SmartAsset and Yahoo Finance LLC may earn commission or revenue through links in the content below.
An advisor fee of 0.75% of assets under management (AUM) is not outside the range of normal. That doesn’t necessarily mean you are getting your money’s worth, however. To further evaluate your advisor, you can take a step back and decide whether you’re getting the right value out of them and whether you’re a good fit.
A couple of ways you can do this include compare your portfolio’s performance against benchmarks, taking care to consider your stated risk tolerance when doing so. Also ask yourself whether your advisor’s communications practices are in line with your preferences and whether the advisor is keeping you up to date on tax changes, market news and other matters of interest. If you haven’t already done so, assess your advisor’s professional credentials. Finally, consider whether the general fit seems good, for instance, if the advisor is more focused on planning or performance, and how that accords with what you want. Finally, you can consider using this free tool to match with up to three fiduciary advisors and find a good fit.
There is more to assessing a financial advisor than comparing cost with performance. Your relationship with your advisor encompasses a range of services and features, including how well and how often the advisor communicates, whether you feel your risk preferences are being adequately accounted for and how much of the investment management job you want to handle yourself. Here are some things to keep in mind:
While fees aren’t always the most important consideration, they definitely represent a significant factor. And, since that’s the initial concern you expressed, it makes sense to address them first. With that in mind, an annual fee of 0.75% of assets under management (AUM) is about in the middle of what you can expect to pay. Robo-advisors, often the least costly among financial advisor options, may charge 0.25% to 0.5%. A financial advisor may charge up to 2%, but for accounts of the size you are talking about 1% is more typical. Financial advisors generally offer a wide expanse of services beyond investment advice, including retirement account strategies, estate planning, tax planning and more.
Another question is whether you are getting your money’s worth. One way to look at this is to determine whether the portfolio performance is meeting your expectations. You can evaluate performance by comparing your portfolio’s return to a suitable benchmark. The concept of suitability is important. You’ll want to compare the portfolio’s annual return with a benchmark that fits your investment style. If you’re neither particularly conservative nor particularly aggressive, the return on the S&P 500 might be a good one for you. A suitable financial advisor can help you determine your risk profile based on your goals and preferences.
