What do Millionaires think about the fees they pay to their financial advisors? Do they have a preferred type of fee? Do they believe the fees are fair? And what demographic factors influence the way that Millionaires regard advisory fees? Learn the answers to these questions and more.
What do Millionaires think about the fees they pay to their financial advisors? Do they have a preferred type of fee? Do they believe the fees are fair? And what demographic factors influence the way that Millionaires regard advisory fees?
In recent research conducted by Spectrem Group and Millionaire Corner with more than 1,000 Millionaires, it was found that sixty percent of Millionaires are comfortable with the fees they pay to their financial advisor. Despite the fact that the government and the media believe that advisory fees need greater transparency, 88 percent of Millionaires feel they understand their fees.
But despite the fact that they are comfortable with their own fees and feel they understand the fee structure, 51 percent of Millionaire investors believe the fees are too expensive. This was particularly true of investors who classify themselves as Self-Directed. About one-fourth of Millionaires consider themselves to be "Self-Directed". This means that they make their investment decisions on their own without the help of a financial advisor. Seventy-three percent of Self-Directed investors believe the fees charged by financial advisors are very expensive and may be one of the reasons they choose not to use an advisor. In contrast, those individuals who define themselves as "Advisor-Dependent" are much less likely to feel that financial advisory fees are expensive. In fact, only 26 percent of Advisor-Dependent individuals believe that advisory fees are expensive.
Investors who use an advisor to some extent classify themselves as "Advisor-Assisted" or "Event-Driven". Event-Driven investors go to an advisor upon the occurrence of a large life event. Fifty-six percent of those individuals who go to an advisor upon a large "life event" believe financial advisory fees are expensive and 34 percent of Advisor-Assisted Millionaires are worried about the cost of fees.
Fifty-five percent of Millionaires prefer to pay a fee for services compared to the 45 percent who prefer that a commission be charged to the account. Fifty-eight percent of Millionaires over the age of 65 prefer a commission compared to younger Millionaires who prefer a fee. It may be that older Millionaires are more comfortable with a commission as this has traditionally been the most common way to charge for services.
Sixty-seven percent of Millionaires prefer to pay a fixed fee rather than a percentage of the assets to their advisor. More than half of Advisor-Dependent Millionaires prefer to pay a percentage of assets.
Despite the fact that Millionaires and other investors complain about fees, it often seems they are satisfied with the fees they pay their own advisor. Research consistently shows that while fees are important to an advisory relationship, the ability to trust one's advisor is the most important factor in choosing and retaining an advisor. And the main reason for firing an advisor? Not fees and not performance. Failure to promptly return calls and emails is the most common reason for firing a financial advisor.
Catherine S. McBreen is President of Millionaire Corner. McBreen plans and develops content for Millionaire Corner. Catherine balances editorial content to meet the informational needs of both new and seasoned investors. She designs special monthly surveys on topical issues affecting the economic environment.
McBreen has a B.S. in speech communications from Northwestern University and a J.D. from DePail University College of Law. She is a member of the American Bar Association, the Illinois Bar Association, and the Chicago Bar Association.
Well-known for her expertise in the affluent and retirement arenas, McBreen is a frequent speaker at industry conferences. She has been quoted widely by the financial media, including The Financial Times, The Wall Street Journal, Research, Private Asset Management, On Wall Street, Reuters, Bloomberg News, The Dow Jones Newswires and Worth. Cathy has appeared as a guest on CNBC Closing Bell, First Business Morning News, Neal Cavuto at Fox Business News, ABC and CBS radio.
McBreen is co-author with Spectrem President George H. Walper, Jr. of the book "Get Rich, Stay Rich, Pass It On: The Wealth-Accumulation Secrets of America's Richest Families" (Portfolio, January 2008)
Catherine is the mother of four and is involved in many school and community events.