I’m 78 with $6.5 million. My adviser was rated ‘best in the state.’ He’s increased my net worth by 7.6% over 10 years, but he’s charging me 1%. It is time to ditch him?

I’m 78 with $6.5 million. My adviser was rated ‘best in the state.’ He’s increased my net worth by 7.6% over 10 years, but he’s charging me 1%. It is time to ditch him?

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Question: I am 78 years old, but I’ll be 79 in two months. I have about $6.5 million in my IRA and personal investment accounts combined. My personal financial adviser who is rated “best in the state” by a well-known financial publication is charging me 1% on my total capital. He has increased my net worth by 7.6% compounded annually over a 10 year period. Am I paying too much in fees? How do you know when you’re paying too much or just the right amount? Should I look for someone else? (Looking for a new financial adviser? This free tool from SmartAsset can match you to a fiduciary adviser.)

Answer: The simple answer is that a 1% fee on $6.5 million is likely on the higher side — and you could certainly find someone who will charge less. Many advisers “use a tiered fee schedule, meaning you pay a particular fee for an asset range and the fee decreases as the range increases,” says Ryan Townsley, certified financial planner at Town Capital. “This makes some general assumptions that there should be efficiencies gained, and it is not double the work the manage $4 million versus $2 million. However, what really matters is the level of service for the fee you’re paying.”

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More specifically, unless your adviser is providing a private banking or concierge-type experience, you’re likely paying too much, some pros say. “If that fee is covering things like business and personal tax preparation, legal document drafting, estate/trust administration and concierge services such as help booking travel or dinner reservations, it could be appropriate. If it’s just for investment management and financial planning, it’s probably excessive as that usually won’t take up more than 25 to 30 hours per year of work for a high-net worth individual in my experience,” says certified financial planner Chris Diodato at WELLth Financial Planning. Put simply, if that’s your adviser’s time commitment, they could be, in effect, charging up to $2,600 per hour of work, he says.

Whether or not you’re paying too much ultimately depends on the level of service you receive and the complexity of your financial situation. “Paying 1% as an advisory fee is within the typical range for many financial advisers, but since you have a substantial amount invested with the adviser, you can likely negotiate a rate below 1% or at least have a discussion with your current adviser about your concern regarding the fees paid,” says certified financial planner Ryan Haiss at Flynn Zito Capital Management.

That said, sometimes paying a premium is OK. To determine that, ask yourself things like:  “Are you feeling like you’re getting the value for your fee? Are there other services that you wish your adviser offered? Are you getting comprehensive financial planning that keeps you on track for your financial goals and keeps you from making costly mistakes? Are you also paying heavy commission or fund fees?,” says certified financial planner Neela Hummel at Santa Monica, California-based financial planning and wealth firm Abacus Wealth Partners.

Finding the right balance between fees and value provided is crucial. “Paying lower fees for any service is desirable but it shouldn’t come at the expense of quality advice and exceptional service. It’s essential to carefully evaluate options and make an informed decisions that aligns with your financial objectives,” says Haiss.

Another option to consider: look at local competitor’s fees. “You can always pull up the fee schedules of your adviser’s local competitors to see if rates are in line with the local market. Check out the investment adviser public disclosure page of the SEC’s website and flip through their form ADV part two to find their fee schedule,” says certified financial planner Matt Bacon at Carmichael Hill & Associates. (Looking for a new financial adviser? This free tool from SmartAsset can match you to a fiduciary adviser.)

Were the returns good?

As for the returns of your portfolio, they seem very reasonable given the state of the markets over the past 10 years. “It’s important to understand how your portfolio is structured and the level of risk you’re taking. Then, you can get an apples to apples comparison against a benchmark and determine how well your portfolio is performing,” says Haiss.

Looking for a new financial adviser? This free tool from SmartAsset can match you to a fiduciary adviser.

Without knowing the specifics of your portfolio, certified financial planner Bill Kan at Candent Capital compared it to a good old portfolio that contains 60% stocks and 40% bonds. “For ease, I looked up the performance of the Vanguard Balance Index Fund (VBAIX) which holds stocks and bonds that represent the US equity and US bond markets. According to Morningstar, the 10-year total return was 7.9% and the fee was 0.07%,” says Kan. That said, from the performance perspective, there are readily available, less expensive options with similar performance. “To be fair, you should consider the value gained from working with a best in state adviser and other services provided,” says Kan.

Something else to keep in mind is that online reviews and lists are often marketing efforts. “If an adviser writes a check and fills out some forms, they can usually land on a list, so don’t put too much stock in the online ratings,” says certified financial planner Bill Nugent at Convey Wealth.

Have an issue with your financial adviser or looking for a new one? Email [email protected].