Investors need to be informed not just about the assets they are investing in, but also how much fees are involved in the process. While engaging a professional financial advisor to manage your investment and customise an investment portfolio that suits your needs sounds like an excellent plan, it does not come free.
Therefore, it is pertinent to understand how much you need to pay when looking to engage the services of a financial advisor or investment management firm, as such fees will have a direct impact on your return. Every cent counts towards performance in the long run.
Here, we take a closer look at the different types of fees investors will encounter:
Many financial advisors and wealth management firms charge their clients based on a fee structure, and the most commonly used fee structure in the industry is charging a percentage of the total assets managed. The average fee paid to financial advisors and wealth management firms is usually between 1-2% of the total investment sum of the client’s account annually.
It is worth noting that the advisory fee percentage is often scaled, and often decreases as the amount of assets under management increases. For example, a financial advisor may charge a client 1.5% annually to manage an investment account of $100,000 or less, but charge less than 1% for an account of more than $1 million. In short, you have more negotiating power when you have a larger portfolio size.
Additionally, you will also incur a transaction fee each time you buy or sell a mutual fund or stock. Such fees range from product to product, with mutual funds generally gravitating towards higher transaction fees, compared to exchange-traded funds (ETF) and stocks. Trading fees vary depending on the volume transacted and which market. In Singapore, commissions for purchasing local equities and ETFs can be as low as 0.12% and 0.08% respectively. As such, ETFs and stocks are more attractive to investors who wish to keep their transaction costs low, as these products can be transacted for relatively low fees.
The Privé Technologies Team