Few advisors explain how the amount of their fees, and the way they are collected, may be the biggest impediment preventing clients from reaching their retirement goals.
RENO, Nev., June 21, 2022 /PRNewswire-PRWeb/ -- Registered investment advisors often tout the fact they are "fiduciaries" to their clients. They are supposed to avoid conflicts of interest and disclose any that are unavoidable. Above all, they are required to always place the interest of their clients above their own.
Yet, few advisors explain how the amount of their fees, and the way they are collected, may be the biggest impediment preventing clients from reaching their retirement goals.
Advisor's fees are typically expressed as a percentage of assets being managed. Commonly, it's 1%, but brokerage firms may charge 1.50% or higher.
Typically, fees are deducted directly from the portfolio.
Few clients understand the long term ramifications of these fees and the way they are collected.
On a $1 million portfolio, earning an average of 6% a year over a 20-year period, total fees paid by a client when the advisor charges 1% of assets under management is over $364,000.
If those fees are deducted directly from the portfolio, the client will lose an additional $189,000 because that money was not available for investment, aggregating $553,000 as the real cost of using an advisor.
Investors whose fees are collected in this manner will lose 25% of their total gains over a 20-year period.
Instead of telling these clients, "We charge 1% of your assets under management", a real fiduciary would be forthright and state: "Retaining us will cost you one-quarter of the total gains in your portfolio over a 20-year period."
Most investors are unaware of the existence of low-fee advisors, like Sensible Portfolios, who charge significantly lower fees, offer very high quality investment guidance and provide retirement lifestyle planning for clients in or nearing retirement, using sophisticated software.
In the same example above, Sensible's fees would be only $128,336 (compared to $364,000). It gives its clients the option of not having those fees deducted from their portfolios, which would save them an additional $76,942.
Even if these clients consent to having advisory fees deducted from their portfolio, the percentage of their gains lost over a 20-year period is only 9% (compared to 25%).
According to Darrell Armuth, CPA, the founding partner of Sensible, "This difference in fees can be a major factor separating investors who achieve their retirement goals from those who don't."
Darrell Armuth, CPA, is the founder, Portfolio Manager and Registered Investment Advisor of Sensible Portfolios. He has been providing low fee, high value service to investors since 1994.
Media Contact
Darrell Armuth, Sensible Portfolios, 1 775 323-1488, [email protected]
SOURCE Sensible Portfolios
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