Dare to Compare: Fee-based Advisory Services
When you consider investing with a financial advisor, it is critical that you understand – and compare – of the costs associated with making your investment.
At Voyage, we are proud of our efforts to keep investment costs low as well as our DARE TO COMPARE approach to explaining them. Cost, by itself, should not be the only reason for selecting a financial advisor, but it is an important one.
That’s why we put together the following questions and answers commonly associated with engaging a fee-based advisor. This way, prospective clients can DARE TO COMPARE our fees in relation to industry averages and other financial advisors.
Are there different fee structures to consider when engaging a financial advisor?
Yes, there are differences, and it’s important to understand them.
- Fee-based account: The total cost of investing includes an Advisory Fee and Investment Costs. This includes performance monitoring of a risk-adjusted portfolio, investment management (asset allocation, trading, rebalancing, manager due diligence) without paying for commissions to make changes or trades.
- Fee-only account: Their work and advice is paid for as a flat retainer, an hourly rate or a charge that is specific to the task at hand. They do not accept fees or compensation based on product sales.
- Commission-based account: The advisor receives compensation upon opening an account; or, on the sale of a financial product by the company offering the product.
The financial consultants at Voyage Financial Group use a fee-based model. This makes us responsible for making sure each client’s portfolio is suitable for his or her financial goals and objectives on an ongoing/continuous basis.
What fees can I expect to pay a fee-based financial advisor?
There are two components that make up the Total Cost of investing:
- Investment Advisory Fee (annual rate)
- Investment Costs charged by mutual funds and exchange traded funds (ETF). This includes management, administration and transaction fees.
Can you give me an example of how Voyage’s Investment Advisory Fee is calculated, and is there any way to tell if the fee is high or low?
Sure, let’s say you are prepared to invest $1.5 million with Voyage:
$750,000 is calculated at 1.00%
$750,000 is calculated at .50%
Total Voyage Advisory Fee is .75%
For comparison purposes:
Advisory HQ News reports the average percentage fee charged for $1 million in client assets is 1.02%.
Source: http://www.advisoryhq.com, Average
Financial Advisor Fees in 2016. How Much Does
Financial Advisor Cost? 2/26/2016
PriceMetrix reports charges for fee-based accounts – regardless of the amount of assets managed – range from 0.81% to 2.08%.
Source: http://www.pricemetrix.com, Fee &
Managed Asset Pricing, 3/1/2011
How much should I expect to pay in Investment Costs at Voyage, and what can I compare the cost to?
At Voyage, we have access to institutional shares for most funds, which are the lowest costing share available. We always purchase shares at the lowest cost available on the same platform.
As a result, our Investment Costs average .65%
Morningstar reports the equivalent industry average is 1.25%.
What should I expect in return for paying an Advisory Fee?
At Voyage, this includes:
- Financial planning and consulting
- Access to thousands of securities
- Flexibility to update your investment strategy as personal or market circumstances warrant
- A fee structure that works to align our mutual interest in your growing assets
There are also no:
- Ticket charges
- Front or back-end sales charges
- Annual IRA fees for accounts over $250,000
- Transaction fees for funds in model portfolios
What else should I DARE TO COMPARE?
We suggest you consider:
- Voyage consultants are independent financial advisors and, as such, we can select from the universe of investment options that include mutual funds, actively managed portfolios, alternative investments, individual stocks and bonds, variable annuities and exchange-traded funds (ETF).
- Voyage clients receive a personal financial plan that is monitored at least annually. Based on the client’s goals, tax implications, time horizon and risk tolerance, the plan is comprehensive by including real estate holdings, retirement accounts, social security, personal savings and life insurance policies.
Investing in mutual funds and ETF’s involves risk, including possible loss of principal.