Is this potential adviser charging a fair rate?


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Question: A new adviser is suggesting 0.9% for a portfolio of $7 million. Does this sound fair? What could I reasonably negotiate?

Answer: You’re smart to question the fees you’re paying. The short answer is that it almost never hurts to negotiate fees — and you could likely do better than 0.9%.

While 0.9% is within the range of industry norms (1% of assets under management is pretty typical), for a portfolio of your size, it could be lower, though there is plenty of nuance to that. “Typically at this level of assets, a high quality adviser can be found for 0.8% and less,” says Eric Ross at F2 Wealth. (Looking for a financial adviser too? This tool can match you to an adviser who may meet your needs.)

Have an issue with your financial adviser or looking for a new one? Email questions or concerns to [email protected].

The first thing to know is that those with more assets under management tend to pay a lower percentage, pros say. “Many advisers have a waterfall fee schedule, which charges lower percentages as your portfolio grows,” says certified financial planner Kaleb Paddock at Ten Talents Financial Planning.

Another thing to consider is what your adviser is doing that’s covered by the fee. “If they’re performing money management services only then, yes, the 0.9% annually does seem high. If they’re performing wealth management services, including tax planning, cash flow planning, portfolio management, review of estate documents, insurance review and potentially multi-generational planning, the 0.9% may only be a bit on the high side,” says certified financial planner Bruce Primeau at Summit Wealth Advocates. 

How to negotiate with a financial adviser

As for what you can reasonably negotiate, with a $7 million dollar portfolio, Paddock says you should negotiate additional services in addition to a lower pricing model. “Your adviser should be including tax return filing and preparation and an estate attorney on retainer as included services in their pricing, since you would receive tremendous value from coordinating your investments, taxes and estate plan all under one group of providers communicating and coordinating on your behalf,” says Paddock.

Instead of a percentage, you might also want to negotiate a flat price, says Paddock. “While the 0.9% sounds like a tiny percentage, it would equate to $63,000 per year and as your portfolio grows, so will your fees,” says Paddock. 

It can also be worthwhile to evaluate if the adviser has the option to cap the fee at a certain level. “They should have several other examples of the value they provide to other customers in an effort to justify that kind of price tag — and if you feel the need to negotiate, then it’s likely they haven’t demonstrated enough value for the cost of service,” says Terrance Hutchins, certified financial planner at Logos Financial Group.

One way to test what you could be getting from other advisers is to cast a wide net. “One of the best ways to test the reasonableness of the fee is to get a few quotes. I’d suggest getting four quotes,”  says Al Faber, certified financial planner at Woodson Wealth Management. (Looking for a financial adviser too? This tool can match you to an adviser who may meet your needs.)

One thing to keep in mind: “While the portfolio value may be $7 million, it doesn’t mean the fee has to apply to the entire amount. If you had 50% in the S&P and 20% in individual municipal bonds and cash not being managed, you should only have a fee on about $2 million,” says Faber.

Have an issue with your financial adviser or looking for a new one? Email questions or concerns to [email protected].

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