Fees for a managed money account of 2+ million?

[Anonymous]

What is a reasonable fee for a managed portfolio of 2.5 million (think Morgan Stanley). We recently sold our family business but are not planning to retire for another five or so years. In the meantime, we'd like to grow our nest egg. We're wondering what most people are paying for this service.

[Anonymous]

No more than 0.5%

[Anonymous]

Anonymous wrote:No more than 0.5%

Really? The person who was recommended to us has a fee of 1.25%. We thought that seemed high.

[Anonymous]

Ours is 1.0% for first $1mln, then 0.85% after that. That's typical in the financial advisor industry, at least for independent advisors.

[Anonymous]

1% or more is typical. However, the drag imposed by such fees will materially reduce your long-term returns. https://www.investor.gov/introduction-investing/getting-started/understanding-fees Such advisors usually create complex and not necessarily tax-efficient portfolios for their clients.

For many people, a superior and equally effective alternative is Vanguard's Personal Advisor Service, a hybrid robo-advisor which combines automated features with personal advice at a much lower cost: https://investor.vanguard.com/advice/financial-advisor

A variety of pure robo services also might be helpful if you only require asset allocation and portfolio rebalancing services, and have no need of personal financial planning or other investment advice. Those services generally cost even less than PAS. Vanguard, as one such example, offers their Vanguard Digital Advisor service, but many other companies offer similar products: https://investor.vanguard.com/advice/digital-advisor

[Anonymous]

Put it in ETF's and the fee is 0.03%. It's perfect about to let it grow on it's own with the market. Spend money on tax accountant.

[Anonymous]

Anonymous wrote:

Anonymous wrote:No more than 0.5%

Really? The person who was recommended to us has a fee of 1.25%. We thought that seemed high.

This seems reasonable to me. However, I agree with the comment about ETF. Also, you can just do an S&P index fund (slightly higher fees than ETF). We got rid of our FA because it's easier for us just to do it ourselves and the return is equally as good, better since I don't charge myself fees.

[Anonymous]

Anonymous wrote:Put it in ETF's and the fee is 0.03%. It's perfect about to let it grow on it's own with the market. Spend money on tax accountant.

$2 million is around the threshold where you can start buying individual muni bonds with specific local tax advantages or where you can start worrying about the level of gains or dividends generated. I still would cap fees at .5% though

[Anonymous]

For $2 million, I’d manage that on my own with low fee ETF’s or mutual funds.

[Anonymous]

Anonymous wrote:

Anonymous wrote:No more than 0.5%

Really? The person who was recommended to us has a fee of 1.25%. We thought that seemed high.

We had an advisor for a portion of our portfolio for about 10 years. The market (S&P, DOW and Nasdaq), our 3 401Ks and 3 of my brokerage accounts all beat the returns of the advisor's return in pretty much every time period. Their response always was "we manage risk" and "you will see our value in a market downturn when we won't lose as much", etc. Not really. Fired them last year.

We paid 1% for a 600K account. I believe the fee structure was a sliding scale. Not sure what it would have been for 2M. If I was to do it again with a larger portfolio, I wouldn't pay more than 0.5% (hence my recommendation). I'm sure you can negotiate. It's just another service, not something set by statute. 0.5% is another 10K per year for doing close to nothing (other than at the beginning of the relationship).

[Anonymous]

I don't pay anyone to manage my money, OP. I have it all in online, TD Ameritrade kind of trading accounts, and buy and sell individual stocks myself. Which is to say, I buy to hold long-term (Apple, Google, Amazon, that type of stuff). It has served me very well in the decade + I've done that. When I get older, I will perhaps move to more dividend-rich stocks.

My trading account at HSBC comes with a free advisor, that I don't listen to, because he spouts mealy nonsense about diversifying.

[Anonymous]

our firm is .8% on 2.5M and includes estate planning in the fee

[Anonymous]

Total market index funds for .03%. An advisor is not going to "grow your money" anymore than the market can or cannot.

[Anonymous]

Anonymous wrote:Total market index funds for .03%. An advisor is not going to "grow your money" anymore than the market can or cannot.

Most advisors don't say they will. If they do, run away.

I'm an advisor and never in a million years would I sell myself out to beat the market consistently. People hire my firm because they don't want to deal with it, don't trust themselves to act rationally in market declines (which is where most money is lost due to emotional trading), want other services like tax help, estate planning, insurance, etc.

I can easily cut my own grass but I chose to pay someone. May be dumb to some, but I have better things to worry about.

[Anonymous]

Our advisor charges a sliding scale. We’re at around .94% for around $2.5 million. I can’t recall if it reduces every $500k or $1 million. I have been very happy with my returns, even taking their fees into consideration. My company also offers complimentary estate planning services.