‘It has me questioning if we are in the right relationship.’ Our financial adviser is a ‘top performer’ but she costs well over $20K a year — even when we lose money. Should we get a new one?
How to know if your financial adviser is worth the money.
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Question: After our first financial adviser retired, we picked a new one recommended by her to continue our relationship with the firm. Our fixed-rate fee of $1,700 per year changed to 0.9% of our assets under management. That meant the fee was around $20,000 in a year. This year we’ve added way north of $1 million to our investments from an inheritance. But still our advisor will not go with a flat fee or lower percentage fee. Yes, our advisor is a top performer, but like everyone, our portfolio is taking a big hit this year and the fee will be well over $20,000. Should we be pursuing a set fee even if it means changing advisors? The 10 or 15 times the original annual flat fee has me questioning if we are in the right relationship. (Looking for a new financial adviser too? You can use this tool to get matched with a financial adviser who might meet your needs here.)
Answer: The answer isn’t a simple one, but let’s start with the 0.9% fee, which pros say is pretty standard in the industry. But that doesn’t mean it’s not worth looking into further by examining what she is really doing for you for that fee, and whether someone just as good might charge far less. “For 0.9%, the adviser better be providing comprehensive planning or you’re paying way too much for something that can be done for fractions of the price,” says certified financial planner Chris Russell of Tempus Pecunia. Adds certified financial planner Ryan Townsley of Town Capital: “As an adviser, I’m sympathetic to sticking to your fee schedule with very rare exceptions. That doesn’t mean your adviser is delivering value worth this fee. Paying a fee that large should come with massive value,” says Townsley.
Have an issue with your adviser or looking for a new one? Email [email protected].
For his part, certified financial planner Michael Miller at Miller Premier Investment Planning says: “You need to consider the services rendered by your adviser when assessing whether or not to get rid of him or her. Some financial advisers provide a very comprehensive list of planning services as part of their package: estate planning and document preparation, bespoke structured notes, tax planning, risk management, retirement income planning and even business planning … At the end of the day, you’re the one who actually holds all of the cards as it’s your decision who you hire. If you feel that your adviser is not delivering the services and expertise for the price you’re paying, you have the freedom to shop around.”
Looking for a new financial adviser too? You can use this tool to get matched with a financial adviser who might meet your needs here.
What’s more, your adviser doesn’t seem as willing to work with you as maybe she should, pros say. “Do you want to be in a relationship where the answer to a request is a flat no? There are lower cost advisers out there that will offer a flat fee,” says Russell. Indeed, a flat fee may be worth considering. When looking for a new adviser with a fixed-rate fee, certified financial planner Kaleb Paddock at Ten Talents Financial Planning, says you should ask a new adviser how many hours they spend actually working on each client in a given year. “How many meetings do you get with them per year? Does the adviser do tax planning and beneficiary planning? Do they provide asset allocation advice to help you hold the right investments in the right tax-advantaged accounts? You’ll get more value from comprehensive planning than simply trying to find a top performer who just focuses on investments,” says Paddock.
And Townsley notes that an adviser should always be in the process of earning your continued business, and also points out that asset-based fees should come with reductions in fees as your portfolio gets bigger. “It doesn’t take double the work to manage double the money, so a tiered fee structure is most appropriate. My best advice is to get a second opinion,” says Townsley.
Whoever you go with, pros you may want to interview 2-3 other people, or even more if needed, to find someone who is going to deliver and make you feel the fee is well worth it. Here’s a guide on what questions to ask any adviser you might want to hire.
Have an issue with your adviser or looking for a new one? Email [email protected].
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