When you graduate from college, your financial life isn’t too complicated. Student debt is generally the biggest concern. For those who don’t have student loans, all there is to worry about is collecting your salary and paying rents on time. During your early professional years, there is ample opportunity to save and start building wealth. At that time, you don’t really think about questions like is it worth paying a financial advisor 1%. All you think about is setting up a financial foundation.
However, as time passes by, you get job promotions. Or perhaps, you start a business. Your income levels steadily rise. At the same time, things start to happen in your personal life as well. Maybe meet your life partner, you start living together, or get married. By this time, you already might have or may be looking to buy a house.
After marriage, you become a mother or a father. If you are wealthy enough, you buy more than one property. At the same time, your retirement or IRA account begins to grow. Now, you have to work with an accountant to file your taxes. You have to start thinking about how to save on taxes, how to structure your financial life, and how to achieve your life goals.You can read more about achieving financial goals inthis downloadable guide on choosing the best financial advisor for individuals with $10 million or more in liquid assets.
Table of Contents
- When is it time to hire a financial advisor?
- One example to analyze the question is it worth paying a financial advisor 1%
- The costs of a financial advisor
- Reasons to hire a personal financial advisor
- This is why you should be paying Pillar Wealth Management a 1% fee to manage your ultra-high net worth portfolio
- Decision time?
As you can see, the more wealth you accumulate the more decisions you have to think about. Here at Pillar Wealth Management, we deal with such decisions every day for our clients who have portfolios between $5 million and $500 million. Questions about your legacy, philanthropy, andbusiness succession planning are common. With more wealth comes more responsibility.
When is it time to hire a financial advisor?
To answer the question when is it time to hire a financial advisor, one first needs to look inwards. Understand your current financial situation. Are you at a point in your life when you are beginning to feel that your life goals have to be met in a time-bound manner? Do you feel that you need to make smart decisions right away so that your future is secured?
If you think that you need professional advice on structuring your finances in order to achieve your life goals or that you simply have too many moving parts to take care of, then a financial advisor can help. Pillar Wealth Management has a host of services that cover tax and retirement planning, M&A and business sales, estate planning, portfolio management, and general financial planning. The firm offers high net worth strategies for clients with $5 million to $500 million in investible assets.
As you ponder over the question when is it time to hire a financial advisor, it will help you to also think this – is it worth paying afinancial advisor 1%? We will discuss in greater detail the cost structures of financial advisors. But, you certainly have to think about whether it makes sense for you to pay a 1% fee to an advisor. You need to think about whether the benefits are worth the cost of the fee. This math will begin to make sense once your portfolio size reaches a certain threshold.
So, another way to know that it is the right time to hire a financial advisor is by looking at the size of your investible assets and the complexity of decision making. Schedule your free consultation with Hutch Ashoo from Pillar Wealth Management to discuss when to work with a financial advisor.
One example to analyze the question is it worth paying a financial advisor 1%
Let us consider two scenarios – first where you have $300,000 in liquid investible assets andthe second where you have $30 million in liquid investible assets. In both these situations, let us assume that you go and speak with a financial advisor. You find out that the advisor charges1% of the total assets that you want the advisor to manage.What you get isprofessional advice on all aspects of your financial lifeso that you can meet your short and long-term goals.
In the first case, 1% of $300,000 is $3,000. In the second case, 1% of $30 million is $300,000. In scenario 1, you are weighing whether to go to the advisor or simply invest the money in a passive index fund that has a 0.2% expense ratio. The 0.2% expense ratio is hardly a few hundred dollars and you found a financial planner who will give you advice for a flat fee of $1,000. You probably find the DIY approach a more attractive option.
If you are in scenario 2, the stakes are much higher. If you invest in a mutual fund that charges you a 2% expense ratio, then you will be effectively paying $600,000 just to the mutual fund company. If your portfolio gets changed too frequently, you pay short-term capital gains tax instead of long-term capital gains tax. That could be a difference of a few percentage points. You slowly add up the costs and it suddenly makes sense to rather pay $300,000 to an experienced financial advisor who can save you a significant chunk of unnecessary costs. Check out this guide on improving portfolio performance for investors with $5 million to $500 million and you will be amazed at how investment costs become significant once the portfolio size increases.
We have touched upon the costs of a financial advisor and the services that the advisor offers in return. However, it is important to discuss further how the costs of a financial advisor are structured. Different advisors follow different fee models. There are 3 main models, fee-only, fee-based, and commission only.
A fee-only model involves only a fee for the most common services. Specific value-added services are extra. The fee can either be a fixed percentage of the total assets that the client asks the financial advisor to manage, it can be based on an hourly rate and the time spent on a particular task,or it can be a milestone-based model where a fixed amount is pre-determined and then it is released once a task or milestone is completed.
The fee-based model has a fee along with commissions. The commissions are earned by the financial advisor when a certain investment/financial product is bought by the client. The company selling the product pays a commission directly to the advisor. In this model, there may be an incentive for the advisor to “recommend” or “push” certain products towards the client even when the client does not really need that product. The plus point is that the fee component may be lower because the commissions make up for the shortfall. A commission-only model has no fees, but just commissions as explained above.
We believe that a fee-only model is most aligned to the client’s interests because there are no alternate incentives for the advisor. You can read more about the benefits of a fee-only model in this downloadable book on choosing financial advisors for individuals with $5 million to $500 million in liquid investible assets. You may also start a conversation with us to know more about the advantages.
Reasons to hire a personal financial advisor
Now that you understand how to evaluate the topic of “is it worth payingafinancial advisor 1%”, we will look into the reasons to hire a personal financial advisor. A reputed personal financial advisor will get to know you and your motivations. The advisor will understand what your financial goals are and then figure out how you can achieve them. Since the advisor does this for a living, he/she would know the pitfalls to avoid and the least stressful path towards your goals. An average person may not have all of the knowledge or experience to have such foresight.
Secondly, a financial advisor can bring in skills from multiple areas. Whether it is tax planning, succession planning, portfolio management, philanthropy, or any other finance-related topic, a good advisor will either have these skills in-house or bring in an outside expert. This way, you only have to deal with one person rather than running around trying to coordinate the strategies of multiple experts.
Another factor among the reasons to hire a personal financial advisor is whether the advisor is a fiduciary. A fiduciary is someone who is registered with regulators and is required to always have the client’s best interests in mind. If there is ever a conflict of interest, then that will be pointed out right away. You can read more about the attributes of reputed financial advisors in this bookThe Ultimate Guide to Choosing the Best Financial Advisor: For Investors With $5 Million to $500 Million in Liquid Assets.
Ultimately, your wealth has meaning when it allows you to achieve your goals and do everything that you have always wanted to in your life. Get in touch with Pillar Wealth Management to discuss what decisions you can take to make that happen in your life.
This is why you should be paying Pillar Wealth Management a 1% fee to manage your ultra-high net worth portfolio
We would now like to touch upon a few key aspects that demonstrate one thing – “this is why you should be paying Pillar Wealth Management a 1% fee to manage your ultra-high net worth portfolio”. Pillar Wealth Management has more than 60 years of combined experience in managing wealth for high net worth and ultra-high net worth individuals. We have been called in by M&A firms to provide financial advice to entrepreneurs who were selling their businesses for significant sums of money.
Our focus on the client is such that we took only 17 new clients last year. We are not a volume-driven firm and know all our clients by their first name whenever they call our office. Our motto is to provide financial serenity to our clients so that they achieve their financial goals and be able to sleep soundly at night without worrying about the next market crash. Go ahead and speak to Hutch Ashoo or Chris Snyder to know more about our wealth management philosophy.
Our white-glove services ensure that you find solutions to all aspects of your financial life at Pillar Wealth Management and that your profile is treated as a unique one. There is no one-size-fits-all approach here and we recognize that the top-level advisory services are personal and customized in nature.
If you are asking yourself this, “is it worth paying afinancial advisor 1%”, then among many other reasons, this is why you should be paying Pillar Wealth Management a 1% fee to manage your ultra-high net worth portfolio.
Now that we have armed you with useful information about how a financial advisor works and when it makes sense to hire one, we hope that you will be able to make a decision with greater confidence. Trusting an advisor with your hard-earned wealth is not a small decision. Therefore, it is a good idea to individually meet a few shortlisted advisors and get a feel of whether you can establish a relationship with that person.
You can ask the advisor questions about their background, their way of working, and their expertise. When you feel confident and sense that you can trust the person, you can then think about going ahead or continuing your search for a financial advisor who fits your needs.
Hutch Ashoo and Christopher Snyder are the expert founders of independent, fee-only, and fiduciary wealth management firm Pillar Wealth Management. If you would like to speak with them or simply ask any questions about how custom and trusted wealth management advice is offered to highnet worth individuals with $5 million to $500 million in investible assets, then feel free to start a conversation.
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