Question – The fees associated with my investment portfolio which is managed by my financial advisor, are eating into my ‘retirement nest egg’ which is already performing poorly. Any suggestions?
Answer – Most financial advisors work on a fee that is linked to the value of the portfolio. This could be a ‘trail’ commission or an advisor fee that was negotiated when you first invested. This fee combined with the selected products can seem quite high particularly in the current climate of poor returns.
It is not possible for humble savers to judge if your advisor is justifying the fees being charged. You may see the portfolio performing poorly but you need to consider how your portfolio is performing in the context of your investments, that should have been selected with full consideration of your circumstances.
A good advisor should add value beyond the investment portfolio. They should work hard to construct a strategy that takes into account your personal circumstances including, insurance, estate planning, taxes and so on. If your advisor is only focused on the portfolio, looking for an alternative advisor is an option worth pursuing.
Other suggestions include:
- Talk to the advisor and air your concerns – You won’t be the first to show concern and the advisor would like to keep your business
- Review your portfolio in terms of its original goals and the goals you may now have
- Ask if less expensive products can be selected without any significant up front costs (fees and taxes)
- Ask if his/her advisor fees can be negotiated – For example, can you arrange a ‘fixed flat dollar fee’. Or a fee for the time he/she spends working on the portfolio
If you don’t feel comfortable with the responses from your advisor, shop around. Start with recommendations from people you can trust and that have had expepreinces with advisers in your area. You can also review Five Ways to Save – Financial Advisor which will provide further guidance.