Perhaps you are like approximately 75 percent of United States Millionaires who hire an investment advisor to manage their assets. But, maybe you struggle with the type of fee structures in the industry. Does a fee based on a percentage of your assets make the most sense to you? Or is a fixed fee is more to your liking? What about commission or transaction fee?
What can you learn from other investors who have faced similar fee decisions when hiring an investment manager? We asked Millionaire Investors about their fee preferences. Overall, 35 percent of Millionaires prefer to pay their fees based on a percentage of their assets, 27 percent would prefer a fixed fee for the service, 22 percent like transaction fees while only 16 percent indicate they are more comfortable with a commission based arrangement. The greatest variable for Millionaire investors preference is their age. 37 percent of investors over age 66 prefer a fee structure based on a percentage of their assets while 35 percent of investors under 55 prefer the fixed fee arrangement.
Another interesting group of investors whose insights might help you determine the most appropriate fee structure for your assets are Ultra High Net Worth Investors. These investors have upwards of $25 million of assets. This group is even more focused on paying investment advisors based on a percentage of their assets with 44 percent indicating this model as their preference. The 55 to 65 age group indicates a little less interest in the percentage of assets fee structure. They also are somewhat more comfortable with a transaction fee structure.
Your preference for the type of fee structure you utilize when hiring an investment manager will most likely lead you the type of advisor to hire. The most important element for you is to understand the fee structure very well and that you and your advisor are on the same page on both structure and the amount that you are willing to pay for their service.