Recently, a national business publication ran an article about “the compressing of fees” that is underway with financial advisory firms. The story claims that there is such great competitive pressure to reduce fees that many advisers are voluntarily and proactively lowering what they charge below the “standard” annual advisory fee of 1 percent of account value.
Without a doubt, there are asset managers and advisers that are reducing costs, rising to the competitive pricing of computer-driven “robo-advisors” and similar programs that will direct a person’s investment plans. In the right situation, these arrangements could work well for an investor that possesses certain characteristics and abilities.
However, the problem for most investors, and I do not see this ever going away, is that while it seems sensible and simple to just “buy low, sell high,” it's not easy. It is very hard to overcome human nature’s desire to buy when everything looks good and to sell when the news and headlines are scary.
This is one of the primary duties of a financial advisory firm, to create a written investment action plan and to instill discipline in the portfolio management process. Helping an investor by influencing these behavioral tendencies (to buy high and sell low) is in many cases worth much more than advisory fees paid.
But there is more!
Financial advisers and wealth managers provide much more in the way of advice and service than just isolated attention on a client’s investments.
My book, The Eight Points of Financial Confidence, is a clear statement of what investors should expect of a wealth adviser, and investment and asset management is only one of the eight points. Advisers that deliver this array of services, which include considerable thought and attention, work hard to provide value to clients and earn the advisory fees they charge.
(Advisers that are not providing a full wealth management experience for their clients could be under great pressure to reduce fees.)
If you are in the process of selecting your financial adviser (or evaluating your present arrangement), consider getting a copy of this practical book and make sure you get your money’s worth for service fees you pay.
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