Are Wealth Management Fees Worth it? 4 Answers To Clear It Up
The question is, “Are wealth management fees worth it if you have $5 million or more in investible assets?” And the answer is “yes” for anyone who wants an expert to manage their investments, report on their growth, advise them on big financial decisions, and enable them to fulfill all their lifestyle goals and desires.
STRATEGIES FOR FAMILIES WORTH $5 MILLION TO $500 MILLION
7 Secrets To High Net Worth Investment Management, Estate, Tax and Financial Planning
The insights you’ll discover from our published book will help you integrate a variety of wealth management tools with financial planning, providing guidance for your future security alongside complex financial strategies, so your human and financial capital will both flourish.
Clients frequently share with us how the knowledge gained from this book helped provide them tremendous clarity, shattering industry-pitched ideologies, while offering insight and direction in making such important financial decisions.
If this is your case, you would be well served by reading this guide to how the best advisors help you minimize fees, with an eye on performance—before you do anything else.
A wealth manager is a professional financial advisor with the responsibility of providing advice on the proper management of finances, money, and assets for high net worth and ultra high net worth individuals. Naturally, there will be wealth management fees.
A wealth management advisor is a professional who helps individuals navigate the difficulties of the financial landscape, from managing taxes and optimizing an investment portfolio to advice on credit cards. They even focus on strategies for tax minimization, including tax loss harvesting, to greatly reduce the tax liability of the individual.
They also offer advice on managing a portfolio to ensure it’s well diversified and aligns with the financial goals of the client. Expense ratios are another area where your wealth manager adds value and is, therefore, a necessity for reaching your financial health and growth goals. Understanding and reducing your expense ratios is relevant to your investments, including those related to credit cards.
The wealth manager offers services on investment management, retirement planning, tax planning, philanthropy, succession planning, financial planning, estate planning, among other services that high net worth individuals need during their lives. Normally, the charges for services are set by the wealth manager.
At Pillar Wealth Management, we provide a transparent structure of wealth management fees ensuring control over the costs, with high returns. We are a fiduciary advisory firm bringing 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.
Moreover, we can consider whether wealth advisors take the emotion out of investment planning.
Last but not least, what factors would you consider when choosing an advisor, and would it make sense to opt for a PillarWM wealth advisor for your needs?
If indeed you have a high or ultra-high net worth, then you know wealth management is not about going online to open an investment account. Would you consider paying wealth management fees?
The more wealth you accumulate, the more complex the decisions to preserve and protect that wealth. Pillar Wealth Management deals with such decisions on a daily basis for portfolios of $5 million to $500 million.
When you are talking about millions of dollars in investible assets, you want to work with the very best advisors, and you want transparency in their wealth management fees.
The wealth management fees that they charge can be well worth the money if their advice helps you achieve your financial goals. It is like having a top surgeon for major surgery.
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 they add to your financial state.
How Much Does Wealth Management Cost?
Financial advisor fees make up the biggest portion of the wealth management cost structure. Most advisors charge based on the assets under their management, while some may offer their services at a flat fee or even work at an hourly rate. This kind of fee structure gives the client room to choose the type of fee that works best for his financial objectives and investment style.
Wealth management entails the provision of a combination of financial planning, investment management, and other financial advisory services to individuals, especially high-net-worth individuals. The cost of these services varies with the scope of services provided, the expertise and reputation of the firm, and the amount of assets under management.
This article discusses the different fee structures, typical costs, and the factors that influence the price of services in wealth management to clarify what a client may expect to invest professional wealth management assistance.
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Wealth Management Fees
Most wealth managers and wealth management firms charge a fee equal to a percentage of the value of the assets under management (AUM). The percentage varies, decreasing as the AUM increases, but tends to be between 0.2% and 2%. The most common is a 1% fee.
Wealth management fees also vary depending on the level of services provided, especially if a dedicated human advisor is part of those services.
Some managers charge a flat fee per service, such as a retirement plan or an estate plan. Some may charge an hourly fee per consultation or service.
Wealth Management Fees by Service
Robo-Advisors
Robo-advisors provide investment planning advice through an online platform. Fees are typically less than 0.5% of AUM. The automated advisor provides investment advice based on input from a questionnaire completed by the investor. The robo-advisor monitors the portfolio and may adjust it periodically to align with the investor’s goals.
Online Financial Planning Services
In addition to automatically generated advice, online platforms may offer financial planning and investment advice through an online platform with a staff of human advisors. The advisor works with the client online, and their fees vary depending on AUM and the level of services provided. There may be a minimum AUM or a minimum fee for an advisor.
Traditional Human Wealth Managers
Traditional human advisors typically offer a broad range of financial planning services, including creating a financial plan, planning for retirement, estate planning, tax management, investment advisory, asset management and diversification, and insurance planning. The client works with a dedicated advisor, who is committed to helping them meet their financial goals. A relationship lasting years or decades may develop, giving the client the peace of mind that comes from having someone dedicated to meeting their financial needs and objectives.
Fees are typically around 1% of AUM. There may be flat fees and hourly fees as well. Some advisors may take a retainer, either monthly or yearly.
Some advisors are paid commissions on the products they sell, particularly insurance policies.
Why a Wealth Manager's Fee Structure Matters
It’s best to have a wealth manager who charges fees for their services but does not accept commissions or other perks from sales. You know that you are getting unbiased advice because there are no conflicts of interest.
What is a Normal Fee for a Wealth Manager?
Wealth management fees vary. It’s important to know what you need regarding wealth management services and not pay for services you don’t need. Due diligence and research should help you find a wealth manager or firm that meets your needs and allows you to keep within your budget for advisory fees.
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 realize this only too well: wealth management is more serious than the mere act of opening an online investment account. You may be confronted with a series of decisions on how to protect and continue to grow your wealth, which will be increasingly difficult, as well as decisions that will make you even wealthier.
Wealth management is worth the fees if the advice received helps you reach 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 that allow the client to achieve their financial goals. Different people have different goals. For some, it may be 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 cause in the form of philanthropy.
At Pillar Wealth Management, we believe that our ultimate responsibility 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 pays to think through how taxes can be minimized, what to do with a windfall, and whether and how any of the wealth generated is transferred to family members/heirs after you're 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 to advising an entrepreneur from a personal finance viewpoint.
There are many moving parts to a seemingly straightforward deal. A wealth advisor specializes in bringing together 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.
First, the wealth advisor needs to understand your family situation, 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 together, with 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
Pros
Many factors 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 professionally, they can probably see how the various moving parts affect your financial situation better than you can.
Responsive wealth managers will be accessible whenever you need them. If they are close to your neighborhood, then that's 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 may want to 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 are not affected by the interests of the financial advisor. If there is any conflict of interest, the fiduciary manager brings that to the notice of the client, explaining how the client may be affected. After all, if you need the services of a so-called wealth advisor and trust them with your hard-earned money, you would expect them to be aligned with your interests and goals.
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.
Cons
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 needed. The advisor is motivated by the earned commission on the product and not just 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 changed.
Their investment products may be 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
Investing involves so much risk, volatility, and all kinds of uncertainties. They say it calls for having the right temperament to be 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 an investment system that operates without emotion.
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 financial advice.
If a client’s financial situation does not allow for taking high risks, it makes no sense to go looking for “high-return” investments that are volatile. Getting the asset allocation right is one way to take the emotion out of investing.
Following a 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 planners, 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, you're probably wondering how you can find a competent wealth advisor.
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 widespread in the US, so you can probably find a wealth manager near your zip code.
If you run a Google search, then the chances are that you will spot the big Wall Street firms. 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 highly personal. The money matters of every individual are unique! Hundreds of high net worth individuals 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 activity. 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 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 the 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.
When you have identified an advisor with whom you will work on the management of your wealth, make sure you know how much you are going to pay for the service the advisor will offer you.
The wealth manager will charge an advisory fee. Besides the fee for advice, the advisor might also be paid some percentage value of the client's managed assets (AUM), and this is also negotiable. It may decrease as the AUM increases.
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
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.
What is the average management fee?
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.
What percentage do most financial advisors charge?
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.
How much are investment management fees?
Investment management fees vary significantly, depending on the fee structure, the type of asset managed, the services included, and the value of the portfolio.
How much money should you have before hiring a financial advisor?
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.
What is included in management fees?
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.
What is a typical investment management fee?
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.
What is a high management fee?
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.
What are typical fees for wealth management?
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.
What are wealth management fees?
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.
Are wealth management fees worth it?
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.
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