A fast-growing trend in the investment business is to charge clients a percentage of their account assets as a fee for advice.
Advisers may be forthcoming about the fees they themselves charge when talking to clients and prospective clients. But it’s near impossible to compare fees from firm to firm in order to benchmark your personal cost of advice.
How do you pay your adviser?
Two other ways to pay for investment advice1
If You Own Mutual funds:
Many fund companies pay advisers out of fees they charge on their funds
|Equity funds||1 per cent of assets|
|Bond funds||0.5 per cent of assets|
There isn't a lot of variation on trailing commissions, which is the industry term for commissions paid to advisers out of fees charged on mutual funds. These fees are taken off the top of fund returns; the net returns are what investors see.2
If you pay commissions to trade stocks:
In a transaction-based account, you pay a fee to your adviser and his or her firm to buy or sell stocks.
Commissions for trading of stocks and other securities vary according to account size and other factors.
Follow Rob Carrick on Twitter: