Are Wealth Management Fees Worth it? 4 Answers To Clear It Up
The question really is, “Are wealth management fees worth it?” If you have $5 million or more in investible assets, then you should read this guide on how the best advisors help you minimize fees with an eye on performance.
A wealth manager is a financial advisor who specializes in an array of services essential for managing the finances, money and assets, of high net worth and ultra-high net worth individuals. Naturally, there will be wealth management fees.
The services include investment management, retirement planning, tax planning, philanthropy, succession planning, financial planning, estate planning, and other areas that high net worth individuals normally deal with during their lifetime. Wealth managers charge a fee for their services.
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At Pillar Wealth Management, we will provide you with a transparent structure for our wealth management fees, allowing you to control your costs and secure high returns. We are a fiduciary advisory firm and have over 60 years of combined experience in wealth management. Click here to book a free consultation with us.
So returning to the main question, are wealth management fees worth it?
To answer this question, we first have to look at the best wealth strategies: does a professional wealth advisor add value? We then have to compare the pros and cons of paying for wealth management services, as well as the wealth management fees involved.
We need to explore whether wealth advisors take the emotion out of investment planning.
And lastly, we need to look at factors that one should look at while choosing an advisor and whether it makes sense to choose a PillarWM wealth advisor for your needs.
If you are a high net worth or ultra-high net worth individual, then you know that managing prosperity is not as easy as simply opening an online investment account. Would you consider paying wealth management fees?
The more prosperity you accumulate, the more complex are the decisions to preserve and protect that worth. Pillar Wealth Management deals with such decisions on a daily basis for portfolios of $5 million to $500 million.
When you are talking millions of dollars in investible assets, you want the very best advisors to deal with, and you want transparency in their wealth management fees.
The money that you pay an experienced surgeon is well worth it, right? After all, the surgeon may have saved your life or helped lengthen it by years.
Similarly, your money is also serious business. Whether the wealth management fees are worth it depends on the advisor you work with and the value that he/she adds to your financial life.
Management fees vary from .2% to 2.0% of the value of the client's assets. The higher the value, the lower the fees. A manager may charge a flat yearly fee, ranging from $2,000 to $7,000.
Unless they are charging a flat fee, most financial advisors charge around 1% of the value of the client's assets, where the value of the assets is at least $1 million.
Investment management fees vary significantly, depending on the fee structure, the type of asset managed, the services included, and the value of the portfolio.
Before hiring a financial advisor, you need to feel that you need help with managing your finances, regardless of your net worth, and that you feel comfortable paying for that service.
Management fees vary, but in general, they include the cost of administering the account, executing trades, and providing other financial services such as preparing an estate plan.
Typical fees include fees charged for making stock market trades, providing financial advice, and paying for the services of outside consultants like insurance or tax experts.
Charging fees that are more than 2% of the value of the assets under management would be considered high, and anything more than 1% will erode your earnings over time.
Typical fees are fees for making trades and fixed fees for particular financial services, which vary depending on the type of investment and the service or product offered by the wealth manager.
Wealth management fees, which are charged by a wealth manager or wealth management firm, are fees paid by the client in exchange for financial advisory services, such as investment advice.
It is worthwhile to pay wealth management fees if you are able to develop a trusting relationship with your advisor, and you feel that the results greatly outweigh the cost of the financial advice.
4 Important Points About Wealth Management Fees
- Is Wealth Management Worth It?
- Best Wealth Management Strategies: Does a Professional Wealth Advisor Add Value?
- Pros and Cons of Paying for Wealth Management Services
- Wealth Management Takes the Emotion Out of Investment Planning
1. Is Wealth Management Worth It?
High net worth and ultra-high net worth individuals know that managing prosperity is not as easy as simply opening an online investment account. The more wealth you accumulate, the more complex are the decisions to preserve and grow that wealth. Paying for wealth management expertise is definitely worth the wealth management fees you pay if the advice you get helps you achieve your financial goals.
2. Best Wealth Management Strategies: Does a Professional Wealth Advisor Add Value?
A wealth advisor’s website will list multiple services. It will have information about earning a return on investments, glowing testimonials, and sharp images of smiling people.
But what really are the best wealth strategies: does a professional wealth advisor add value? And are wealth management fees worth it? To answer these questions, one needs to look at how successful wealth advisors work.
A professional wealth advisor offers services so that the client can achieve his/her financial goals. Different people have different goals. For some, it may be about buying a property in Florida and retiring there.
For someone else, it could be sending the grandkids to elite educational institutions or contributing to a specific cause in the form of philanthropy.
At Pillar Wealth Management, we believe that our ultimate goal is to make the client attain financial serenity, which will make the wealth management fees worthwhile.
To achieve short, medium, and long-term life goals, clients need money. Because of inflation, the cost of sending one child to an Ivy League school today will not be the same 10 years down the line.
The same goes for retirement or other goals. Therefore, today’s wealth needs to be invested prudently to earn enough return to fulfill future goals.
Not only is it important to select the right investments, but it is also critical to control the costs associated with the investments, along with the wealth management fees.
You can read all about investment costs in this downloadable guide on improving portfolio performance for investors with $5 million to $500 million in liquid assets.
Every wealth-related decision has multiple effects in multiple areas of your financial life. If you are about to sell your business, the price you negotiate is only one aspect of the deal.
It would be best to think about how you can minimize the tax outflow, what you will do with the windfall, and whether/how any of the wealth generated gets transferred to your family members/heirs after you are gone.
You also have to think about how you can secure your future lifestyle. Get in touch with Hutch or Chris at PillarWM to know more about how an M&A firm brought them into a deal to advise an entrepreneur from a personal finance viewpoint.
There are many moving parts to a seemingly straight-forward deal. A wealth advisor specializes in bringing all of these aspects and working out a strategy that takes care of all the issues involved. It would seem that it’s worth paying the wealth management fees.
For doing so, the wealth advisor first understands your family, your personality, your interests, your motivations, and your life goals. The advisor then crafts a strategy and constantly monitors the progress of that strategy.
It is a highly personalized and customized process that requires working closely and some hand-holding. Let’s put it simply; wealth advisors add value by working out everything related to your financial life so that you can sleep peacefully at night and keep achieving all your goals during the day. And isn’t that worth paying the wealth management fees?
3. Pros and Cons of Paying for Wealth Management Services
Speaking in purely financial terms, paying wealth management fees for wealth management services makes sense if you get greater benefits more than the advisory fees that you pay from a financial advisor.
To better understand the question “are wealth management fees worth it?” we can look at the pros and cons of paying those wealth management fees for wealth management services.
There are many factors that make spending on wealth management fees worthwhile. Reputed wealth managers understand you and your situation inside and out. Therefore, they can spot potential issues with a wealth decision.
As they are trained to manage wealth full-time, they can probably see how the various moving parts affect your financial situation better than you can.
The really responsive wealth managers will be accessible whenever you need them. If they are close to your neighborhood, then that is even better.
You can have a face-to-face meeting with them when you feel like there is a need. Alternatively, a video or phone call can also work. Wealth managers will update you on your progress regularly.
If you have $10 million or more in investible assets, then you can read this guide on how the best financial advisors perform regular stress tests on your portfolio.
An ethical wealth manager who is a fiduciary, will always act in your best interests, and the wealth management fees you pay do not reflect the interests of the financial advisor. If there is ever a conflict of interest, then the fiduciary manager will point that out. If you are going to trust a wealth advisor with your hard-earned wealth, then you want that person to be aligned with your goals and interests.
To learn more about how important this can be, click here to read our guide on 5 critical shifts that are essential for boosting your portfolio.
Wealth management firms charge a fee for their services. There are multiple wealth management fee structures that wealth advisors adopt. A fee-based approach involves commissions.
Therefore, there is a possibility that the wealth advisor may recommend a product that isn’t really needed. The advisor is motivated by the commission that the product will earn him/her, not simply the wealth management fees you pay.
A fee-only or fee-based structure without commissions tends to avoid such misalignment of interests. Schedule a free consultation with Hutch Ashoo from Pillar Wealth Management to discuss how a fee-based structure benefits high net worth individuals.
Another pitfall to avoid is that of a passive wealth manager. You want someone who is focused on your portfolio and knows the nuances of your financial situation.
However, many of the volume-driven large firms focus more on how they can get more assets under management. They send out portfolio updates, which are automatically generated newsletters with just a few details changing.
Their investment products are also limited. Getting hold of them for a one-on-one meeting can also take a few days.
4. Wealth Management Takes the Emotion Out of Investment Planning
Investments are subject to risks, volatility, and all sorts of uncertainties. It is said that having the right temperament is essential to being a successful investor. Human emotions often tend to get the better of most investors.
So, when you ask the question – are wealth management fees worth it? The answer is yes if the wealth advisor has figured out an investment system that runs without emotions.
Feel free to reach out to Pillar Wealth Management to understand its investment system and how it can protect high net worth prosperity and get an understanding of its wealth management fees.
Investment decisions should not be made on gut feelings. Rather, they should be made with careful financial planning and understanding of the requirements at hand before giving the financial advice.
If a client’s financial situation does not allow taking high risks, it makes no sense to go looking for “high-return” investments volatile. Getting the asset allocation right is one way to take out emotion from investing.
Following the system scrupulously no matter what (even if a pandemic hits the world) is another way to reduce the emotional-aspect of investing.
Always make sure you ask a wealth advisor what their investment system is. If you are interested, we have written in further detail how financial planner, especially wealth advisors, take the emotion out of investment planning in our free hardcover book:
Feel free to check it out.
Choosing PillarWM Wealth Management for Your Needs
Now that you understand the value that a wealth advisor adds to your financial life, beyond just earning wealth management fees, you are probably thinking about how you can find a capable wealth advisor to advise you.
While there are plenty of wealth advisors in the country, let us explain why choosing PillarWM wealth advisor for your needs can be a smart decision.
If you want detailed information on choosing the best advisor for portfolios between $5 million and $500 million, then download this complimentary guide.
The wealth management industry is spread out throughout the US. You can pretty much find a wealth manager near your zip code.
If you run a Google search, then the chances are that you will spot big Wall Street firms’ names. They will talk about how they manage hundreds of billions (some even trillions) in assets.
Their focus is on scale and volume. After all, every move of these listed players is analyzed by an army of analysts and observers.
While it is easy to be attracted by the pull of a Wall Street firm’s strong brand, the level of customization and personalization won’t be as strong.
Most of these firms will have standard (and rather limited) products that bucket clients into categories like “high-risk appetite”, “moderate risk appetite”, and “low-risk appetite.”
You know that wealth management is a highly personal topic. The money matters of every individual are unique! Hundreds of high net valuation people cannot have the same “risk appetite”.
Every situation has to be analyzed on its own merits. And ultimately, you will ask yourself one thing – are wealth management fees worth it?
Wealth management, in our opinion, is a low-volume high-depth subject. Pillar Wealth Management took on only 17 clients last year.
But guess what, if any of those 17 clients call our office, we know them and their family by name. Feel free to start a conversation with us to get to know our working style.
We analyze what motivates our clients, their current financial situation, and what their scenario should be 5, 10, 20 years down the line. Going in such detail requires time and focus, something that volume-driven businesses cannot offer.
Besides personalization, wealth managers should also be able to offer ethical and professional advisory services. After all, even small decisions can make a difference of millions of dollars.
Pillar Wealth Management works on a fee-only model. It means we do not earn commissions from products that we recommend. Our wealth management fees are transparent.
If we suggest something, it is because that product can really make a difference to your financial goals and not because we can profit from it.
PillarWM is also registered as a fiduciary and is, therefore, bound to do everything in the best interests of its clients.
Lastly, Pillar Wealth Management has other “non-negotiables” like saving you at least $100,000 for every $10 million in investible assets as well as measuring progress with regularity and in unique ways.
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 high net worth individuals with $5 million to $500 million in investible assets, then feel free to start a conversation. We’ll be very clear about our wealth management fees.
What Do Wealth Management Fees Include?
How wealth-management fees work depends on the wealth advisor and the firm they work for.
Once you have selected an advisor with whom you will be working on managing your wealth, it’s important to determine how much you will be paying for the services they provide.
A wealth manager will have a fee schedule for their advisory services, but these fees will vary. The advisor may charge a percentage of the value of the assets under management (AUM), and that percentage will also vary. It may decrease as the AUM increase.
The advisor may charge a fixed annual fee for financial advice, which will typically vary with the value of the assets. They may also charge a fixed fee for a particular product, such as a retirement plan or an estate plan.
Some advisors will charge an hourly rate for their services, and clients should determine what services are covered under this type of arrangement.
Percentage fees will cover the costs of making investments on your behalf, but in some cases, they may not cover account maintenance or other services. This should be a question for the advisor to answer.
Often, percentage fees do not cover the expenses charged by mutual fund and ETF managers.
The bottom line
To get your money’s worth, always ask more questions! A good financial manager will not hesitate to be transparent about what it will cost you to utilize their services, and if you end up feeling that it’s worthwhile to have a wealth manager, then it’s a win-win.
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