What amount of fees should I reasonably expect from a Financial Advisor?
What is a typical charge for a financial advisor to handle your retirement savings?
Our fees range from .25% to 1.0% per year. Anything above that is probably excessive.
It would be helpful to learn what you mean by handle. Are you asking for advice and then doing it yourself or are you looking for an advisor to take care of it for you? Either way, you should make sure you are dealing with a Registered Investment Advisor who is a Certified Financial Planner.
For advice, when doing it yourself, you are probably looking at an hourly fee of $150-250 and a few hours to review your situation and make recommendations. For discretionary management, a typical fee is 0.75% to 1.25% of assets annually. Transaction fees to the broker/dealer would be in addition. Even so, stock and ETF trades will be about $10 each (though some have no transaction fee). Mutual fund trades may be at no-cost and are relatively low. Either way, do not buy load (sales charge) funds. That's a waste of money.
It all depends upon whether it is active management or passive management. I am an active, fee based only manager and charge anywhere from 1% to 1.6% depending upon strategy and how much work it entails. For passive "pie" charts, you should only pay around .10% to .25% because you could easily do a passive strategy yourself with a little research and there is very little maintenance. For a "blended" strategy which would be some L-T passive, it is called "strategic", and some M-T active, called "tactical:, fees generally range around .70% to 1%.
Then, there is a whole broker/insurance group who rely on commissions. Annuities fall into this category and commissions can be as high as 8% to even 10% of the principal placed in the annuity. I vehemently disagree with this approach because there is a conflict of interest. And there are actually commission free, fee based only annuities but you never hear about them. Most fee based advisors only act as your Fiduciary with your best interest first.
The most important thing is to do your homework and know HOW the advisor is getting paid. It is not necessarily about lowest costs/fees, but the value you are getting for those fees.
Hope this helps.
First, let me address the "Financial Advisor" section of your question. In many states, a hair dresser is more regulated than a financial advisor. The hair dresser is required to prove certain levels of proficiency and receive a license. To be a "Financial Advisor" requires printing a card that states you are one, nothing more. What you want to look for is someone who is a Certified Financial Planner (TM), which means that the individual has passed the test, been in the industry for 3 years, and has a clean record.
That said, CFPs have all kinds of fee structures. At HFH Planning, we charge as follows:
Development of a plan - $360/hour. That includes reviewing your information (Spending plan, income, assets, a questionnaire that will give us an indication of your risk tolerance, etc.) You may find the entire list on our website, hfhplanning.com.
The time required depends on a number of variables, 6 to 8 hours for a couple is usual. Single individuals take less time.
At the end of that portion, you will have a plan that includes your need for insurance, estate planning documents, things that you might do to reduce your tax exposure, and an asset allocation. We use sub-sections of the following groups for the allocation: Equity (US & Foreign), Fixed Income, and Inflation Protection.
At that point, you may take the information and put it into place yourself or continue to work with us and have us implement the plan. We do not sell any product and will direct you with regard to insurance, estate planning, and Mutual Fund selection. We have two separate plans for the ongoing advice. It would be best to go to the website and even better to contact us for further information.
Apart from what has been discussed already below, I'll add my own opinion.
- Don't let the 'fee tail wag the dog.' Clients should be going for someone who is not only charging a reasonable fee (Under 1% if asset based fee), but also is providing good value for the fee charged. For example, many advisors include some amount of financial planning services for the asset based fee charged.
- Understand the importance of 'alignment of interest.' For example, some advisors are structured as fee-only. They do not get any commissions and, therefore, have an 'open architecture' in that they can use any product and usually choose the best available product for the client. Clients should look for advisors who will go to bat for them.