Cost of Financial Management Evaluated in Relation to Services Provided
A financial advisor should disclose the costs associated with the advice they provide. Remember, the financial advisor has the responsibility to account for all costs their client pays to others for the financial products and services they utilize. The expenses paid for financial management of a client’s portfolio should be evaluated in relation to the services received. Most expense categories can be broken down into the following categories:
- Money manager account fees and/or annual expenses for pooled fund accounts;
- Trading costs for separately managed accounts (commissions and best execution costs);
- Custodial charges, including custodial, transaction and cash management fees; and
- Consultation, recordkeeping, or administrative fees and costs.
A financial planner can identify the parties that has been compensated from the client’s portfolio, and help their clients determine whether the compensation is fair and reasonable for the level of services being provided.
