Not only have you inherited your parents’ portfolio, you’ve also inherited their long-time adviser. Now you’ll have to decide if you should move the money elsewhere or even manage it yourself.
But, since the portfolio has strong returns, why mess with it if it ain’t broke? This can be a difficult decision, rife with guilt and obligation, especially if your parents have worked with this adviser for decades
Since this is a sizable portfolio, a financial adviser could help with portfolio management, investment management and performance reporting, as well as aligning asset allocation with risk tolerance. The adviser could also help by creating a custom strategy to help you reach your retirement goals and ongoing financial management to adjust the portfolio as necessary.
But professional advice isn’t free. The fee may be the percentage of your assets under management (AUM), and this typically ranges anywhere from 0.5% to 2%. While the average advisory fee is around 1% per a 2019 survey of over 1,350 registered investment adviser (“RIA”) firms, 1.75% isn’t out of line with a full-service wealth management firm. However, it does mean that your $680,000 portfolio is costing $11,900 per year — though that should be compared against the returns on the portfolio.
With assets under management, the fee serves as an incentive to maximize returns. In other words, growing your assets is in your adviser’s best interests. So, if the returns are exceptional, then the higher rate may be worth it.
Robo-advisors charge lower fees, but you (obviously) won’t get the human touch. There’s also other drawbacks, like a narrow range of investment options and limits on how personalized the advice is. Of course, there’s also the possibility of managing the money yourself, but you should be financially literate and feel comfortable enough to invest according to your financial goals.
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Otherwise, you may want to consider another arrangement like an annual retainer or flat fee for various services. A retainer could cost anywhere from $6,000 to $11,000, according to a 2023 report by Advisory HQ. You could also consider working with a financial adviser who charges a fee on a per-hour or project basis, if you’re interested in doing some of the money management yourself. An hourly fee ranges from $120 to $300 an hour, according to Advisory HQ.
