Ask the Money Lady: What should you pay an advisor?

 In Opinion

Dear Money Lady,

I received a large severance from my employer that recently eliminated my job after 38 years. I plan to find an advisor, but because I have never had one before I am wondering what I should pay for their services.


Ed, you are not the only one looking around for a new investment advisor. With the volatile stock market environment, many people have sent me comments and questions about how to move their portfolios to a new advisor. I would caution those investors on making any quick changes and selling stock at this time. Remember, the key is to maintain a well-diversified portfolio which includes bonds, cash, and high-quality stocks. When you are looking for an investment “partner,” try to pick an advisor who really has your best interests at heart; someone you will definitely need when weathering future market uncertainties. Please make sure to do your homework and find out what the firm and the new advisor’s value proposition is. It goes without saying that you should interview more than one and make sure you find a good fit with not only the advisor but also the brokerage firm. Now let’s talk about fees. What should you pay? There are two types of fee structures – transactional or fee-based.

Transactional fees are charged with every investment transaction. This is often the case when you buy fixed income investments such as bonds. A fee is charged when you purchase the bond and then again when you sell it. There are not many advisors that still offer transactional fee structures when buying securities. They seem to have left the industry with the vintage old-school stockbrokers who had to do multiple trades every month to make any money. A method we used to call “pump and dump” back in the day. Now we have investment advisors that want to put you in fee-based plans, designed to offer more protection for clients along with a consistent revenue stream for the advisor and brokerage firm.

At the retail level, many financial planners are paid a base salary with a commission matrix based on how they grow their book of business and bring on new clients. Typically, fees are preset and based on the mutual fund you choose ranging from one per cent to 2.95 per cent. Investment advisors at an IIROC brokerage firm (member of the Investment Industry Regulatory Organization of Canada) are usually on straight commission, making them much more motivated to ensure you make a profit of which they in turn are compensated on. Fee-based services range from .75 per cent all the way up to 3 per cent. Some advisors act as personal bankers for ultra-rich clients, doing everything for them, hence they may be able to justify the higher fee structure. But for most of us, we do not need someone to pay our bills and handle our budgets, so if you are paying more than 1.5 per cent for a fee-based portfolio, you may be paying too much. If you have different SMA products, (Separately Managed Accounts) your advisor may increase their fee up to a max of 1.75 per cent.

Really Ed, the bottom line is, fees are all over the map and vary from one advisor to another. The cost you pay for professional financial advice should be based on your own personal comfort zone. Is your advisor a valued partner that you are willing to pay for, and most importantly are you satisfied with their services? It is always a good idea to periodically check out the competition, talk to your friends and see what they pay. Remember, as you age and move investments into secure fixed income products with lower risk and smaller gains, your number one problem will be fees and expenses. Fees, inflation, and future market volatility always eat away at your retirement capital, decrease your purchasing power, and eventually force you to lower your lifestyle as you age.

Christine Ibbotson is a national radio host, YouTuber, and author. Send questions through the contact page at

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