This article was published more than 5 years ago. Some information in it may no longer be current.
Question from 79-year-old Bill Silverberg from Winnipeg: What is a fair fee to pay an advisor for management of my portfolio and how should this fee be structured?
Mr. Gillespie specializes in how to generate tax-effective income in retirement.
Clay Gillespie is a financial adviser, portfolio manager and managing director of Rogers Group Financial in Vancouver.
“Not only is it important to know what your adviser is getting paid but also the total cost of the recommended strategy. Disappointingly, much of the regulatory changes coming in our industry focus solely on adviser compensation when equally, or even more, important is the overall cost of the recommendations.
“If you’re doing most of the work and assessing your own situation while your adviser is just filling the order, then the compensation should be much lower. In this case you should consider a robo-adviser or a self-directed account where you can direct the decisions. The dealer compensation in this model should only be 0.25 per cent to 0.50 per cent. There is no need to pay for advice you’re not getting or do not need. If you buy a mutual fund at your local bank branch because you really don’t want the advice, you are probably paying just as much as if you bought the mutual fund through a full-service adviser.
“What you’re paying an adviser should be based upon the services and advice that you get. The larger your account the lower this percentage should be. I would suggest the highest you should pay an adviser is 1.25 per cent. An average fee would be approximately 1 per cent.
“However at the end of the day, what an adviser is compensated should be directly related to the services and advice that he or she provides. If there is no advice, then the fee should be much lower than if it is a full-service adviser providing comprehensive advice, monitoring and adjustments based upon your unique circumstances.”