Financial Planning & Investment Advisory Fees – What is Reasonable?

From what I’ve seen, fee-based advisory firms, my own included, generally charge an annual fee which ranges from .75% to 1.75% of assets under management.  Generally, the larger your account balance, the more likely you are to receive a lower fee.  In fact, fee schedules are often tiered such that the initial 250K is billed at a higher rate which scales down at varying thresholds such as 500K and 1M.  There may, however, be other methods of determining an advisory fee beyond simply the size of the account.  For example, some firms are more active (tactical) than others.  Those firms would likely charge a slightly higher fee than a firm which is more passive and investing strictly in products which mirror indexes such as the S&P 500 and the Dow Jones.  Firms with passive investment strategies may still charge fees over 1% if they are including valuable services such as financial planning, estate planning, tax planning, etc.  What is included in the fee amount (above and beyond investment management) should be discussed in clear detail at an initial consultation. Continue reading