There may be a big difference between what you think financial advisers earn and what you pay them.
I am not only referring to the fact that they may be getting referral fees for recommending you as a client. That would be a conflict of interest harmful to your interests.
I am calculating direct cost. You will pay the adviser’s fee, on the management of your assets, It can be1% to 3%, generally 11⁄2%. That’s $1500 for every $100,000 they manage.
Yet the asset-management fee may not be the only cost . You pay other charges, which include mutual fund and exchange-traded fund fees for management. And if you use a hedge fund, you may also pay about 20% or so of fund earnings.
The problem is that these 1 1⁄2% management costs add up to a considerable chunk of your annual returns. After all, you’re lucky if you earn $6000, or 6% for each $100,000. The advisory fee, in other words, can be as much as 25% or more.(See the Earl J. Weinreb NewsHole® comments and @BusinesNewshole at Twitter.)