I have an estate worth approximately $5,000,000. Would it be better to pay a financial advisor a flat fee of $10,000 or 0.5% of my assets?
Not everyone wants to deal with managing their estate. Instead, they prefer to find a reliable financial advisor who can stay on top of the assets and grow them over time. A high-net-worth individual with a $5 million portfolio is looking for this type of solution and is choosing between two financial advisors. One of […] The post I have an estate worth approximately $5,000,000. Would it be better to pay a financial advisor a flat fee of $10,000 or 0.5% of my assets? appeared first on 24/7 Wall St..
Not everyone wants to deal with managing their estate. Instead, they prefer to find a reliable financial advisor who can stay on top of the assets and grow them over time. A high-net-worth individual with a $5 million portfolio is looking for this type of solution and is choosing between two financial advisors.
One of the financial advisors will charge a flat fee of $10,000. The other advisor will charge 0.5% of the assets. These financial advisors have different business models and rates. Let’s unpack it a bit to explore which financial advisor makes more sense for the high-net-worth individual.
Key Points
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An investor with a $5 million estate is wondering if it’s better to pay a financial advisor a flat fee or based on AUM.
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It’s important to see how much money you save with each option and how you feel about each financial advisor. It’s good to note that an AUM advisor has a greater incentive to grow your estate.
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You Will Save Money With The Flat Fee
The flat fee comes to $10,000, while a 0.5% AUM fee is $25,000 with a $5 million portfolio. As the portfolio grows, the $10,000 flat fee will stay intact. However, the AUM advisor’s expenses will go up as your portfolio grows.
You’ll save $15,000 per year with the flat fee advisor. Furthermore, those savings will grow as the portfolio continues to appreciate. Those savings can add up quickly. In 10 years, you’ll save more than $150,000 with a flat fee advisor instead of the one who charges based on AUM. You can put those savings back into your estate and have that money compound as well.
AUM Advisors Are More Invested In Your Success
While the AUM advisor is more expensive in this scenario, this advisor is also more invested in your success. That’s because any portfolio growth translates into a higher AUM fee. However, if this advisor causes your portfolio to drop, they will collect a lower fee.
Granted, there is still a big gap between the AUM advisor’s $25,000 annual fee compared to the annual $10,000 fee. Being able to invest the difference may be enough to warrant working with the advisor who will charge a flat fee.
See How You Feel During The Interview Process
Even though one advisor presents clear savings, it’s still important to do your due diligence and interview both professionals. Human touch is a vital component of the process, and part of your decision should be based on who you feel more comfortable working with.
You should assess how quickly each professional responds to your emails and how they make you feel when responding to your questions. If price wasn’t a factor, which professional would you feel more comfortable entrusting your estate to? Some people charge a higher fee because they are more trustworthy or have a history of delivering impressive results for their clients.
Monitor The Financial Advisor’s Performance
The post I have an estate worth approximately $5,000,000. Would it be better to pay a financial advisor a flat fee of $10,000 or 0.5% of my assets? appeared first on 24/7 Wall St..
