When all is said and done, how much can I expect to pay Edward Jones to manage a $10,000 account per year?
Question:
Let's also assume that I don't flip the account at all the entire year. No active trading.
I'm asking this because my mom, who's retired, is paying a financial planner 1% on her 0.9 mil account that really is quite straightforward (mainly income stocks), and I was wondering if a popular brokerage would offer similar services at lower rates.
Answer:
First, understand that no matter what you pay, you aren't necessarily getting management. What you get is an upfront assessment of needs and wants. You then get a plan laid out for many years. You get an annual (sometimes) review of progress toward the plan.
You are not getting manager who watcher your account and switches you from a bad growth fund to a good growth fund.
This is particularly true of conservative income accounts (like your Mom's account), because with conservative investments there is generally less need to switch . . . funds in the conservative categories deviate modestly from their expected performance.
Popular brokerages (Fidelity Vanguard) will offer automated website recommendations, and will usually take your call and discuss general investment topics . . . all in all about as valuable as a "management" relationship with Edward Jones.
Now, I don't mind a guy taking a fee as long as he earns it, Many do not earn it. IMHO.
just call a few of them for there input
As far as your mom goes, 1% is about what you will find pretty much everywhere. It may very a little, but 1% is realy quite decent. I've seen fees north of 1.3% routinely. And if your mom is working with a real planner then he/she should be providing other services as well. Its not all about asset management.
2 options...
1. the same as your mother. Most of the "wrap" accounts are offered in most banks/full service firms with a minimum amount of $10,000 and so therefore, if your mom is getting 1% go to Edward Jones and demand the same fee:)
2. Pay for the mutual funds you want to invest in. 4% for A share up front, B share nothing up front but back end scaling fee if you leave under 7 years and higher internal fees, or C share which usually is 1% fee a year.
Note to you- You mother is paying a very respectable fee for her account. Alot of full service firms go alot higher. He is giving her the lowest rate he is allowed to give(i know for a fact, worked there once)
Note to pgpaul-That is a very stereo typical answer. Not ALL financial advisors stick you in a plan and never review it again. And to compare Fidelity to a full service firm like Edward Jones is crazy. I am sure his mother has a relationship with "one" financial advisor there and they review the accounts and if needed make changes. With fees, it is in the clients and the financial advisor's best interest to do well. If the client's assets grow so does the fee to the advisor.
Good luck.
My mother has used Edward Jones. If you just open a regular brokerage account and don't do any trading, it probably won't cost anything. As far as I know, there's no "annual fee" for a regular brokerage account.
From my mother's experience, however, the broker will call you up fairly frequently suggesting that you sell something that they don't like any more and buy something else that they do like. If you follow their advice, the commissions are pretty steep. Most of the mutual funds have "loads" (fees) of about 6% when you buy them. I also know of one stock transaction that was only a few thousand dollars worth of stock which had a commission over $100...and of course that's $100+ on the sell and another $100+ on the buy. I could do the same transactions at a discount broker for $10 or less per trade. Of course a discount broker won't give you advice. If you need the advice, then you have to pay for it.
Before making a change, be sure you know what all the financial planner is doing for her. It might involve more than just managing the investments. For example, insurance, estate planning, etc. Be sure you can get everything you need at the new place if you decide to switch.
1% is pretty much the standard rate for a managed account. Sometimes they'll have a minimal fee, which can make it a bit more expensive for smaller accounts.
Example: 1% annual fee with a minimum fee of $2,500. (If the account is <$250,000 then you'll end up paying more than 1%).
For a $10,000 account, I'd suspect that you would be charged a one time commission.
I concur with pgcpaul. For a 10,000 account, on top of what you'll pay to the funds (about 1% on average), you;ll pay an additional 1% (plus the 3-4%front-end loads) to a planner like Edwards, or for a 10k account about $100. All you'll get for this is a quarterly or yearly statement.
For a $100 bucks, I'll take a little time to review the status quo of the economy and buy my own index, value, or growth funds and have a little more control and visibility of my accounts.
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Never buy mutual funds with a sales charge. It's just stupid. That's what those guys on commission want to sell to you. Every time they need some cash, they'll be tempted to churn their accounts and collect some commissions.
Select a "fee only" planner, and you'll probably pay 1%. A friend of mine has my mother as a client and the assets are distributed among no-load mutual funds and a few individual stock and bonds.
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