Client who has been paying an adviser over $20,000 per year in AUM fees for a $2M trust

“Another day, another client who has been paying an adviser over $20,000 per year in AUM fees for a $2M trust that holds 83 different mutual funds and ETFs. I use the term “adviser” begrudgingly here because there is no clue of advice in this account.”

This is a tweet from Rick Ferri in the US.  He explains that so many investors employ advisers, wealth managers, private bank investment services…charge based on the client assets they manage. In this example, an adviser is charging 1% for a trust fund valued at $2m. The portfolio has a large number of mutual funds.  These funds can charge from as little as 0.1% to almost 2%. Then you need to add paying for platforms.  The point is that handing your money over to advisers who work on an AUM (Assets under management) basis, may not be fair and equitable to the client.

In the UK, the majority of wealth managers and similar advisers charge on an AUM basis. If they have clients with £100,000, the 1% model pays £1,000 to the advisers. If you have £2m, is £20,000 fair?  Probably not.

Whilst a great number of investors readily accept paying on an AUM basis, until of course, they realise, alternatives are available which offer significantly better value for money.

The first step in understanding whether you are getting value or not is our Investment Audit service.  See the link.