What are reasonable FA annual fees?

[Retiredmajor]

I know that many here don't like or use a Financial Advisor but I'm looking for thoughts on what would be REASONABLE, or better yet, LOW annual fees as a percent of the amount invested.


Thoughts? and Thanks in advance!

 

[REWahoo]

One of the lowest fees around is Vanguard, who charges 0.3%: https://investor.vanguard.com/financial-advisor/financial-advice

 

[flintnational]

Instead of a percent of assets, I would suggest a fee only FA charging by the hour or an annual fee. It will vary depending on what you want the adviser to do. Others may have a better number but I would think you could find someone for $2k to $5k per year.

In answer to your question for low % of AUM, Vanguard will do it for .30% (30 basis points). I would not pay more.

 

[Another Reader]

Zero. People that charge based on AUM put their interests first. Their "advice" will be slanted and self serving. They will also likely put you in high cost investments, compounding your problem.

 

[target2019]

I know that many here don't like or use a Financial Advisor but I'm looking for thoughts on what would be REASONABLE, or better yet, LOW annual fees as a percent of the amount invested.

For a low annual fee, I'd accept .25%.
A reasonable as-you-need-advice fee IMO would be $75-$150/hour. In this case, the advisor might want to create a plan up-front, and then charge a retainer each year for access to him/her. OTH, some simply charge by the hour.
If I was in a tight spot, I'd turn on a Schwab or Fidelity or Vanguard robot, and then learn from the moves.
We have 12 accounts, and I am able to manage Asset Allocation (AA) as a total portfolio. BTW, I am no genius. Bogleheads and E-R are good sources for help.

 

[kgtest]

I would charge 1% if I were an FA trying to feed my family. 1,000,000 * .01 = $10,000. You need $10mil of AUM to make a decent living at that rate. That's 100 clients with $100k with you, or 5 with $2mil. I am guessing FAs chase the 100s of 100k clients and hope to catch an occasional 2mil fish.

 

[Scuba]

When I used to work, our company paid 0.7% for management of a $250 million portfolio. When we had an FA, we did a competitive bidding process and negotiated 0.75% which applied as long as AUM stayed above $2M. I think most FA’s charge 1% or a bit more.

 

[OldShooter]

@Retiredmajor, long answer to simple question. Sorry.

First, ignore the FA-haters like @Another Reader.

Second, understand that "Investment Advisor" and "Financial Advisor" are frequently conflated. At places like Vanguard, you are getting basically an investment advisor. The scope of a financial advisor is much broader, including things like Social Security strategies, Roth vs TIRA strategies, advice on estate planning and other non-investment aspects of financial life. So you have to decide which you want.

Third, fees are negotiable. This is especially true at the smaller shops where, IMO, the relatiionship and the financial advice is potentially better. FAs associated with large brokerage houses and insurance companies are less able to negotiate fees and are more likely to be investment advisors and salespeople.

Fourth, some data: I am peripherally involved with a non-profit that has about $1M with Morgan Stanley and is paying 89 bps. This is an egregiously badly run portfolio ("peripherally" means they kicked me off the investment committee) but the organization is very low maintenance. Basically a quarterly meeting here in town and that's it.

I am involved with another nonprofit where we created an RFP and solicited proposals from a half-dozen FAs to run about $4M. This is a higher-maintenance client, where the FA is required to travel to a board meeting once a year to make a report and the portfolio is complicated by having some endowment funds and some donations that have to be tracked individually as to how the income is spent. The range of fees was from 0.4% at Vanguard to 1% at a large insurance company. The competitive range was 60-80 bps and the winner was at 68bps with a promise to reduce to 0.62% at $5M and 0.50% at $10M.

Edit: In both of these cases, the organizations are getting an investment advisor, as all the other functions that a true FA brings to individual clients are not needed.

From casual browsing I think a typical sticker price for running $1M and being a financial advisor rather than just an investment advisor is about 1%. One thing to be aware of, self-aware really, is whether you will be a high-maintenance client with lots of questions and phone calls. A client that the FA perceives as high maintenance will be less successful in negotiating lower fees.

Finally, for each FA you interview be sure to run a brokercheck (https://brokercheck.finra.org/) and be sure to establish that the FA relationship will be as a fiduciary.

 

[Sojourner]

Instead of a percent of assets, I would suggest a fee only FA charging by the hour or an annual fee. It will vary depending on what you want the adviser to do. Others may have a better number but I would think you could find someone for $2k to $5k per year.

+1

I found a great fee-only FA several years ago who I ended up paying around $1,200 for a thorough, top-to-bottom analysis of my situation and a very detailed financial/investment plan. Check out https://www.napfa.org/find-an-advisor.

In answer to your question for low % of AUM, Vanguard will do it for .30% (30 basis points). I would not pay more.

If, for some reason, you decide to forego a fee-only adviser, definitely do not pay more than 0.3% of assets. And I'd strongly recommend at least trying out a fee-only FA first, to see it that works for you. You may end up saving yourself many thousands (or 10s of thousands) of dollars over the years.

 

[SumDay]

Instead of a percent of assets, I would suggest a fee only FA charging by the hour or an annual fee. It will vary depending on what you want the adviser to do. Others may have a better number but I would think you could find someone for $2k to $5k per year.

In answer to your question for low % of AUM, Vanguard will do it for .30% (30 basis points). I would not pay more.

Ditto on the fee only. I pay ours $450 to do periodic 'tune-ups', which I usually ask for every 2 or 3 years. We found ours here: https://www.napfa.org/

I have instructions for DH in case I go first, and he'll turn it over to Vanguard.

 

[gwraigty]

First, ignore the FA-haters like @Another Reader.

That's not nice. Yours isn't the only valid opinion.

 

[OldShooter]

That's not nice. Yours isn't the only valid opinion.

Well, the OP was very explicit in his question and indicated that he already knew many people here didn't like FAs. So he was not soliciting those opinions.

In the case of @Another Reader, his post was such a broad statement that is was prima facie false. "All" advisors do not put their interests first. Even if that was true, which IMO it is not, he could not possibly know that unless he had evaluated every single advisor on the planet. So simple logic says it is false.

That said, I am a fan of fee-based advisors to the extent an advisor is needed at all. I am also attracted to the logic, often stated here, that by the time you know enough to select a good advisor you don't need one. But the OP didn't ask for my opinion and I didn't offer it.

So ... "not nice?" I'll plead not guilty.

 

[RetireAge50]

The folks at Vanguard Wellington charge us .17% to manage a big chunk of our investments. Seems a bit high but I am lazy and go with it.

 

[MichaelB]

First, ignore the FA-haters like @Another Reader.

Did you take a grouch pill for breakfast or put salt on your cheerios? You might want to brush up on your Dale Carnegie. https://www.amazon.com/gp/product/B003WEAI4E/ref=dbs_a_def_rwt_hsch_vapi_taft_p1_i0

 

[travelover]

Good advice given thus far. I think it is a mistake to refer to anyone here as a "hater", regardless of your intentions.

I'd second the notion that a fee for services advisor makes sense to set up a strategy initially or if your situation changes substantially. But once your portfolio is set up and you have a strategy for SS and legal documents squared away, I view it as a waste to pay an advisor an ongoing fee on AUM.

If you really need ongoing hand holding, Vanguard as mentioned, will do it relatively inexpensively. But, many or most of us do it by ourselves once we have educated ourselves to the point where we feel that we can responsibly choose an advisor.

 

[bclover]

I have a great financial adviser. My first year when he did a lot of time consuming stuff, like going through my late husbands estate he charged me 0.75% of the assets. Now that I'm pretty much on a coasting basis, we've switched over to a flat fee charge. I see him about 4 times a year.

 

[Another Reader]

I have a great financial adviser. My first year when he did a lot of time consuming stuff, like going through my late husbands estate he charged me 0.75% of the assets. Now that I'm pretty much on a coasting basis, we've switched over to a flat fee charge. I see him about 4 times a year.

I'm ok with this, because the poster here needed a lot of help after her husband died. Sounds like she got the quality help she needed at the time. The adviser backed off his fee when her needs changed.

I'm not ok with the sleazy bank in another post that was going to charge the OP's unsuspecting mother fees on top of fees for garbage products.

 

[Another Reader]

Well, the OP was very explicit in his question and indicated that he already knew many people here didn't like FAs. So he was not soliciting those opinions.

In the case of @Another Reader, his post was such a broad statement that is was prima facie false. "All" advisors do not put their interests first. Even if that was true, which IMO it is not, he could not possibly know that unless he had evaluated every single advisor on the planet. So simple logic says it is false.

That said, I am a fan of fee-based advisors to the extent an advisor is needed at all. I am also attracted to the logic, often stated here, that by the time you know enough to select a good advisor you don't need one. But the OP didn't ask for my opinion and I didn't offer it.

So ... "not nice?" I'll plead not guilty.

Very few people need the visible management and investment accounting services of a non-profit. So Old Shooter's experience is likely not applicable to most individuals. My comments were about managers using the AUM model with individuals anyway. A fiduciary, fee only FA can be helpful in some cases. The OP might benefit from some advice from a non-biased and knowledgeable third party. Not an AUM FA.

 

[target2019]

The folks at Vanguard Wellington charge us .17% to manage a big chunk of our investments. Seems a bit high but I am lazy and go with it.

Short and to the point.
They manage 10% of ours.

 

[Texas Proud]

Also be aware that insurance salesmen will tout themselves as FA...


A friend of DW ex husband (of the friend) was one... one time when we were visiting he kinda did a bit a spiel to me but I cut it off... when the friend was going thru the divorce I saw the finances and he had SOOO much debt that she basically got nothing... lucky for her they were only married a bit more than a year...


IMO, if a FA will not give you the information on what they own and what they are invested in then do not use them... now, it does not mean that what they do is what you should do, but at least you want to find out if they can even invest for themselves and make money...

 

[Bir48die]

Did you take a grouch pill for breakfast or put salt on your cheerios? You might want to brush up on your Dale Carnegie. https://www.amazon.com/gp/product/B003WEAI4E/ref=dbs_a_def_rwt_hsch_vapi_taft_p1_i0

And you're a moderator?

 

[MichaelB]

And you're a moderator?

It certainly appears that way.

 

[target2019]

This too shall pass.
All good FAs go to heaven?

 

[Midpack]

Instead of a percent of assets, I would suggest a fee only FA charging by the hour or an annual fee. It will vary depending on what you want the adviser to do. Others may have a better number but I would think you could find someone for $2k to $5k per year.

In answer to your question for low % of AUM, Vanguard will do it for .30% (30 basis points). I would not pay more.

+1. I’d go with a fee based advisor.

I wouldn’t sign up for any advisor that worked under AUM, and wouldn’t suggest anyone pay more than 0.3%. In the past some members here have described an easy way to ‘cheat’ an AUM advisor, but it’s underhanded IMO, so I’ll let someone else share it if they’d like.

Unfortunately there are too many people who are their own worst enemy as investors (e.g. amateur market timers, panic sellers, etc.), who may be better off with a full time advisor to hold their hands (not meant as an insult). Those types aren’t well represented here, and those who wade in don’t usually stay long.

 

[38Chevy454]

I agree, if you feel the need for a FA, then a fee-based will be a lot better. Paying by the hour for what you need will be better financially.



Here is an example to show why a % of Assets Under Management (AUM) is bad. Let's assume you have $500K in total assets. If you pick a FA that charges 1%, that is $5K per year. Even if the FA works on your stuff for 20 hours (probably less hours, but follow my example here), that is $250/hour. Realistically you are lucky to get 10 hours, that means your equivalent rate cost is $500/hour. Not sure about you, but I would sure like to get $500/hour pay rate. Multiply those numbers by double if you have $1M of total assets; or $10K per year cost. Even Vanguard at 0.3% will be $3K/year at $1M AUM.



A fee based FA might be $2-3K/year, that sure seems a better deal for you than potentially $5-10K/year.