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Is a 1% Fee Reasonable for an IRA Account with a Balance of $800,000?


A 1% fee may be considered reasonable for an IRA account with a balance of $800,000. However, it’s important to evaluate the value you receive for that fee. Consider whether the fee covers additional services such as financial planning or tax preparation. It’s wise to explore different options and compare wealth managers based on your specific needs and must-haves in the relationship.

Finding the Right Financial Adviser

When looking for a financial adviser, it’s crucial to understand the details of the fee structure. It is not uncommon for the fee to be divided based on portfolio size. For instance, the fee on the first $500,000 could be around 1.25%, while the next $500,000 might be assessed at 1%. In the case of an $800,000 portfolio, this could result in an annual fee of $9,250.

To make an informed decision, request a description of the services included in the 1% fee. Seek estimates on how often these services will be performed and ask for a proposed meeting schedule for the year. This way, you can ensure that your financial adviser aligns with your goals and provides the necessary services you require.

Remember, finding the right financial adviser is crucial for managing your IRA account effectively. Consider seeking recommendations or utilizing tools that can match you with fiduciary advisers who may meet your needs.

Assessing the Costs of Investment Management

Remember that the 1% management fee is what’s paid to the adviser, but there are other costs associated with investments that investors should be aware of. It’s essential to pay close attention to the adviser’s approach to managing investments and get an estimate of the cost or expense ratios associated with the funds used in their strategies. According to Presogna, an adviser charging a 1% management fee using only actively managed mutual funds may end up costing the investor close to 2% in fees.

Evaluating the Value of Financial Advisers

There’s always going to be a cost to managing investments, so it’s crucial to assess whether the services and benefits provided by the adviser justify the costs. Certified financial planner Ryan Haiss at Flynn Zito Capital Management suggests that an adviser should perform various tasks, including recommending suitable asset allocation using diversified fonts, ETFs, choosing cost-effective investments, rebalancing, behavioral coaching during market volatility, and developing a spending strategy. These are all essential services that investors should consider when evaluating the value of their financial adviser.

The Importance of Comprehensive Financial Planning

Given today’s highly volatile market conditions, achieving better results than the market while maintaining appropriate risk levels has become increasingly challenging. Therefore, paying 1% for a single investment service may seem expensive. According to certified financial planner Alonso Rodriguez Segarra at Advise Financial, investors should receive complimentary services to ensure they’re on the right path for retirement. These services should include tax planning as well as a holistic view of their finances. To explore different options and compare prices, you can check websites such as CFP, NAPFA, and FeeOnlyNetwork.

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