Castle Wealth Planning

This fee structure charges a percentage of the assets under management by the firm. Fee structures are often tiered based on the amount of assets managed, with higher AUM often charged a lower rate.

Between 0.50% and 2.00% of assets under management (annually), often lower for a robo advisor. Fees are typically charged quarterly by the firm and will show on your investment statement. View typical advisor costs here.

~96% of registered firms offer this fee structure.

If you have $1 million managed by a firm at a 1% management fee, you would be charged $10,000/year to manage your assets (or $2,500 per quarter). This would be automatically deducted from your investment portfolio.

Similar to an attorney, a financial consultant might charge fees based on hourly rates. This fee structure can be advantageous when seeking specific or ad hoc advice.

Charges generally span from $150 to $400 per hour, depending on the extent of the services required.

~33% of registered firms offer this fee structure.

If you needed hourly consulting to sell a business or transfer your estate to your children but did not want your assets managed by a firm, you could consult a firm at an hourly rate to answer any questions you may have.

Firms charge this fee for offering educational resources, such as a monthly periodical. This arrangement is helpful if you aspire to independently learn about investing or financial management.

Anywhere from $10 - $800 per month depending on the level of educational resources offered by the firm. Firms often include financial education as a benefit to clients whose assets they manage.

<1% of registered firms offer this fee structure

For $50 per month, a client can subscribe to an educational periodical that teaches the fundamentals of investing.

Fixed fees are a one-time, lump-sum payment rendered for a specific service, such as creating a financial plan without ongoing management or implementation. This option is beneficial if you solely require guidance for a particular objective rather than a long-term consultancy or asset management.

Fixed fees for creating a financial plan often range from $1,000 to $3,000.

~49% of registered firms offer this fee structure.

If you did not want a firm to manage your assets but needed to create a retirement plan, life transition plan such as divorce or loss of a spouse, estate transition plan, business financial plan, or any other financial planning, you could consult with an RIA firm to help you with the creation of that plan.

Occasionally, advisors are compensated through commissions by selling certain financial products, such as mutual funds or life insurance policies, or as a broker-dealer by facilitating the buying and selling of securities. Advisors who receive commissions may be incentivized to make specific suggestions to clients in order to secure a commission. Advisors who operate on a fee-only basis do not earn commissions, whereas fee-based advisors may do so.

Often 3% - 6% of the value of the security.

Only ~3% of registered firms say they offer this fee structure, but other advisors may receive “soft dollars”. Many mutual funds charge 12b-1 fees to cover the promoting and selling of the fund’s shares. While your advisor does not charge these fees, they may receive a kickback for recommending the investment.

An advisor selling their client on a life insurance policy and receiving a commission on the sale of that policy, or recommending a specific investment and receiving a kickback for that recommendation.

Advisors typically obtain performance-based fees if a portfolio surpasses a predefined benchmark. This fee is determined through various methods, but is most commonly assessed as a percentage of investment gains. Performance-based fees may incentivize advisors to undertake riskier decisions in pursuit of generating higher returns.

“Two and Twenty” is common among hedge funds with a 2% management fee and a 20% incentive fee above the “hurdle rate,” or performance threshold the fund is compared against.

32% of registered firms offer this fee structure.

A hedge fund earns a 15% return with a 20% performance fee in above the performance of the S&P 500, which grew 7% that same year.

20% of fund growth in excess of S&P 500’s 7% growth for that year = 15% hedge fund growth - 7% S&P 500 growth = 8% difference x 20% = 2% performance fee (in addition to the management fee).