Investment advice is already complex enough to many, so adding a discussion on fees can make heads spin for the everyday investor. While there should be disclosures explaining your fees, you may not take the time to read through them. Even if you do, you still might be scratching your head.
One fee that advisors should be disclosing and making sure clients know is how much they will be compensated each year for keeping an eye on (managing) your money.
This fee is really straightforward: If you have an advisor who charges 1.00% of the Assets Under Management (AUM), an account of $100,000 will pay $1,000 ($100,000 x 1.00%). Many managers will offer a tiered fee schedule. For example, a manager may have the following chart in their marketing materials.
Depending on the financial advisor, this annual cost can include different services, but at the very least, you should be expecting for your advisor to invest the funds to fit your risk tolerance and investment intentions.
This is the easiest concept to understand when it comes to fees charged, though the Cerulli study points out clients still don’t know they pay a fee or they that the client actually believes the service is free.
For an in-depth look on this subject, download our white paper on Hidden Fees, click below to download!
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