Fees for Financial Advisors?

Question

I am looking at financial advisors who manage just stock profios. What is a good way to determine the best fees to expect? How much are the fees normally? I was told 1/4 of a base point for a month by one. If I have $1000 in the account how much would that be?

Thanks

Answer 1

1. Most advisors have a $35k or $50k minimum on fee-based or managed accounts. Unless you have at least that much money to invest there are few if any FAs who will manage your stock portfolio. It is difficult to properly diversify a portfolio (by market cap and sector) with less than 20 stocks.

2. If you only have $1000 to invest, you should be investing in a diversified mutual fund, not stocks. Too much risk with one stock. Too much with even 5 stocks. Don't take risk you don't need to take.

3. Let's assume you have enough to invest in a managed account. 25 bps/mo is 0.25%/month or 3%/yr. That's at the top of the price list for any broker I know - if you had a $50k account you'd pay $1500/yr in fees.

4. If you invested in a mutual fund you might pay anywhere from 1% - 2.5% in internal fees - you could by C-class shares which have no sales charges as long as you held them a year. Great idea for people who might need to raid their investments for an emergency.

If all you want is to invest, you can buy no-load funds ddirectly from the mutual fund company. You get funds on the cheap - save about 1%/yr on costs (hidden and up-front, total) vs going with an FA using C shares. What you lose is the advise. Do you know what a Sharpe Ratio is? Beta?

Answer 2

If you are looking for a good financial advisor, find one who charges you by the hour. For example, if your advisor makes money every time you make a trade, then he's going to tell you to make lots of trades. But if he charges you by the hour, then he will honestly tell you everything you need to know. That won't be cheap, of course.

An appointment with a good financial advisor may cost you 100-200 dollars per hour. But always remember: You get what you pay for. If you pay $2.50, then that's the kind of advice you're going to get. :)

It's a good idea to talk to a financial advisor about your future, but if your goal is to invest $1000 and make money, then you need to look for cheaper ways to get that financial advice. Hiring a financial advisor to manage $1000 would be like paying for a helicopter ride to go across the street. Why go with a helicopter if you could just walk across by yourself?

Whether you should buy a stock or a mutual fund depends on how old you are. Stocks are riskier than mutual funds. But stocks can also go up and down faster than mutual funds. If you are younger than 50, then buy stocks. Buy 3-5 stocks, so if one of them goes bankrupt, you don't lose all your money.

If I were you, I would read some books about investing and money management and ask good questions here on Yahoo Answers. By way of introduction, I would start by reading The Millionaire Next Door by Thomas J. Stanley & William D. Danko. You can also get it in audio format and listen to it.

Good luck.

Answer 3

1/4 of a point on $1000 would be $2.50. But if your total is
$1000, you don't need a financial advisor - you need to have that amount in a readily accessible account for emergencies. Most professional financial advisors would have minimum amounts that are greater than $1000 to manage.

Answer 4

You do not need to be paying for a Financial Advisor until you have a net worth of $100,000 or more, and after that, they should not be charging you fees anyway!

If you have a "financial advisor" who is charging you "1/4 of a base point" (or 0.25%) on assets of only $1000, you need to lose him/her...they are scamming you!

Answer 5

Are you joking? $1000 is peanuts. Add another two zeros and then multiply by 2.
Management fees vary from 1% to 3% annually.
There will also be some hidden charges, which you will get to know with experience.

Answer 6

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Answer 7

Here's some links that might help.

http://www.sec.gov/investor/pubs/invadvisers.htm

http://www.nasd.com/InvestorInformation/InvestorProtection/NASDW_005882

http://www.nasaa.org/QuickLinks/ContactYourRegulator.cfm?state=or

http://www.adviserinfo.sec.gov/IAPD/Content/Search/iapd_OrgSearch.aspx

You can look up their ADV's here, It tells how they charge and background information.

Advisors have to be registered with the states they operate in and the NASD. Normally if they have more than 25 million under management they also have to be registered with the SEC.

Answer 8

If you only have $1,000.00 then I suggest you to invest in the ETF DIA and open a brokerage account at Zecco.