Average Advisor Fees Charged By Brokerage

Average Adviser Fees By Assets Managed

The average advisor fees charged by brokerage range from 0.63% to 1.17%, depending on client assets. In general, average advisor fees have been coming down over time due to pressure from robo-advisors like Empower, Wealthfront, and Betterment. This is great for clients looking to save on brokerage advisor fees.

The wealth advisory business is great because it's a sticky business that earns more money over time as client balances grow. There are some wealth management teams out there who manage over $1 billion in combined client assets. That's a cool $10 – $20 million in fees a year!

The actively managed mutual fund business is also lucrative given the high fees and similar leverage effect. Many portfolio managers I know at large mutual funds easily make seven figures a year, while doing no more work than portfolio managers at small mutual funds. A lot of fund managers don't even outperform the S&P 500, but they'll still get paid. Hence, if you want a potentially lucrative career, get an MBA or CFA and join the money management business.

What if you can charge annual advisor fees plus get your clients to own actively run mutual funds your company has created that also charge a fee? That's where you can make the mega bucks as you earn double income from your clients. Don't believe me? Know that Charles Schwab is worth over $6 billion and Abigail Johnson of Fidelity is worth over $14 billion. Beware of the double dip!

Related: How To Pick A Robo Advisor In A Digital Wealth Management Era

Average Advisor Fees By Brokerage

Ever wonder how much wealth management companies like Merrill Lynch, Morgan Stanley, Charles Schwab, Fidelity, and Ameriprise charge in annual advisory fees? Well look no further. My old client, Personal Capital has put together a white paper ranking the most and least expensive brokerage firms by advisory, mutual fund, and total fees.

Chart 1: Average Advisory Fee Percentages By Brokerage

This is the fee you pay on your total assets managed by the brokerage company to manage your money and provide financial advice. Below are the average advisor fees by brokerage.

Average Advisory Fee By Brokerage Company

Chart 2: Average Mutual Fund And ETF Expense Ratio By Brokerage

This is the fee you pay as a shareholder of the mutual fund or ETF by brokerage. The fee is paid in hopes the mutual fund or ETF outperforms its benchmark. ETF fees are generally much lower than actively managed mutual funds.

Average Mutual Fund And ETF Fee / Expense Ratio By Brokerage Co

Chart 3: Average Total Fee By Brokerage

Average Total Fee By Brokerage Company

This is the combined total of advisor fee plus mutual fund / ETF fee by brokerage. Anything over 1.5% seems high to me. At least it's not a 5% selling commission fee real estate agents charge! If your money is being managed by a brokerage / wealth management company, please ask them to disclose their fees and ask what you are getting for the fees you are paying.

Note: Vanguard just launched their semi robo-advisory business in 2015 and charges 0.3% + ~0.1-0.2% in expense ratios. Only clients with over $500,000 will get a dedicated advisor. Clients under $500,000 will get a team e.g. junior person. Edward Jones charges 1.35% – 1.5%, depending on AUM size for their advisory business + ~0.5 – 0.7% in expense ratios.

How Much Will You Pay In Fees Over A Career?

Let's say you have a $500,000 account balance with one of the big brokerage firms. Below is a chart of how much in fees you'll pay over 30 years per brokerage company. It can add up fast. This is why you can't brush off data on average advisor fees. You want to find ways to pay less than average so you can keep more of your hard earned money!

How much you'll lose in management fees over 30 years with a $500,000 account

Paying close to $1 million fees should make you feel a little queasy if you are a client of Merrill Lynch, even if your portfolio grows into the multi-millions. Their average advisory fee percentage is 1.30% and their average mutual fund and ETF expense ratio is 0.76% for a total fee of roughly 2%.

2% is not egregious if your portfolio is outperforming the market every year by 2% or more. But we all know that the majority of actively run mutual funds underperform the S&P 500 or whatever index they are benchmarked against over time. Hence, you better get some darn good financial planning advice if you are willing to pay ~$10,000 a year in fees on a $500,000 portfolio!

These high fees clearly demonstrate why there is so much money pouring into the financial technology space. Opportunity is ripe for democratizing access to investing and wealth advisory services.

Lower Your Investment Fees

Before running my investment portfolios through Empower's free Investment Checkup tool, I had no idea I was paying roughly $1,200 a year in fees for a Fidelity Blue Chip Growth Fund with a 0.78% expense ratio.

I just bought the mutual fund because it had a good Morningstar rating and served the purpose of providing me exposure to higher quality large cap stocks. Check out my pre-Investment Checkup portfolio back in 2012.

Excessive Portfolio Fees

I wasn't down to spending ~$100,000 in management fees over the next 20 years, so I sold my expensive Fidelity Blue Chip Growth Fund and bought the SPY ETF instead. Although the Fidelity fund has performed relatively well since, over the next 20 years, I don't think it will outperform the S&P 500.

If you haven't done so already, run your portfolio(s) through the Investment Checkup feature yourself and see what you're paying a year. Just link up your investment accounts and then click the “Advisor Tools” tab on the top and select Investment Checkup to run your numbers. I bet you'll be surprised. There are a bunch of other free features, such as their Retirement Planning Calculator you should try as well.

If you want to have Personal Capital manage your money, they charge 89 basis points for the first $1 million AUM. For clients that invest $1 million or more it's 0.79% for the first $3M, 0.69% for the next $2M, $0.59% for the next $5M, and 0.49% for over $10M. They build your portfolio using ETFs and stocks to minimize expense ratios.

Of course, you can just use their free tools and manage everything yourself like I do currently.

Don't Be Afraid To Leave Your Advisor That Charges Too Much

If you were put into an actively managed mutual fund created by a wealth management company that is also charging you an annual advisory fee, you've got to immediately ask your advisor WHY with all the lower cost options out there. We know why, but it's good to make them explain themselves for not looking out for your best interest in order to make themselves more money.

Once they've fumbled about trying to explain why their actively managed mutual funds are the best, really ask yourself whether they are worth the fees you are paying every year. If the answer is “no,” then move your money! OK, maybe give them a three month probation to prove themselves, but after that, find an alternative if nothing changes. It's much easier than you think. You deserve better.

I had one personal finance consulting client pay $12,000 a year in fees and another $8,000 a year in mutual fund fees because his entire portfolio consisted of 20 funds created by his brokerage. He had no idea until we spoke. Now he's at a new firm that constructed a similar portfolio for 90% less in fees.

Everybody should figure out how to be a DIY investor. Even if you don't manage all your investments, you'll at least ask better questions and appreciate what your advisor does for you.

Who Should Hire A Financial Advisor?

You shouldn't expect to get anything valuable for free (except for maybe the content here). I believe wealth management firms should charge a fee for the services they provide, with a declining fee structure as your assets under management grow. But not all services are created equal. They've got to clearly demonstrate what you'll get for the amount you're paying.

For those of you who are uncomfortable investing your own money because you don't understand the markets, hiring a financial advisor to manage your money is not a bad idea. Mobilizing idle capital beyond a money market account could easily provide a greater than 1-2% annual return over the long run. After all, a financial advisor is spending his or her entire working day studying the markets.

For those of you who are too busy to manage your finances because your expertise is making money elsewhere, using a wealth management company will probably help you out tremendously over the long run as well. The stress of managing your own money after a certain absolute dollar figure can get to you. Offloading this duty to a professional will seriously reduce such stress. Just remember to ask your financial advisor the tough questions before hiring them.

DIY If You Don't Want To Pay Average Advisor Fees

But for those of you who are comfortable making your own investments, then it's easy to build a low-cost portfolio of ETFs that basically do what an investment advisor would do. Your focus should first be on building a portfolio with the proper asset allocation of stocks and bonds.

You can keep things as simple as buying the S&P 500 ETF, SPY for your equities allocation, and IEF, the 7-10 year Treasury bond ETF for your fixed income allocation. Or, you can make things as complicated as you want.

If you invest by yourself, you won't get research commentary on the markets, thoughts about how to position your portfolio if the Federal Reserve raises the Fed Funds rate by more than expected, or estate planning advice from a financial advisor. But there's a plethora of great free information out there to help you make smart investment decisions.

DIY investing is becoming more and more common over time due to low costs and better technology. Just know that if you don't know what you're doing, you could cost yourself way more money than just the fees you're saving.

Invest In Private Growth Companies

Consider diversifying into private growth companies through an open venture capital fund. Companies are staying private for longer, as a result, more gains are accruing to private company investors. Finding the next Google or Apple before going public can be a life-changing investment. 

Check out the Innovation Fund, which invests in the following five sectors:

  • Artificial Intelligence & Machine Learning
  • Modern Data Infrastructure
  • Development Operations (DevOps)
  • Financial Technology (FinTech)
  • Real Estate & Property Technology (PropTech)

Roughly 35% of the Innovation Fund is invested in artificial intelligence, which I'm extremely bullish about. In 20 years, I don't want my kids wondering why I didn't invest in AI or work in AI!

The investment minimum is also only $10 and there is no carry fee. Most venture capital funds have a $250,000+ minimum and often charge 20% – 30% of profits (carry).

You can see what the Innovation Fund is holding before deciding to invest and how much. Traditional venture capital funds require capital commitment first and then hope the general partners will find great investments.

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53 thoughts on “Average Advisor Fees Charged By Brokerage”

  1. Jimmy Jones

    Great research on the total expense load borne by the investor. However, a couple of quick points might be made. First, you state that ‘wealth management firms should charge a fee for the services they provide.’ What exactly is being provided here? Normally wealth advisors simply allocate out the management services to mutual fund managers, who also charge a fee. So again, what is the wealth management firm bringing to the table? Your guess about asset allocation is no less legitimate than theirs….and you might save 150 basis points. If you need a CPA for specific wealth planning issues, go get one; it will only cost you $150 an hour for very experienced advice, not 150 basis points on your whole portfolio value from someone who doesn’t really know what they are doing anyway.

  2. I know this is an older thread, but I am a little confused on why you have TD Ameritrade Fees so high. I do business with them and the absolute most fees any of the managed products are 1.25% and that’s if you only have 25k in it. Most of the portfolios only charge 1% and that’s again on the high end if you have any sort of money. I have been with them for years and it has always been similar fees so I am not sure where you got your information.

  3. Can someone explain to me why the numbers here don’t add up? I feel like I must be missing something. For example: .67% + .82% for USAA does not equal 1.06%. And if you add up the data from the first 2 charts, it doesn’t actually add up for any of them, in fact fund fees + advisory fees are higher for Morgan Stanley, Ameriprise,and UBS than they are for Merrill Lynch. I like this information, and it’s useful to share with people, but I need to understand the discrepancy in the numbers before I would feel comfortable referring to this.

  4. I realize that performance will vary, but if I’ve got an actively managed account what should be considered “reasonable” performance relative to a major index like S&P 500, DJIA, NASDAQ, FTSE, HengSeng? Should I expect that a paid manager should be able to beat these some of the time & if so, how often?

    1. If you google that question, you’ll find that typically 65% fail to beat their index each year. Over a 5 year period, ~80% failed to beat their index.

      John Bogle’s book gives a pretty good explanation of why this happens in “The Little Book of Common Sense Investing”.

  5. I have just recently considered hiring a financial advisor. I’m 31 and have been careful about saving money since grad school. No student loans either :-) Unfortunately, I have just stuffing all of that money into a savings acct and it’s not really doing much. I’m not a big fan of putting the time and effort to manage my money. I’ve got a lot of hobbies.

    So I’ve been thinking about hiring an adviser from Merrill Lynch (he’s a friend of a friend). In addition to my savings acct, I’ve got an old 401K I can roll over. However, there are a lot of articles about ML’s fees…but does that mean ML is a poor choice? Are fees the only metric to consider? Are all these firms pretty much equal in terms of the return so I basically need to find the cheapest one?

    1. Have you considered a “fee only” advisor who would provide an overall plan where you can then purchase ETFs (perhaps Vanguard?) on your own?
      The advisor recommends the diversified portfolio, you buy the ETFs, no annual fees other than the ETF fees.

      1. Hmm that’s also a possibility. I’m thinking about all this stuff because I’ve come to the conclusion that my money should be actively managed. However, I don’t want to be the one to do it.

        If I meet with a fee only advisor *once* to buy some ETFs, I wouldn’t consider that being actively managed. If I meet with one on a regular basis, then I’m probably spending more time than I want on it.

        Even with your suggestion, the question still stands: A fee only advisor + ETFs may be low cost option, but would it grow as much as something being actively managed by an advisor? Would Merrill Lynch still get me more in my pocket despite their high fees?

        1. We used a financial advisor for 27 months. They cleaned up some of the mish-mash of funds and stocks we were holding, which was good. Then they started buying and selling funds, sometimes in less than 30 days, often selling at a loss. The final 12 months, they lost 6% while money we managed ourselves gained 6%. We pulled our account and have managed it ourselves since.

          Less than half of actively managed mutual funds beat the S&P500. If I were in your shoes, I’d go with the fee only advisor and a couple of low-fee index ETFs. After a few years get a follow-up with the advisor. That’s got to be less than the 1% typically charged for active management.

  6. Stacey Paris

    Speaking from someone who has very limited knowledge of the markets, do you have a particular firm you recommend if one needs a wealth manager. I work a full time job, have a young son and just don’t have time to keep an active watch on the markets for my retirement investments. I just switched back to being a contractor and have to roll over my company 401K. The manager of that 401K (Morgan Stanley) – has offered to help manage my entire portfolio which includes a Fidelity IRA and an IRA managed by American Portfolios but invested into a Fidelity Index Fund (my husband’s IRA) and my company 401K which is overseen by Morgan Stanley right now. We also have a lot of liquid money that we’d like to put into the market with moderate risk – but are so unknowledgeable do not know where to put it. So thinking we need an advisor – would you recommend we go with Morgan Stanley or another firm. He could not give me an exact figure -but said approximately 1-1.5% would be his fee.

    And also how will the fact that the department of Labor ( DOL ) is implementing new rules for the investment direction and care of retirement plans affect those fees – think that is to go into effect this coming year?

    Appreciate the input.

    1. If you really want to hire a financial advisor find one with a good reputation who will also confirm in writing (or better yet actively advertises publicly in writing) that they have a legally fiduciary duty to you as a client (most financial advisors do not and will try to dodge that question).

      If you just have extra cash that you don’t plan to touch for 5-10+ years though, the simplest thing to do is to open an account with Vanguard and put all the money you don’t need to touch for at least 5-10 yrs in VTI at Vanguard and set it to automatically reinvest dividends (just make sure you download the year end tax statements every year for tax filings etc… as you will owe some taxes even on reinvested dividends) and ignore it for 5-10 yrs (don’t panic if Covid etc is in the news), just check on it on a monthly or quarterly basis to keep the account active and make sure you ar up to date on how to use the interface etc.

  7. AUM fees is the greatest invention by the financial service industry to enrich itself. It is a big fraud.

    There is not much difference in effort once a portfolio reaches above $200k (or any amount you like, eg $400k), an adviser would probably manage them similarly.

    I know someone who pays “wealth advisory” fees of 24 basis. Her returns this year is over 9%, not including the dividend–which adds about 3%. She has her tax return files for her too. The surprising thing is that the adviser wants to lower the fees, saying it is too much. There are some good guys out there.

  8. I was the executor of my parents’ estate and left with a haphazard mess of stocks, funds, and bonds. There was no asset allocation to speak of, other than large-cap, and issues regarding their home prevented distribution of assets to my siblings until a couple of years had passed. My parents used a wealth management guy in their hometown. He charged a very small fee and basically ignored them as far as advise was concerned.

    When the smoke cleared and asset distribution was complete I rolled my share to a financial adviser of my choosing, who then set me up with a Schwab account. He charges a 1% fee but gets nothing from Schwab. My main goal was to transfer the overwhelming collection of stocks and funds as tax-efficiently as possible into a reasonable set of low cost funds and ETFs that mirrored my eventual retirement goals and risk tolerance.

    It will be interesting to see how this turns out. This is the first year of little/no major capital gains transactions, so the tax bite should be much smaller this year, mainly on interest and dividends. I think my adviser has me in too many funds, but they all highly rated and the fees are reasonable – but I’m thinking I will push for some consolidation this coming year. If I ultimately decide I’m not getting the benefit suited for the 1% fee I will switch to self-direction or the robo-investment options.

    My IRA (Vanguard) and 401K (Fidelity) are self directed and doing OK.

  9. Hi,

    I have a portfolio of 10-15 individual stocks (large cap, mature, dividend paying) and a couple of sector ETFs. I got the stocks to avoid annual fees and earn dividends. But I think I should sell some positions to diversify more into the ETF area, despite incurring fees (VS having single stocks). Now I’m just waiting for the right time in the market to sell and use the proceeds to buy ETFs. Any thoughts on this strategy?

    1. As long as your holdings are ‘Dividend Aristocrats’ or other solid blue chip stocks, I say increase the number to ~20 stocks at equal dollar amounts. Then each holding is ~5% of your stocks. Personally, I selected ‘Dividend Aristocrats’ yielding dividends >3%.

      Dividend ETFs typically yield 2%.

  10. Good thing for the common retail investor, or anyone who simply wants cheap access to broadly available public investments. Lower fees as well as robo-advisers who can manage this for cheap, or even relatively simple DIY solutions at Vanguard/Fidelity/Schwab/etc.

    My guess is the wealthier people will continue to want the services of an adviser and/or access to non-public investments or not-cheap investment strategies. I don’t see private market investments becoming a ton cheaper than they are today simply due to lack of freely available information. That may change someday with the likes of Secondmarket and other similar platforms, but not yet.

    Also, at some level of wealth (different for each person) their personal opportunity cost is higher than the cost of outsourcing asset management. It’s very possible that there is a sub-set of people who value their time more than the cost to pay an adviser.

    I do hope that one outcome would be to see the average person switch over to robo-advisers and lower their costs to <.5% all in. It's absurd to pay a salesperson at Edward Jones or another "common man" adviser almost as much in fees as you would pay a hedge fund.

  11. In my younger and stupider days I started an IRA with Merrill-Lynch and learned only years after how much was being chewed up in fees, loads, and who knows what other charges. Fortunately I was alerted to Vanguard by a knowledgeable friend and moved all my money over. I didn’t bother discussing the situation with the M-L advisor because I knew all I would get was a pack of lies.

    There’s enough good information out there for free (e.g., the Bogleheads forums) or in inexpensive books that I see no need to hire an adviser at this point. I keep my assets in a few well-diversified Vanguard index funds and that’s all I need.

    1. Good highlight! I remember reading this last year. I can see how an adviser is worth 3% a year, especially to people who’ve really mismanaged or don’t manage their money.

      I would put the bogey at 1.5%, and be willing to pay just under 1% a year for the relief of not having to managing my money so I can focus on making money elsewhere.

  12. Really conflicted on this one. Currently with UBS (middle of your group). Have a team of advisors that work my moderate size account (2 senior managers, one junior manager, one administrator type). 95%+ of my interaction is with one or more of these 4 so it is almost like a small company feel although I know there is big company resources behind them. I like the people (relationships are important to me) and I like the personal interaction, I can always get a hold of someone. I am conflicted because I know I am paying a lot of dollars for their services and since I am approaching retirement in a year or so I feel as if I shouldn’t pay these dollars going forward.

    BTW, I created a PC account yesterday. Linking accounts looks time consuming so will have to wait. I did go through the retirement projection excersize which was easy and quick (10 minutes). UBS brought in a very sophisticated tool when I asked with a young hotshot to drive it (lots of inputs and adjustable factors). PC’s default projections seem way too optimistic, moderate risk = 7.8% assumed portfolio growth? I think we used 5.5% at UBS.

    Great food for thought Sam. Another hit in my book…

    1. I’ve never met someone who uses UBS in the states. What were some of the reasons you went with them, and is the advisory fee about 1.45%, as indicated in this article?

      If you have a tough time linking your accounts online, then you are probably a great client for UBS. The sub 35 age group are super adopters of technology, and this is the demographic that businesses are looking to penetrate.

      1. My wealth management fee is 1%. I do not think I am in many if any UBS specific products but I will take a look to your point about adding in those fees on top of the management fee.

        I went to UBS by following my portfolio management team that bailed on Merril Lynch shortly after BofA bought them. My guys did not like what they saw coming from BofA and they negotiated their whole team moving to UBS. They then offered the clients they “wanted” to come with to “come with”. They told me not everyone got such offers (a way to easily get rid of “bad” clients I guess). Merril made their pitch for me to stay but as I mentioned, personal connections and service are important to me so I followed.

        I didn’t say I had a tough time with links, I said it looked like it would take time, UBS is not in their top level list and when I typed it in I got what appeared to be rather lengthy instructions including that I had to contact UBS so I just quickly closed to do later.

        You appear to have an age bias Sammy (not the first time you have shown it). I have a Bachelors in Computer Science from UCI so I am pretty sure I can handle the technology in this case.

        1. Oh and I forgot to mention, I double majored and graduated Magna Cum Laude and Phi Beta Kappa so I am actually “really” sure I can handle it.

        2. Thanks for the background. Merrill consistently gets poked at for being the most expensive brokerage out there that the new fintech wave wants to conquer.

          Believe it or not, it’s just the data that shows the tendencies of different demographics. It’s one of the insights I garnered after a couple years of consulting in the marketing departments. It’s helped me structure a lot of the topics discussed here, and observe how people respond to XYZ. It’s truly fascinating stuff. And no doubt I have my biases and beliefs. That’s the difference between bloggers and journalists.

          Check out: Who Is The Typical Financial Samurai Reader

  13. Oh, there’s a typo in the article, you wrote:
    […]really ask yourself whether they are worth the fees you are paying every year. *If* the answer is “no,”[..]

    I think you meant “*Since* the answer is no”….


    1. Ha! Well, like I said, if you are:

      1) Clueless about the markets

      2) Don’t have time to follow and invest

      3) Have built a fortune beyond a level you feel comfortable investing e.g. $3M+

      Then I think having a professional who spends 40 hours a week or greater studying the markets and keeping an eye on your money is a good idea, even if it does cost money. The question is, what price should one pay? I would say in the year 2015, that price is 1% or less.

      Now if we can just lower the 5% selling commission for real estate. I’m on strike to never sell until that selling commission gets cut in half at least!

  14. I interned at Smith Barney in a Wealth Management group in college and was stunned to realize how much our clients were willing to pay in fees (1-1.5% of the portfolio) – especially if they knew it was the 19 year old intern who was preparing their annual presentation packages and plugging their asset allocations into a simple Excel model to determine how much of the company’s recommended funds they should buy/sell in order to rebalance each year.

    The advisors were ethical and I respected them, but I was surprised to realize their primary job was sales and marketing – i.e. getting new clients. The financial management itself was simple and fairly automatic. Help the client pick one of 9 proprietary asset allocation models; dump the client’s money into whatever funds the company recommended according to that target; spend 20 minutes a year checking to see what should be bought/sold to rebalance.

    Any discount brokerage website or even personal finance blog can walk you through the same process and save you tens of thousands a year – even if you pay a bit more for a managed target date fund or robo-advisor website (like Personal Capital) that will take care of rebalancing and even tax loss harvesting for you.

    People feel safer having a person at the wheel, and sure it’s nice to have somebody to call to ask specific questions, take you to lunch a few times a year, and refer you to an insurer/estate planner/trust adviser/CPA as needed. But that is hardly worth the tens and hundreds of thousands in fees many people pay over their lives, if you ask me.

    Financial planners are different from investment managers, which few people realize. If you want to pay for help, pay for a comprehensive financial plan from an actual financial PLANNER who doesn’t invest your money for you. You can also pay hourly for advice from one on a specific topic.

    1. Some great points! Cookie cutter advice is not going to cut it anymore w/ the rise of fintech. There are so many free tools out there that can help you asset allocate yourself and tell you what to buy. Hence, there needs to be an added level of SERVICE.

      I see financial advisory as a service business. Those who are must attentive, responsive, and open to communication will keep their clients happy for a long time. They don’t have to be the smartest people, as the models are already built. They just have to BE THERE when the client wants to be there, and be there when the advisor thinks the client should hear from them e.g. after the Fed’s decision today.

      SERVICE is key.

  15. The double dipping by putting clients into their own actively managed funds with fees is understandable, but also somewhat a conflict without disclosure.

  16. I have a few family members and people I know who use an adviser at Edward Jones. I just don’t see them listed on this post and am curious how their fees compare. I manage my own investments but don’t feel comfortable managing my family members investments, but I never know if they are getting ripped off by fees at places like Edward Jones.

    1. This is what I found from Edward Jone’s website. Not sure why PC didn’t include them in their study. But there are so many wealth management companies, it’s hard to get them all.

      The overall fee for an Advisory Solutions account includes the following:

      Program Fee – The Program Fee schedule on the first $500,000 is annualized at either a 1.35% or a 1.50% rate, depending on the account, and is subject to lower fees depending on account size.

      Administrative or Administrative-UMA Fee – An additional fee is assessed on accounts for certain record keeping and other account services. The Administrative-UMA fee also covers security trading activity and overlay management for UMA Models.

      Fund Models – 0.09% annualized rate
      UMA Models – 0.30% annualized rate


      Add on 0.6-0.8% in expense ratio for mutual funds, and Edward Jones is in the 2% level for total annual fees a year.

  17. At the time of taking this poll I am part of the 67% that said I will never hire an adviser.

    Been reading this blog for a while and it appears that the majority of readers here are pretty financially savvy and well off as we have mastered the art of wealth building. So if we are the self made millionaire kind of people why would we ever support an actively managed portfolio? Due to inflation in the economy it’s pretty obvious to see that as t => infiniti the stock price will go up (aka the long run) just because of the FEDs need for inflation. So knowing that, and knowing I can purchase cheap products like the SPY myself, why would I give someone else a cut for making my long term investment for me? Sure, the adviser may know to manage the rising interest rate situation better than most (not me though), but is it worth paying those fees and making someone else wealthy off of your hard work? I think not! An adviser is paying for a convenience, often times from a manager who isn’t even half as smart as me (I’m an Electrical Engineer and MBA finance educated man, who graduated top of my class in both) or many on here I’d imagine, so for people like me (and there are plenty of other insanely smart folk out there) I just don’t see how advisers could ever get us? What’s your take on how they’re doing so well?

    On a side note, I just read last month that Index funds have come to take 20% of the market funds and growing. It makes me smile seeing that this growth here as in theory as the limit goes to infiniti again we will see lower fees, money taken out of the bankers pockets, and less volatility as everyone would just be following a benchmark and going for long term horizon (though we all know everyone has different risks, timing, needs etc) and of course we will always be chasing unicorns and looking for value stocks with our extra “troughs” of wealth to make the big returns but still I just don’t really see how the active management module can expect to grow when all the disruptive technology is out to displace the industry. Look into “RobinHood”, it’s an App I read about and downloaded on my iphone, they give 100% free trades to clients. The way they say they can do this is by keeping the interest on the investors un-invested money in their portfolios. That’s going to continue to drive the cost down if something like that takes off. Honestly, I think that the reason the finance industry is doing so well is mostly because of the 401k and the requirement for people to be in them (if you’re smart and you forfeit your match by not paying in – it’s practically a requirement). But looking at all the charts, you see that the majority of people’s wealth is in their home equity and their 401k, and the finance industry has been able to take over the 401k (think of who manages your portfolio – just yesterday I read that Fidelity stated the majority of their big young earners called “super savers” were using date funds – Fidelity and other brokers are getting the majority of their business right there from those 401ks). But hey, there is some merit to that because the majority Americans (and probably the world) are not financially literate so they need forced savings and someone else managing their wealth. It just surprises me how easy it is to dollar price average on the long term yet someone is willing to pay approx 1% in fees for an actively managed fund when the basic aren’t that hard. Maybe I’m just the minority though. My portfolio overall is up approx 8% this year compared to my 401k being down approx 8% (which I use the target date fund – go figure ;) ). So I’ve again beaten the actively managed fund and with a 16% absolute value spread no less.

    I’m interested in hearing your insights to the future of the finance industry though, care to offer what you think about where they are going in the future? I mean, will people continue to allow the bankers to bring home that 7+ figure salary for not ever working harder than the smaller managed fund, I only wonder due to the atmosphere of income inequality in this nation right now and all the attention it has garnered up. Hope to hear from you!

    1. A lot of people I know have made their money NOT through investing, but through their work or business. One of my clients has done well being a Hollywood agent, for example. She doesn’t know the intricacies of investing, which is why she is more than happy to have her money managed by a wealth management company. I agree w/ her decision b/c she wouldn’t know how to properly allocate her wealth that fits her risk tolerance otherwise.

      It’s a race to the bottom for fees. Hence, each firm must differentiate on PRODUCT and on QUALITY OF SERVICE. There is also a very important element of BRANDING, TRUST, as well as longevity.

      I’m super frustrated w/ the real estate industry for and online real estate firms for not doing enough to lower the 5% selling commission cost.

    2. While I understand your argument I would have a few opposing viewpoints on this:

      1) While I believe that I can handle my money myself I think there is a certain threshold of wealth at which you begin to need to outsource the task. If for no other reason, this would likely be true just for the opportunity cost of your time.

      2) For most of people, we know one or two industries really well. But, there are a great many industries and investment vehicles which I really may not be that great on. Having outside perspective and input can be greatly rewarding in that case.

      3) Every bank has tiered private wealth management firms. There is a reason HNW individuals bank with JP and GS. They get white sheets, top notch service, best-in-class timely information on items that matter and access to cream-of-the-crop investment opportunities.

      4) IMO 401ks are a ripoff created by the banks for the banks. But, that doesn’t mean you have to stay in them. Roll over to a self directed IRA.

      1. Agreed, there is a point for a lot of people where saving 1-2% in fees isn’t worth the extra time spent managing a very large portfolio. When I have $50 million of investments I don’t plan on being involved in the day to day operations the way that I am today.

        1. Agree, nor wood I want to risk DIY on that amount b/c I might F it up, and I won’t be on it every day b/c I want to do other things, like travel, work on my business, spend time with family etc.

          Managing your money every day can get STRESSFUL. By offloading this duty to a professional, the stress goes down a lot.

          After about $3 – $5 M, I don’t want to manage the money all myself. I’d be afraid I’m missing something.

        1. I used to work with a guy who had a PHD in EE. He was insanely smart. We talk about options trading all day long and things like theta and vega. He was one of the few that knew what I was talking about. Even Stanford MBA guys didn’t know what this guy knew. But, he is the last guy in the world I would ever ask to go to HH. He was socially inept.

      2. Sam, my thoughts around actively managing a net worth of around $3 – $5 MM are similar and that you should never fully take your hand off the wheel. One approach that interests me would be similar to the way a business hires consultants for their expertise. It would be nice if a pricing model existed that would be based upon a scope of work and not sum of an individual’s investments!

        Nice points Austin. I just opened up a self directed account last month because I was looking for more investment options then my 401k could provide. I have found some success with private lending to a contractor friend of mine. Where are you finding success with your self directed investments?

    3. Robert Bothmer

      Vanguard posted a study showing that working with an advisor will allow you to get 2-3% per year on average in better returns…wonder why a low cost provider would say that? Because behavioral finance and people’s illusions around money. I’m sure that engineer who ranted about doing it himself is exposed to a ton of blind spots he has no idea about…if you’re really a great engineer /doctor/ lawyer or whatever then you will most likely be heavily involved in your profession and not researching financial planning and the markets. Work with a CFP(r) and you’ll see what I mean by blind spots

  18. I’m surprised they left Vanguard out of the analysis, but then again it would have made them look expensive by comparison. Several of the comments pointed this out, and the response was that they didn’t have enough data from Vanguard. I seriously doubt they don’t have enough Vanguard data, as they’re one of the largest firms in terms of assets under management.

    1. I agree. Why not invest directly with Vanguard? Financial Technology needs to be more than a slick webpage that charges a fee to invest in Vanguard funds. I have a free account with Personal Capital but I do not let them manage my money.

      Avoid financial intermediation!!

    2. I asked them about Vanguard, and this was the response:

      “When I completed this analysis Vanguard had recently begun managing money and there were not enough Personal Capital users with portfolios managed by Vanguard to accurately reflect their fees, so they were omitted from the analysis.”

      Vanguard just started an advisory business after 40 years in the past 12 months, and this report took 6-8 months to compile. I remember seeing a version of it while I was still actively consulting at Personal Capital back in Jan/Feb 2015.

      Vanguard charges 0.3% in advisory fee per their website.

  19. Ali @ Anything You Want

    Holy cow these numbers are crazy!! I don’t use a managed service for my money, and I guess I’m not going to start! I use Charles Schwab but I manage everything myself and I am mostly invested in extremely low cost index funds and ETFs. I have a long time horizon so I think the key for me is to just keep pouring money in and keep fees as low as possible. No need to overthink things or try to beat the market.

    1. Help!! This may be a really stupid question but how do I switch to a non-managed service? Currently I’ve been with Morgan Stanley for the past 12 years and just came to find out fees were raised again and basically I’ve already given them over $30K in fees for this same time period. Super stressed about this and want to do things solely on my own from here on out. Looking for a little guidance on taking a DIY approach to investing.

  20. Pursuing Financial Freedom

    Chart 2 would be more interesting if you included Vanguard. They blow everyone out of the water with ETF expense ratios.

    1. Good call. I looked up Vanguard’s advisory service fee and it is 0.3%. I assume, they’d use their Vanguard funds to build portfolios for their clients as well. Therefore, their total fee is probably somewhere around 0.5% – 0.7%.

      1. Pursuing Financial Freedom

        Where do you get 0.6%-0.7% for Vanguard? There advisor fee is 0.3% and most ETFs expense ratios are between 0.05%-0.2%, which would make them the cheapest option.

        1. I’m being conservative, as there are other fees involved as well that gets tacked on to every account.

          Are you a Vanguard advisory client? If so, can you share the exact fee they are charging you? The report isn’t a simple X + Y = total fee.

          1. Pursuing Financial Freedom

            I am currently not a Vanguard advisory client. I prefer to DIY as I enjoy the research and owning the process of managing my own investments. However, out of curiosity, I have had conversations with Vanguard to inquire about the service when it was introduced. They ensured me that the fee was a flat 0.3% and would only decrease, if the assets managed went above $5 million. They don’t really have anything else to upsell. All ETF expense ratios can be found in one view. The highest I found is 0.34%. So essentially the highest possible fee you would incure, if you used the advisory fee and only purchased the most expensive (expense ratio wise) ETF, would be 0.64%. But if you went the traditional SP500 ETF or Total Stock Market ETF route you could pay as low as 0.35% all in. Not too shabby.

            1. Not too shabby at all. The question then becomes: what makes the Vanguard financial advisor better than XYZ.

              Vanguard has a great brand for low cost ETFs. But as a new player in the advisory business (w/in 12 months), it is unclear about their quality of service and quality of advisor.

              Getting a team at GS to look after your money, where the minimum is in the millions sounds pretty good, b/c it is very difficult to get a job there, for example.

  21. Sam,

    Just curious. Why do you use SPY instead of VOO? You would save 3 basis points for the exact same investment.

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