Financial planner: In-depth advice, including reverse mortgage, justifies a 1% fee


A discussion in the financial planning community has emerged about the structure of compensation, illustrated by a recently published story on the validity and rationale for investment advisers charging a 1% fee on their assets under management for their advisory services. . However, one planner says the in-depth advice offered by his company – which in one case resulted in a client getting a reverse mortgage – justifies this fee structure.

That’s according to the article published last weekend in the Wall Street Journal.

Starting with the story of an investor who switched to advisers charging by the hour instead of a 1% figure based on assets under management, Keith Rudman, 62, describes a noticeable difference in the level of service he received and the money he received. saved by making such a jump.

“They provide a ton more services than my former financial advisers and they charge me between a 10th and a 20th as much,” he told the Journal.

This indicates a growing trend, according to the article written by Journalist Neal Templin.

“Mr. Rudman is among those investors who seek – and find – alternatives to traditional financial advisers who charge a certain percentage of assets under management,” the article read. Mutual funds and trading fees have declined over the past few years, the fees that registered investment advisers charge on portfolio balances have increased slightly. The average investor with $ 750,000 paid 1.04% of the assets invested in fees in 2020, up from 1.02% in 2015, according to Cerulli Associates, a research and consulting firm. Meanwhile, an investor with $ 10 million paid 0.62%, up from 0.54% .

However, not all advisors are created equal and there are those who believe that the services provided – as well as the depth of that service – are justified by a 1% fee. This includes services which, at least in one instance, resulted in a customer taking out a reverse mortgage.

“Advisors charging 1% believe their fees are worth it for investors who want or need a high level of service,” the article said. “Milo Benningfield of San Francisco considers himself much more than an asset manager, saying he immerses himself in the financial lives of his clients. For example, he says he found a reverse mortgage that was much cheaper for one and got a special loan for another so he didn’t have to sell stocks and pay taxes on the earnings. in capital.

According to the article, the way consumers choose to manage their money can have potentially significant implications for their financial security, and the burgeoning compensation debate among financial advisers is just one example that may illustrate this.

Read the article in the Wall Street Journal, subscription required.


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