Revealed: The Lowdown on Advisor Fees

03/26/2012 10:15 am EST

Focus: MONEY MANAGEMENT

Rob Carrick

Columnist, The Globe and Mail

High-net-worth clients pay much less whether they have commission- or fee-based accounts, so here's how to tell if you are getting bang for your buck, writes Rob Carrick, reporter and columnist for The Globe and Mail.

It's not enough to know how much you're paying in fees to your advisor.

You can't really tell if you're getting value for the buck unless you know what everyone else is paying, too. So let's find out what the going price of having an advisor is for investors with accounts of various types and sizes.

Our guide to the latest fee trends is the software firm PriceMetrix, which collects data in the advisory business and uses it to help advisors run their businesses more profitably. For this column, PriceMetrix has made available fee data drawn from a survey of ten Canadian firms that include both large and medium players with as few as 150 advisors on staff.

Let's use a $100,000 account as a quick point of comparison. In cases where advisors are paid through commissions associated with mutual funds and other products, the average fee is 0.9%. With fee-based accounts, where the cost is set as a percentage of the client's assets, the average charge is 1.61%.

High-net-worth clients pay much less in all situations. With an account of $1 million or more, the average cost of a fee-based account falls to 0.93%, and the average commission-based account drops to 0.66%. With less than $50,000, clients are on average paying a hefty 1.9% in fee-based accounts and 1.02% in commission-based accounts.

PriceMetrix gathers this data in order to help advisors decide how much to charge for their time. Never forget: Selling investments and providing investment advice is a business. Advisors have to pay their staff and cover overhead costs like rent, marketing, licensing, and administration. There has to be enough left over to make a living, or no one would work in the advice business.

Understand this as a client, and then stand up for your own interests by seeking a fair price for the services provided by an advisor. The average fee data presented here will help you with this, but there's more to the analysis than pure pricing. You also have to consider what services your advisor provides.

Here, I'm sure to run into trouble with investor advocates who object to my use of the term "advisor." They argue that too many advisors are just investment sales people who don't provide advice. The advocates have a point. So in assessing the value you're getting for the fees you're paying, ask yourself whether your advisor has:

  • Discussed your broad financial situation in detail and produced a financial plan that maps a route from where you are now to where you want to be later on in life.

  • Evaluated how financially set you are for retirement.

  • Given some attention to how you'll afford to put your kids through college or university.

  • Looked at and addressed your debt level and tax situation.

  • Made ongoing adjustments to your plan to reflect your changing life.

Patrick Kennedy, vice-president of product and client management at PriceMetrix, said advisors who prefer fee-based accounts tend to put more emphasis on advice, and this is reflected in the fee premium over commission-based accounts.

Certainly, fee-based accounts are more lucrative to the financial industry. PriceMetrix data shows that fee-based accounts have 26% of the assets, but generate 43% of the revenue for advice firms.

Has your advisor suggested a fee-based account instead of you paying commissions? If so, ask how the bottom line amount of fees will change.

"If it turns out the rate is higher with a fee-based account, ask the advisor what the additional services are," Kennedy said. "It's entirely fair to ask that."

While the number of fee-based accounts is growing, most investors still have a commission-based relationship with their advisor. Here, the advisor's fees are either paid as commissions on stock trades or, more commonly, they're buried in the cost of owning mutual funds.

If you own the typical equity mutual fund, a full percentage point of the management expense ratio is split by your advisor and her firm (here's a column I wrote that explains how this works).

The PriceMetrix data show advisors who work on a commission basis are not as well paid as fee-based advisors. But that doesn't mean you should expect little or no advice.

Without it, you might as well move to an online broker, where you make your own decisions and cut your fees to the minimum. In fact, some online brokers now let clients trade a limited selection of exchange traded funds at no cost (read more here).

The PriceMetrix data suggest investors shouldn't consider a fee-based account with assets of less than $100,000. Below that level, the average 1.9% fee is prohibitively expensive unless you get the most comprehensive advice imaginable. With a small account, the chances of that are close to nil.

If you have a large account, say $250,000 or more, verify that you're paying lower fees than clients with smaller accounts. If you like your advisor, ask whether consolidating accounts held elsewhere with him or her would get you a fee cut.

One additional point to remember when looking at advisor fees is that there will in most cases be additional ownership costs associated with investments. In a fee-based account, you might pay an additional half a percentage point on average for a portfolio of exchange traded funds. With mutual funds, you should expect additional fees of at least one percentage point on average.

Credit the choppy stock markets of the past couple of years for a modest downward trend in the price of having an advisor. Kennedy said some advisors are prone to cutting fees when investment returns are poor. "We call that sympathy pricing."

High-net-worth clients pay much less whether they have commission- or fee-based accounts, so here's how to tell if you are getting bang for your buck, writes Rob Carrick, reporter and columnist for The Globe and Mail.

It's not enough to know how much you're paying in fees to your advisor.

You can't really tell if you're getting value for the buck unless you know what everyone else is paying, too. So let's find out what the going price of having an advisor is for investors with accounts of various types and sizes.

Our guide to the latest fee trends is the software firm PriceMetrix, which collects data in the advisory business and uses it to help advisors run their businesses more profitably. For this column, PriceMetrix has made available fee data drawn from a survey of ten Canadian firms that include both large and medium players with as few as 150 advisors on staff.

Let's use a $100,000 account as a quick point of comparison. In cases where advisors are paid through commissions associated with mutual funds and other products, the average fee is 0.9%. With fee-based accounts, where the cost is set as a percentage of the client's assets, the average charge is 1.61%.

High-net-worth clients pay much less in all situations. With an account of $1 million or more, the average cost of a fee-based account falls to 0.93%, and the average commission-based account drops to 0.66%. With less than $50,000, clients are on average paying a hefty 1.9% in fee-based accounts and 1.02% in commission-based accounts.

PriceMetrix gathers this data in order to help advisors decide how much to charge for their time. Never forget: Selling investments and providing investment advice is a business. Advisors have to pay their staff and cover overhead costs like rent, marketing, licensing, and administration. There has to be enough left over to make a living, or no one would work in the advice business.

Understand this as a client, and then stand up for your own interests by seeking a fair price for the services provided by an advisor. The average fee data presented here will help you with this, but there's more to the analysis than pure pricing. You also have to consider what services your advisor provides.

Here, I'm sure to run into trouble with investor advocates who object to my use of the term "advisor." They argue that too many advisors are just investment sales people who don't provide advice. The advocates have a point. So in assessing the value you're getting for the fees you're paying, ask yourself whether your advisor has:

  • Discussed your broad financial situation in detail and produced a financial plan that maps a route from where you are now to where you want to be later on in life.

  • Evaluated how financially set you are for retirement.

  • Given some attention to how you'll afford to put your kids through college or university.

  • Looked at and addressed your debt level and tax situation.

  • Made ongoing adjustments to your plan to reflect your changing life.

Patrick Kennedy, vice-president of product and client management at PriceMetrix, said advisors who prefer fee-based accounts tend to put more emphasis on advice, and this is reflected in the fee premium over commission-based accounts.

Certainly, fee-based accounts are more lucrative to the financial industry. PriceMetrix data shows that fee-based accounts have 26% of the assets, but generate 43% of the revenue for advice firms.

Has your advisor suggested a fee-based account instead of you paying commissions? If so, ask how the bottom line amount of fees will change.

"If it turns out the rate is higher with a fee-based account, ask the advisor what the additional services are," Kennedy said. "It's entirely fair to ask that."

While the number of fee-based accounts is growing, most investors still have a commission-based relationship with their advisor. Here, the advisor's fees are either paid as commissions on stock trades or, more commonly, they're buried in the cost of owning mutual funds.

If you own the typical equity mutual fund, a full percentage point of the management expense ratio is split by your advisor and her firm (here's a column I wrote that explains how this works).

The PriceMetrix data show advisors who work on a commission basis are not as well paid as fee-based advisors. But that doesn't mean you should expect little or no advice.

Without it, you might as well move to an online broker, where you make your own decisions and cut your fees to the minimum. In fact, some online brokers now let clients trade a limited selection of exchange traded funds at no cost (read more here).

The PriceMetrix data suggest investors shouldn't consider a fee-based account with assets of less than $100,000. Below that level, the average 1.9% fee is prohibitively expensive unless you get the most comprehensive advice imaginable. With a small account, the chances of that are close to nil.

If you have a large account, say $250,000 or more, verify that you're paying lower fees than clients with smaller accounts. If you like your advisor, ask whether consolidating accounts held elsewhere with him or her would get you a fee cut.

One additional point to remember when looking at advisor fees is that there will in most cases be additional ownership costs associated with investments. In a fee-based account, you might pay an additional half a percentage point on average for a portfolio of exchange traded funds. With mutual funds, you should expect additional fees of at least one percentage point on average.

Credit the choppy stock markets of the past couple of years for a modest downward trend in the price of having an advisor. Kennedy said some advisors are prone to cutting fees when investment returns are poor. "We call that sympathy pricing."

High-net-worth clients pay much less whether they have commission- or fee-based accounts, so here's how to tell if you are getting bang for your buck, writes Rob Carrick, reporter and columnist for The Globe and Mail.

It's not enough to know how much you're paying in fees to your advisor.

You can't really tell if you're getting value for the buck unless you know what everyone else is paying, too. So let's find out what the going price of having an advisor is for investors with accounts of various types and sizes.

Our guide to the latest fee trends is the software firm PriceMetrix, which collects data in the advisory business and uses it to help advisors run their businesses more profitably. For this column, PriceMetrix has made available fee data drawn from a survey of ten Canadian firms that include both large and medium players with as few as 150 advisors on staff.

Let's use a $100,000 account as a quick point of comparison. In cases where advisors are paid through commissions associated with mutual funds and other products, the average fee is 0.9%. With fee-based accounts, where the cost is set as a percentage of the client's assets, the average charge is 1.61%.

High-net-worth clients pay much less in all situations. With an account of $1 million or more, the average cost of a fee-based account falls to 0.93%, and the average commission-based account drops to 0.66%. With less than $50,000, clients are on average paying a hefty 1.9% in fee-based accounts and 1.02% in commission-based accounts.

PriceMetrix gathers this data in order to help advisors decide how much to charge for their time. Never forget: Selling investments and providing investment advice is a business. Advisors have to pay their staff and cover overhead costs like rent, marketing, licensing, and administration. There has to be enough left over to make a living, or no one would work in the advice business.

Understand this as a client, and then stand up for your own interests by seeking a fair price for the services provided by an advisor. The average fee data presented here will help you with this, but there's more to the analysis than pure pricing. You also have to consider what services your advisor provides.

Here, I'm sure to run into trouble with investor advocates who object to my use of the term "advisor." They argue that too many advisors are just investment sales people who don't provide advice. The advocates have a point. So in assessing the value you're getting for the fees you're paying, ask yourself whether your advisor has:

  • Discussed your broad financial situation in detail and produced a financial plan that maps a route from where you are now to where you want to be later on in life.

  • Evaluated how financially set you are for retirement.

  • Given some attention to how you'll afford to put your kids through college or university.

  • Looked at and addressed your debt level and tax situation.

  • Made ongoing adjustments to your plan to reflect your changing life.

Patrick Kennedy, vice-president of product and client management at PriceMetrix, said advisors who prefer fee-based accounts tend to put more emphasis on advice, and this is reflected in the fee premium over commission-based accounts.

Certainly, fee-based accounts are more lucrative to the financial industry. PriceMetrix data shows that fee-based accounts have 26% of the assets, but generate 43% of the revenue for advice firms.

Has your advisor suggested a fee-based account instead of you paying commissions? If so, ask how the bottom line amount of fees will change.

"If it turns out the rate is higher with a fee-based account, ask the advisor what the additional services are," Kennedy said. "It's entirely fair to ask that."

While the number of fee-based accounts is growing, most investors still have a commission-based relationship with their advisor. Here, the advisor's fees are either paid as commissions on stock trades or, more commonly, they're buried in the cost of owning mutual funds.

If you own the typical equity mutual fund, a full percentage point of the management expense ratio is split by your advisor and her firm (here's a column I wrote that explains how this works).

The PriceMetrix data show advisors who work on a commission basis are not as well paid as fee-based advisors. But that doesn't mean you should expect little or no advice.

Without it, you might as well move to an online broker, where you make your own decisions and cut your fees to the minimum. In fact, some online brokers now let clients trade a limited selection of exchange traded funds at no cost (read more here).

The PriceMetrix data suggest investors shouldn't consider a fee-based account with assets of less than $100,000. Below that level, the average 1.9% fee is prohibitively expensive unless you get the most comprehensive advice imaginable. With a small account, the chances of that are close to nil.

If you have a large account, say $250,000 or more, verify that you're paying lower fees than clients with smaller accounts. If you like your advisor, ask whether consolidating accounts held elsewhere with him or her would get you a fee cut.

One additional point to remember when looking at advisor fees is that there will in most cases be additional ownership costs associated with investments. In a fee-based account, you might pay an additional half a percentage point on average for a portfolio of exchange traded funds. With mutual funds, you should expect additional fees of at least one percentage point on average.

Credit the choppy stock markets of the past couple of years for a modest downward trend in the price of having an advisor. Kennedy said some advisors are prone to cutting fees when investment returns are poor. "We call that sympathy pricing."

High-net-worth clients pay much less whether they have commission- or fee-based accounts, so here's how to tell if you are getting bang for your buck, writes Rob Carrick, reporter and columnist for The Globe and Mail.

It's not enough to know how much you're paying in fees to your advisor.

You can't really tell if you're getting value for the buck unless you know what everyone else is paying, too. So let's find out what the going price of having an advisor is for investors with accounts of various types and sizes.

Our guide to the latest fee trends is the software firm PriceMetrix, which collects data in the advisory business and uses it to help advisors run their businesses more profitably. For this column, PriceMetrix has made available fee data drawn from a survey of ten Canadian firms that include both large and medium players with as few as 150 advisors on staff.

Let's use a $100,000 account as a quick point of comparison. In cases where advisors are paid through commissions associated with mutual funds and other products, the average fee is 0.9%. With fee-based accounts, where the cost is set as a percentage of the client's assets, the average charge is 1.61%.

High-net-worth clients pay much less in all situations. With an account of $1 million or more, the average cost of a fee-based account falls to 0.93%, and the average commission-based account drops to 0.66%. With less than $50,000, clients are on average paying a hefty 1.9% in fee-based accounts and 1.02% in commission-based accounts.

PriceMetrix gathers this data in order to help advisors decide how much to charge for their time. Never forget: Selling investments and providing investment advice is a business. Advisors have to pay their staff and cover overhead costs like rent, marketing, licensing, and administration. There has to be enough left over to make a living, or no one would work in the advice business.

Understand this as a client, and then stand up for your own interests by seeking a fair price for the services provided by an advisor. The average fee data presented here will help you with this, but there's more to the analysis than pure pricing. You also have to consider what services your advisor provides.

Here, I'm sure to run into trouble with investor advocates who object to my use of the term "advisor." They argue that too many advisors are just investment sales people who don't provide advice. The advocates have a point. So in assessing the value you're getting for the fees you're paying, ask yourself whether your advisor has:

  • Discussed your broad financial situation in detail and produced a financial plan that maps a route from where you are now to where you want to be later on in life.

  • Evaluated how financially set you are for retirement.

  • Given some attention to how you'll afford to put your kids through college or university.

  • Looked at and addressed your debt level and tax situation.

  • Made ongoing adjustments to your plan to reflect your changing life.

Patrick Kennedy, vice-president of product and client management at PriceMetrix, said advisors who prefer fee-based accounts tend to put more emphasis on advice, and this is reflected in the fee premium over commission-based accounts.

Certainly, fee-based accounts are more lucrative to the financial industry. PriceMetrix data shows that fee-based accounts have 26% of the assets, but generate 43% of the revenue for advice firms.

Has your advisor suggested a fee-based account instead of you paying commissions? If so, ask how the bottom line amount of fees will change.

"If it turns out the rate is higher with a fee-based account, ask the advisor what the additional services are," Kennedy said. "It's entirely fair to ask that."

While the number of fee-based accounts is growing, most investors still have a commission-based relationship with their advisor. Here, the advisor's fees are either paid as commissions on stock trades or, more commonly, they're buried in the cost of owning mutual funds.

If you own the typical equity mutual fund, a full percentage point of the management expense ratio is split by your advisor and her firm (here's a column I wrote that explains how this works).

The PriceMetrix data show advisors who work on a commission basis are not as well paid as fee-based advisors. But that doesn't mean you should expect little or no advice.

Without it, you might as well move to an online broker, where you make your own decisions and cut your fees to the minimum. In fact, some online brokers now let clients trade a limited selection of exchange traded funds at no cost (read more here).

The PriceMetrix data suggest investors shouldn't consider a fee-based account with assets of less than $100,000. Below that level, the average 1.9% fee is prohibitively expensive unless you get the most comprehensive advice imaginable. With a small account, the chances of that are close to nil.

If you have a large account, say $250,000 or more, verify that you're paying lower fees than clients with smaller accounts. If you like your advisor, ask whether consolidating accounts held elsewhere with him or her would get you a fee cut.

One additional point to remember when looking at advisor fees is that there will in most cases be additional ownership costs associated with investments. In a fee-based account, you might pay an additional half a percentage point on average for a portfolio of exchange traded funds. With mutual funds, you should expect additional fees of at least one percentage point on average.

Credit the choppy stock markets of the past couple of years for a modest downward trend in the price of having an advisor. Kennedy said some advisors are prone to cutting fees when investment returns are poor. "We call that sympathy pricing."

High-net-worth clients pay much less whether they have commission- or fee-based accounts, so here's how to tell if you are getting bang for your buck, writes Rob Carrick, reporter and columnist for The Globe and Mail.

It's not enough to know how much you're paying in fees to your advisor.

You can't really tell if you're getting value for the buck unless you know what everyone else is paying, too. So let's find out what the going price of having an advisor is for investors with accounts of various types and sizes.

Our guide to the latest fee trends is the software firm PriceMetrix, which collects data in the advisory business and uses it to help advisors run their businesses more profitably. For this column, PriceMetrix has made available fee data drawn from a survey of ten Canadian firms that include both large and medium players with as few as 150 advisors on staff.

Let's use a $100,000 account as a quick point of comparison. In cases where advisors are paid through commissions associated with mutual funds and other products, the average fee is 0.9%. With fee-based accounts, where the cost is set as a percentage of the client's assets, the average charge is 1.61%.

High-net-worth clients pay much less in all situations. With an account of $1 million or more, the average cost of a fee-based account falls to 0.93%, and the average commission-based account drops to 0.66%. With less than $50,000, clients are on average paying a hefty 1.9% in fee-based accounts and 1.02% in commission-based accounts.

PriceMetrix gathers this data in order to help advisors decide how much to charge for their time. Never forget: Selling investments and providing investment advice is a business. Advisors have to pay their staff and cover overhead costs like rent, marketing, licensing, and administration. There has to be enough left over to make a living, or no one would work in the advice business.

Understand this as a client, and then stand up for your own interests by seeking a fair price for the services provided by an advisor. The average fee data presented here will help you with this, but there's more to the analysis than pure pricing. You also have to consider what services your advisor provides.

Here, I'm sure to run into trouble with investor advocates who object to my use of the term "advisor." They argue that too many advisors are just investment sales people who don't provide advice. The advocates have a point. So in assessing the value you're getting for the fees you're paying, ask yourself whether your advisor has:

  • Discussed your broad financial situation in detail and produced a financial plan that maps a route from where you are now to where you want to be later on in life.

  • Evaluated how financially set you are for retirement.

  • Given some attention to how you'll afford to put your kids through college or university.

  • Looked at and addressed your debt level and tax situation.

  • Made ongoing adjustments to your plan to reflect your changing life.

Patrick Kennedy, vice-president of product and client management at PriceMetrix, said advisors who prefer fee-based accounts tend to put more emphasis on advice, and this is reflected in the fee premium over commission-based accounts.

Certainly, fee-based accounts are more lucrative to the financial industry. PriceMetrix data shows that fee-based accounts have 26% of the assets, but generate 43% of the revenue for advice firms.

Has your advisor suggested a fee-based account instead of you paying commissions? If so, ask how the bottom line amount of fees will change.

"If it turns out the rate is higher with a fee-based account, ask the advisor what the additional services are," Kennedy said. "It's entirely fair to ask that."

While the number of fee-based accounts is growing, most investors still have a commission-based relationship with their advisor. Here, the advisor's fees are either paid as commissions on stock trades or, more commonly, they're buried in the cost of owning mutual funds.

If you own the typical equity mutual fund, a full percentage point of the management expense ratio is split by your advisor and her firm (here's a column I wrote that explains how this works).

The PriceMetrix data show advisors who work on a commission basis are not as well paid as fee-based advisors. But that doesn't mean you should expect little or no advice.

Without it, you might as well move to an online broker, where you make your own decisions and cut your fees to the minimum. In fact, some online brokers now let clients trade a limited selection of exchange traded funds at no cost (read more here).

The PriceMetrix data suggest investors shouldn't consider a fee-based account with assets of less than $100,000. Below that level, the average 1.9% fee is prohibitively expensive unless you get the most comprehensive advice imaginable. With a small account, the chances of that are close to nil.

If you have a large account, say $250,000 or more, verify that you're paying lower fees than clients with smaller accounts. If you like your advisor, ask whether consolidating accounts held elsewhere with him or her would get you a fee cut.

One additional point to remember when looking at advisor fees is that there will in most cases be additional ownership costs associated with investments. In a fee-based account, you might pay an additional half a percentage point on average for a portfolio of exchange traded funds. With mutual funds, you should expect additional fees of at least one percentage point on average.

Credit the choppy stock markets of the past couple of years for a modest downward trend in the price of having an advisor. Kennedy said some advisors are prone to cutting fees when investment returns are poor. "We call that sympathy pricing."

High-net-worth clients pay much less whether they have commission- or fee-based accounts, so here's how to tell if you are getting bang for your buck, writes Rob Carrick, reporter and columnist for The Globe and Mail.

It's not enough to know how much you're paying in fees to your advisor.

You can't really tell if you're getting value for the buck unless you know what everyone else is paying, too. So let's find out what the going price of having an advisor is for investors with accounts of various types and sizes.

Our guide to the latest fee trends is the software firm PriceMetrix, which collects data in the advisory business and uses it to help advisors run their businesses more profitably. For this column, PriceMetrix has made available fee data drawn from a survey of ten Canadian firms that include both large and medium players with as few as 150 advisors on staff.

Let's use a $100,000 account as a quick point of comparison. In cases where advisors are paid through commissions associated with mutual funds and other products, the average fee is 0.9%. With fee-based accounts, where the cost is set as a percentage of the client's assets, the average charge is 1.61%.

High-net-worth clients pay much less in all situations. With an account of $1 million or more, the average cost of a fee-based account falls to 0.93%, and the average commission-based account drops to 0.66%. With less than $50,000, clients are on average paying a hefty 1.9% in fee-based accounts and 1.02% in commission-based accounts.

PriceMetrix gathers this data in order to help advisors decide how much to charge for their time. Never forget: Selling investments and providing investment advice is a business. Advisors have to pay their staff and cover overhead costs like rent, marketing, licensing, and administration. There has to be enough left over to make a living, or no one would work in the advice business.

Understand this as a client, and then stand up for your own interests by seeking a fair price for the services provided by an advisor. The average fee data presented here will help you with this, but there's more to the analysis than pure pricing. You also have to consider what services your advisor provides.

Here, I'm sure to run into trouble with investor advocates who object to my use of the term "advisor." They argue that too many advisors are just investment sales people who don't provide advice. The advocates have a point. So in assessing the value you're getting for the fees you're paying, ask yourself whether your advisor has:

  • Discussed your broad financial situation in detail and produced a financial plan that maps a route from where you are now to where you want to be later on in life.

  • Evaluated how financially set you are for retirement.

  • Given some attention to how you'll afford to put your kids through college or university.

  • Looked at and addressed your debt level and tax situation.

  • Made ongoing adjustments to your plan to reflect your changing life.

Patrick Kennedy, vice-president of product and client management at PriceMetrix, said advisors who prefer fee-based accounts tend to put more emphasis on advice, and this is reflected in the fee premium over commission-based accounts.

Certainly, fee-based accounts are more lucrative to the financial industry. PriceMetrix data shows that fee-based accounts have 26% of the assets, but generate 43% of the revenue for advice firms.

Has your advisor suggested a fee-based account instead of you paying commissions? If so, ask how the bottom line amount of fees will change.

"If it turns out the rate is higher with a fee-based account, ask the advisor what the additional services are," Kennedy said. "It's entirely fair to ask that."

While the number of fee-based accounts is growing, most investors still have a commission-based relationship with their advisor. Here, the advisor's fees are either paid as commissions on stock trades or, more commonly, they're buried in the cost of owning mutual funds.

If you own the typical equity mutual fund, a full percentage point of the management expense ratio is split by your advisor and her firm (here's a column I wrote that explains how this works).

The PriceMetrix data show advisors who work on a commission basis are not as well paid as fee-based advisors. But that doesn't mean you should expect little or no advice.

Without it, you might as well move to an online broker, where you make your own decisions and cut your fees to the minimum. In fact, some online brokers now let clients trade a limited selection of exchange traded funds at no cost (read more here).

The PriceMetrix data suggest investors shouldn't consider a fee-based account with assets of less than $100,000. Below that level, the average 1.9% fee is prohibitively expensive unless you get the most comprehensive advice imaginable. With a small account, the chances of that are close to nil.

If you have a large account, say $250,000 or more, verify that you're paying lower fees than clients with smaller accounts. If you like your advisor, ask whether consolidating accounts held elsewhere with him or her would get you a fee cut.

One additional point to remember when looking at advisor fees is that there will in most cases be additional ownership costs associated with investments. In a fee-based account, you might pay an additional half a percentage point on average for a portfolio of exchange traded funds. With mutual funds, you should expect additional fees of at least one percentage point on average.

Credit the choppy stock markets of the past couple of years for a modest downward trend in the price of having an advisor. Kennedy said some advisors are prone to cutting fees when investment returns are poor. "We call that sympathy pricing."

High-net-worth clients pay much less whether they have commission- or fee-based accounts, so here's how to tell if you are getting bang for your buck, writes Rob Carrick, reporter and columnist for The Globe and Mail.

It's not enough to know how much you're paying in fees to your advisor.

You can't really tell if you're getting value for the buck unless you know what everyone else is paying, too. So let's find out what the going price of having an advisor is for investors with accounts of various types and sizes.

Our guide to the latest fee trends is the software firm PriceMetrix, which collects data in the advisory business and uses it to help advisors run their businesses more profitably. For this column, PriceMetrix has made available fee data drawn from a survey of ten Canadian firms that include both large and medium players with as few as 150 advisors on staff.

Let's use a $100,000 account as a quick point of comparison. In cases where advisors are paid through commissions associated with mutual funds and other products, the average fee is 0.9%. With fee-based accounts, where the cost is set as a percentage of the client's assets, the average charge is 1.61%.

High-net-worth clients pay much less in all situations. With an account of $1 million or more, the average cost of a fee-based account falls to 0.93%, and the average commission-based account drops to 0.66%. With less than $50,000, clients are on average paying a hefty 1.9% in fee-based accounts and 1.02% in commission-based accounts.

PriceMetrix gathers this data in order to help advisors decide how much to charge for their time. Never forget: Selling investments and providing investment advice is a business. Advisors have to pay their staff and cover overhead costs like rent, marketing, licensing, and administration. There has to be enough left over to make a living, or no one would work in the advice business.

Understand this as a client, and then stand up for your own interests by seeking a fair price for the services provided by an advisor. The average fee data presented here will help you with this, but there's more to the analysis than pure pricing. You also have to consider what services your advisor provides.

Here, I'm sure to run into trouble with investor advocates who object to my use of the term "advisor." They argue that too many advisors are just investment sales people who don't provide advice. The advocates have a point. So in assessing the value you're getting for the fees you're paying, ask yourself whether your advisor has:

  • Discussed your broad financial situation in detail and produced a financial plan that maps a route from where you are now to where you want to be later on in life.

  • Evaluated how financially set you are for retirement.

  • Given some attention to how you'll afford to put your kids through college or university.

  • Looked at and addressed your debt level and tax situation.

  • Made ongoing adjustments to your plan to reflect your changing life.

Patrick Kennedy, vice-president of product and client management at PriceMetrix, said advisors who prefer fee-based accounts tend to put more emphasis on advice, and this is reflected in the fee premium over commission-based accounts.

Certainly, fee-based accounts are more lucrative to the financial industry. PriceMetrix data shows that fee-based accounts have 26% of the assets, but generate 43% of the revenue for advice firms.

Has your advisor suggested a fee-based account instead of you paying commissions? If so, ask how the bottom line amount of fees will change.

"If it turns out the rate is higher with a fee-based account, ask the advisor what the additional services are," Kennedy said. "It's entirely fair to ask that."

While the number of fee-based accounts is growing, most investors still have a commission-based relationship with their advisor. Here, the advisor's fees are either paid as commissions on stock trades or, more commonly, they're buried in the cost of owning mutual funds.

If you own the typical equity mutual fund, a full percentage point of the management expense ratio is split by your advisor and her firm (here's a column I wrote that explains how this works).

The PriceMetrix data show advisors who work on a commission basis are not as well paid as fee-based advisors. But that doesn't mean you should expect little or no advice.

Without it, you might as well move to an online broker, where you make your own decisions and cut your fees to the minimum. In fact, some online brokers now let clients trade a limited selection of exchange traded funds at no cost (read more here).

The PriceMetrix data suggest investors shouldn't consider a fee-based account with assets of less than $100,000. Below that level, the average 1.9% fee is prohibitively expensive unless you get the most comprehensive advice imaginable. With a small account, the chances of that are close to nil.

If you have a large account, say $250,000 or more, verify that you're paying lower fees than clients with smaller accounts. If you like your advisor, ask whether consolidating accounts held elsewhere with him or her would get you a fee cut.

One additional point to remember when looking at advisor fees is that there will in most cases be additional ownership costs associated with investments. In a fee-based account, you might pay an additional half a percentage point on average for a portfolio of exchange traded funds. With mutual funds, you should expect additional fees of at least one percentage point on average.

Credit the choppy stock markets of the past couple of years for a modest downward trend in the price of having an advisor. Kennedy said some advisors are prone to cutting fees when investment returns are poor. "We call that sympathy pricing."