A big question in our industry is how financial advisors are compensated? And, does every advisor have the same type of compensation? To see the different types of advisor compensation, click this link: Fiduciary Difference.
The financial services industry is not known for its transparency, so allow us to shine some light on the typical costs clients pay. Most people who work with a financial advisor pay 3 layers of costs. It’s important to know what your total costs will be, not just the advisor’s portion.
Typical Client Costs
Clients who work with advisors usually pay three layers of costs:
1. Advisory Fee (largest expense)
2. Investment Fees (paid to investment company)
3. Custodian Expenses (paid to custodian)
Average Advisory Fee for RJ Advisors 3Q 2018
PWFS Client Costs
- PWFS Advisory Fee
- Investment Fees
- 0.50%per year for our managed portfolios
- Custodian Expenses
- Trading costs: $0-$20 per trade
- No annual account charges
- Other misc. fees such as wire fees, etc.
PWFS Tiered Fee Schedule*
Petrovic Weaver Financial are not product salespeople; therefore, we do not take any commissions of any kind. Even if we help you buy a life insurance policy, for example, we are not compensated for the sale of the policy. We are fee-only, which simply means we do not receive any commissions from investment or insurance products. Read the Fiduciary Difference.
Most of our compensation is from assets-under-management fees or AUM. This means we charge you a small percentage on your investments that we manage, whether those managed investments are held at Raymond James or your 401k with your employer. A simple example of this would be charging an annual 1% assets-under-management fee on your investments that we manage. Every quarter, we bill you a fourth of 1%.
Do you work with clients on an hourly basis?
Some advisors do work on an hourly basis, but we do not. Our firm and processes are structured for long-term client relationships, where we know you and your financial situation quite well.
Do you charge extra for financial planning?
For new client financial planning engagements, we often charge a one-time setup fee of between $500 - $2000.
Aside from the one-time setup fee, we usually do not charge an annual financial planning fee. Any financial planning services provided are usually covered in the assets-under-management fee. However, in order to provide financial planning services, we do require clients to have a certain minimum amount of investments that we manage.
Do you show clients what their investment expenses are?
Yes, absolutely! Once a year, for clients invested in our managed portfolios, we’ll review our Portfolio Expenses Report during your meeting. This clearly shows all investment costs at the portfolio level and for each investment you own.
Unfortunately, the way our industry works, you will not see these costs broken out on statements. Since transparency is very important to us, we created our Portfolio Expenses Report to “pull back the curtain” and show you what you pay to the investment companies.
What operational expenses might I expect to pay?
Raymond James is our custodian for clients’ accounts. Our arrangement with Raymond James waives all annual account maintenance charges for our clients.
Regarding trading costs, some of the investments companies we use charge between $10 - $20 per trade. These costs are disclosed in our Portfolio Expenses Report. For several important reasons, we do not buy and sell frequently; therefore, trading costs are usually a minimal expense.
Other additional charges might be for wiring money or having a debit card and check writing abilities for your brokerage account.
As previously mentioned, these costs are usually the smallest of the three that clients pay.