Let’s talk numbers! Portfolio managers charge management fees based on a percentage of your investment portfolio’s value.
- Negotiate wisely at the outset. Your financial journey deserves transparency and smart choices. The top advisors offer discounts on fees for staying with them (long term of at least 2 years) and for the more money that you invest. It doesn’t take more much effort to invest $100,000 then it does to invest $1,000,000. Why should you pay 10x as much if you invest the million?
- Commissions are amounts charged per by or sell transaction. With the exception of gamblers, most of us should have very limited trades in a given year.
- Conflict of interest between management fees and commissions. Advisors push you towards management fees so that they earn more when they make long term recommendations to buy and hold. With this proven strategy, the commissions are low. Advisors want to increase their pay. So they recommend management fees. This is a conflict of interest. On the other hand, if your advisor is recommending lots of trades, run!
Churning and high-frequency trading are high risk, pay the advisor well, and in most cases, have been proven to leave the investor trailing the stock market’s returns. If this is what you want, you might as well buy a lottery ticket. With a lottery ticket, you will get the additional benefit of the dream of winning the jackpot.
