Most people wouldn’t buy a car, hire a contractor or sign a major business agreement without understanding what they’re paying.
Financial advice shouldn’t be any different.
Yet investment and advice fees have historically been difficult for many investors to understand. Fees may appear in different places, be calculated in different ways or be associated with different products and services.
That can make a seemingly simple question surprisingly difficult to answer:
What am I actually paying for financial advice?
Greater fee transparency can help investors answer that question and, just as importantly, understand what they’re receiving in return.
Knowing the percentage isn’t always enough
An investor might know that they’re paying a particular percentage each year, but that doesn’t necessarily mean they understand the full cost of their financial arrangements.
Depending on the accounts and investments involved, costs can include different types of advisory, management, product or transaction-related expenses.
Even relatively small percentages can represent significant dollar amounts as a portfolio grows.
That’s why it’s useful to understand both the percentage and the approximate dollar amount you’re paying.
A fee becomes much easier to evaluate when you can connect it to an actual number.
The next question should be: What am I getting for that fee?
Lower fees aren’t automatically better, just as higher fees don’t automatically mean better advice.
The more useful question is whether the value you’re receiving makes sense for what you’re paying.
For example, is your relationship primarily focused on selecting and managing investments?
Or does your advisor also help you think through:
- Retirement income
- Tax planning
- Estate planning
- Insurance
- Business succession
- Charitable giving
- Major purchases
- Helping children or grandchildren
- Intergenerational wealth transfer
Two investors with similar portfolios may be receiving very different levels of service.
Understanding fees therefore requires understanding the scope of the advice.
Financial planning should look beyond investment returns
Investment performance matters, but it’s only one part of a person’s financial life.
Imagine someone approaching retirement with a successful business, several investment accounts, a corporation, insurance policies and an estate they eventually want to leave to their children.
Choosing investments is important, but it isn’t the only financial decision that matters.
They may also need to decide:
When should they retire?
Where should retirement income come from first?
How should taxes factor into those withdrawals?
Should excess corporate funds remain in the business or be invested elsewhere?
How should assets eventually pass to children?
Are there opportunities to give to charity?
What happens if their health or family circumstances change?
These questions are interconnected.
A financial planning relationship can be more valuable when someone is looking across the entire picture rather than addressing each issue separately.
Transparency helps you evaluate value
Greater transparency gives investors an opportunity to have a more meaningful conversation with their advisor.
Instead of simply seeing that a fee exists, you can ask what services you’re receiving for it.
Some useful questions include:
- How much did I pay in fees last year?
- What services are included?
- How often will my financial plan be reviewed?
- Does the advisor provide tax and estate planning guidance?
- Who coordinates with my accountant or lawyer?
- What happens when my circumstances change?
- How is my investment strategy connected to my broader financial plan?
A good advisor should be able to explain this in straightforward language.
Advice can become more important as your finances become more complex
There may be stages of life when managing finances is relatively simple.
But complexity often increases with income and wealth.
A business owner may have personal and corporate assets. A retired couple may have several different sources of income. A family may own multiple properties. Parents may be considering significant gifts to adult children. Someone may be balancing retirement goals with estate planning and charitable giving.
In these situations, the value of advice may increasingly come from coordinating financial decisions rather than simply managing an investment portfolio.
For example, McInroy & Associates Private Wealth Management takes an approach centred on understanding a client’s full financial picture. Investments are considered alongside other areas of financial life so the overall plan can address retirement, tax, estate and other priorities rather than treating each decision in isolation.
That’s one way investors can think about value when reviewing the fees they’re paying.
Fee conversations shouldn’t be uncomfortable
Asking about fees doesn’t mean you distrust your advisor.
It’s a normal part of understanding your finances.
You should know what you’re paying, how the costs are calculated and what services you’re receiving in return.
If something isn’t clear, ask.
A financial professional should be able to explain fees in language you understand without relying on industry terminology.
Use greater transparency as an opportunity to review your financial plan
Fee transparency can do more than help you understand costs. It can prompt a broader conversation about whether your financial advice still reflects what you need.
Your circumstances may be very different today than they were when you first began working with an advisor.
Maybe you’re approaching retirement. Perhaps you’ve sold a business. Your family may have grown. Your estate may be larger. Your priorities may have changed.
This is a good opportunity to ask whether your financial plan has evolved as well.
Ultimately, understanding fees isn’t only about finding the lowest possible number. It’s about being able to see what you’re paying, understand what you’re receiving and decide whether your financial advice is helping you address the full range of financial decisions that matter to you.
