, such as an adviser who charges hourly or per-project fees. Fees for a time-based or hourly planner vary depending on location and their experience, but you can expect to pay between $150 and $450 per hour for advisory services. To find planners who charge hourly, visit the National Association of Personal Financial Advisors, Garrett Planning Network or XY Planning Network. 

Have an issue with your financial adviser or looking for a new one? Email questions or concerns to picks@marketwatch.com.



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