Have an issue with your financial adviser or looking for a new one? Email [email protected].
Question: If one’s financial planner takes 1% off the top of what one invests annually with his firm and not only makes no money for the client, but actually loses a substantial amount, is it time to go elsewhere?
Is a 1% fee to your financial adviser worth it, even when there are losses? First, know that a 1% fee off the top is common for the first million dollars under investment management and is typically separated from investment performance. “A new BMW sedan will likely cost much more than a Toyota sedan, but that doesn’t mean that we should expect the BMW to be in fewer accidents or cost less to repair than a Toyota.
If the 1% fee includes financial planning, retirement planning, behavioral coaching and a host of other financial services on top of investment management, the value of those services should also be taken into consideration, says Presogna. “There’s value in hand-holding a client through a 25% down market and preventing them from selling and going to cash. That value is hard to quantify on an investment statement that shows large unrealized short-term losses,” he says.
A loss by itself is not always a good reason to move to a new financial planner unless the losses are a symptom of greater problems. “My guess is that your financial planner’s biggest failing was not setting proper expectations or perhaps putting you in a portfolio that was more aggressive than what you were actually comfortable with,” says Whalen.
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