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The scarcity of information on what investment advisers charge makes it tough to tell if you’re getting a good deal.

That’s exactly how the advice business prefers things. Without any publicly available data on typical or average fee levels, it’s difficult to assess what an individual adviser charges. Hence this question from a reader: “Is a 1-per-cent fee for ongoing financial advising in stocks a fair fee? How do I assess this adviser before I sign on?”

First off, my sense is that 1 per cent is a reasonable fee by the standards of the investment advice business in 2020. In fact, it’s a fee that some advice firms would hold for large accounts, say in the high six-figure or seven-figure range. Now, let’s dig a bit deeper. What would an adviser have to do to make that 1-per-cent fee a good value for a client? Some thoughts on that:

Does the adviser offer an investment policy statement?

An IPS documents your risk tolerance, your return expectations and your asset mix. It’s where you and your adviser document your agreement on how your money is to be managed.

Does the adviser do any financial planning?

Investment advice based solely on managing a portfolio of investments is bound to dissatisfy, even at a cost of 1 per cent. There will be down periods for the portfolio where the client chafes at paying the adviser anything at all. Success and failure in this case are determined strictly by what the market offers. A financial plan offers a better way. Your investments are regarded as a means to an end that is defined as a well-funded retirement, for example. The value of your fees is measured in how you are progressing toward your goal, not on what stocks are doing over a short period.

Does the adviser minimize the cost of investments?

Investors who pay their adviser a fee set as a percentage of account assets must also account for the cost of investment products in their portfolio. If a portfolio of exchange-traded funds has a weighted average management expense ratio of 0.25 per cent, then the reader asking about the 1-per-cent fee would have an all-in cost of 1.25 per cent. That’s quite reasonable. Individual stocks would be cheaper, while F-class mutual funds (sold by advisers for fee-based accounts) would be more.

Is the adviser accessible and accountable?

How often will you meet? Can you reach the adviser, and not an associate, on the phone or by e-mail?

In short, a 1-per-cent advice fee is fine. The real question is what does the client get for paying it?

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