So, how much is this going to cost? Fees may vary, but they generally follow the schedules below. If you have questions, just ask. Also, do you know what it means to hire a fee-only financial advisor?
The Details You Really Want
Please note that I can describe Approach Financial’s fees here, but other service providers (like custodians, 401(k) recordkeepers, and third-party administrators) may have additional charges. Any underlying investments may also have fees and expenses, although I typically use relatively low-cost (primarily passive) ETFs and index funds. Don’t worry—that information is all available before you commit to anything. For complete details, it’s critical that you read the following:
- My firm’s ADV
- Disclosures from any service providers you may contract with
- A prospectus or other disclosures from any potential investment
Payment methods: You can write a check, pay electronically from your checking account, or use a credit or debit card to pay for financial planning. For investment management services, the funds typically come out of your investment account—and you receive a notification every time that happens.
When you don’t know how much you’re paying, or if somebody says you pay “no fees,” you have to wonder what’s going on. While those promises may be alluring, we all know there’s no such thing as a free lunch.
* If you choose investment management: The annual fees are negotiable and are pro-rated and paid in arrears on a quarterly basis. The asset-based advisory fee (but not the flat fee) is a blended fee and is calculated by assessing the percentage rates using the predefined levels of assets as shown in the above chart and applying the fee to the account value as of the last business day of the quarter resulting in a combined weighted fee.
- Flat-rate investment management example: A client who pays a flat $6,000 per year would pay quarterly. The quarterly fee is calculated by the following calculation: Flat Fee ÷ 4 = Annual Fee. For example, a $6,000 annual fee would result in a quarterly charge of $1,500. Fees are typically deducted directly from client accounts.
- Percentage example: An account valued at $2,000,000 would pay an effective fee of 0.925% with the annual fee of $18,500. The quarterly fee is determined by the following calculation: (($1,000,000 x 1.00%) + ($1,000,000 x 0.85%)) ÷ 4 = $4,625.
No increase in the annual fee shall be effective without agreement from the client by signing a new agreement or amendment to their current advisory agreement. Please review your account statements and invoices to stay informed on how much you’re paying. Compare reports that you receive from your custodian to any invoices, and verify that you receive quarterly statements from your custodian.