There's really no reason why you can't negotiate a better deal with your money manager. In the wake of the financial crisis, investors turned to their financial advisors for lower fees. The good news, investor protection group Invest Right says, is that a lot of commissions can be negotiated. How far you go in negotiation discussions depends on a combination of your relative position as a client and the questions you ask.
In the age of financial uncertainty, investment advisors who are willing to haggle a little to keep you as a client prevail over those who are inflexible about fees. Advisors only charge based on the services they offer. Therefore, you may be charged hourly or as a percentage of your assets. They can also use a flat-rate withholding charge for individual services.
To properly prepare for a fee negotiation, you need to have a good idea of the actual costs you are paying. While certain fees, such as management fees, may be explicitly stated, other fees, such as trading or custody fees, may not be openly disclosed. Once you extract the true total costs of the services provided by your investment manager, you will be in a better position to determine if the manager is offering you value in the form of excessive returns that sufficiently justify the prices charged. After this evaluation, you can contact your investment manager with confidence, backed by gross figures to advocate for lower fees.
That said, the size of the reduction may depend on the amount you have invested, and customers with higher net worth are granted larger reductions. According to Financial Advisor magazine, it is more difficult to negotiate the size of a rate reduction than the reduction itself. For the traditional 1% rate, customers can expect asset management services and a full financial plan that is updated at least once a year, says Jacob Lumby, a graduate associate instructor in personal financial planning at Texas Tech University. If you ask yourself “is it worth paying a Financial Advisor 1%? , robo-advisors may seem like an attractive cost-saving alternative.
In an ideal relationship, you and your financial advisor should be happy with what you are paying. If you don't have an advisor yet and you're worried about commissions, it's important to understand your goals. The average commission of a financial advisor is generally around 1% of the assets they manage. Take the WCI course “Fire your financial advisor, it's not space science, and you only spend very little time doing it each year, it will become your best knowledge to make money, I personally didn't even take any courses, my interest in personal finance led me to read the money magazine, kiplinger, early retirement forum and I applied this knowledge to my personal financial life.
A financial advisor can provide you with valuable information about what you need to do with your money to achieve your financial goals. And if you only need portfolio management, not financial planning or advice, consider wealth management services like Betterment, for which the commission is only 0.25% to 0.40% of assets. If you are hiring a financial advisor with an actively managed strategy, make sure you are aware of the types of securities in which the advisor will invest and if those holdings align with your long-term financial objectives and your level of risk tolerance. Once you've calculated how your advisor is paid, you can add up how much you're paying for the counseling you receive.
A commission-based advisor makes money by charging a combination of commissions and charging commissions on investment products. If you are already working with an advisor, the easiest way to determine if a 1% commission is reasonable may be to analyze what they have helped you achieve. Be prepared to explain why you think you are too high and why it makes sense for the advisor to accept you as a client for less than what your company normally charges. For many doctors, the cost of their counseling fees is also a big expense and, over the course of a lifetime, can even dwarf the cost of housing.
In the end, if you feel that you are getting good advice and service from your current advisor, and if she is willing to reduce her fees to what you would pay elsewhere, stick with her. . .