Fee Structure for a million dollar portfolio?
Hi all!
Thanks for the awesome feedback so many of you have given since I started a few months ago! I am looking for the fee structure you would charge a client with a half million to a million dollar portfolio. This does not include financial plans, analysis, etc. just the investment management fee. I have seen anywhere between 50bps to 200 bps in California. Then I found some guy charging a 100 bucks a month for any account Thanks for you input.What is the portfolio holding? and 500K-$1Mil is kind of a big gap…
If it was all fixed income then 40-65bps. Equities you could do 75bps-150bps. Depends on your costs, profit margins, what the client is willing to pay.
And are there SMA’s involved? Or just you managing a portfolio of funds, ETF’s, stocks, etc?
Hi: Portfolio will consist primarily of Mutual Funds and ETFs.
Thanks to everyone for your responses!I have low overhead and looking to be ALL-IN of 1.00% - 1.25% as suggested.
Why do people who aren’t and have never been in this business believe they can create things that people who are in this business will want to buy?
Examples: leads, stockpicks, trading strategies, portfolio models like this guy thinks he’s going to sell etc.
[quote=BerkshireBull]
Why do people who aren’t and have never been in this business believe they can create things that people who are in this business will want to buy?
Examples: leads, stockpicks, trading strategies, portfolio models like this guy thinks he’s going to sell etc.
[/quote]
Mutual fund portfolio wrap fee of 1.5%, IMHO, is a bit high. I love SMA’s for the tax advantages.
Thanks All for the input.
I hope people are using SMAs purely as an alpha generator. Allocating to 5-6 different managers is old school. Core-satellite is how I prefer to roll. On a core portfolio of MF & ETFs, I would charge an advisory fee of 1.00-1.25% for that part. If I satellite an SMA to that, I would probably charge around 1.85% and then I would satellite some managed futures and a Multi-Strategy Hedge Fund, which pay trails of 1-3%. I’m in the Southeast.
Thank you Mr. Clutch.
My fee is .5% for a million dollar portfolio.
500k is .8%[quote=Greenbacks]My fee is .5% for a million dollar portfolio.
500k is .8% [/quote] After haircuts and ticket charges, etc. what is your average net for a $500k-$999,999 portfolio?For a portfolio that is 70/30 or 60/40, you are selling yourself short. I assume you are using funds as opposed to SMA’s?? A 500k acct is going to pay at least 1% with me, and 1mm is looking at .90’ish, depending on the mix.
I have low overhead and looking to be ALL-IN of 1.00% - 1.25% as suggested.
Sounds about right to me. I charge 1% on anything over 1 million if it's funds and etfs.
Client picks up ticket charges.
[quote=Greenbacks]My fee is .5% for a million dollar portfolio.
500k is .8% [/quote] Do you also collect 12b-1's? That does seem a bit low unless you are talking fixed-income portfolios.Tier the fees. No retroactive breakpoints. FIrst tier is at 250k, then 500k, then 1mm, North of 2mm is “negotiable”.
[quote=iceco1d] Do you guys “tier” your fees? Or do you run them like mutual fund breakpoints?At my firm it’s like “first 100K @ 1.5%, next 400K @ 1.25%, next 500K @ 1%, etc.”
[/quote]
Have both. For my discretionary accounts it’s like mutual funds under 500K 1.25% under $1MM 1.00%…
But for the firm managed stuff it is tiered… I don’t understand the point of the whole tier system…
[quote=Greenbacks]My fee is .5% for a million dollar portfolio.
500k is .8% [/quote] You mean that's what you hope to charge if anyone with real money is deluded enough to hire you. I've read your posts enough to know better.Good forum on this topic. From what I've seen, fee-billing types are all over the place. RIA Advisors have shared with me a wide range of billing options including:
1. Flat-Fee BPS 2. Tiered Fee Schedule 3. Sliding Scale Fee 3. Engagement Fee (i.e. Hourly Fee) 4. Income Based Fee 5. Net Worth Based Fee 6. Or some combination thereof A good book I read on the subject of fee-billing types and how to find which one might work best for your practice is: To Fee or Not to Fee II written by Marc Lamontagne.Fred, within TradePMR can we charge....
under 25k - $35/m fee
over 25k - $1.5% or whatever.
thanks.
what is SMA?
Seperately Managed Accounts. Basically it's an account that uses pooled money to buy assets. However unlike a Mutual Fund, the owner of the account actually owns the securities, not a fractional percentage of the pool. The account is professionally managed and tailored specifically to the individual who owns it. Think of it like giving $500k to your favorite money manager to manage for you personally as he sees fit. He buys or sells securities on your behalf but discretionary authority as to virtually everything including asset class, price, timing, etc. He is paid via a fee based system rather than transactionally based.what is SMA?
Ask Windy and Ron14.what is SMA?
FWIW … I read an intriguing take on SMA from the owner of Cambridge Investment Research. His position: that by and large, SMA’s are the domain of the wirehouses and mostly because they can leverage them best and turn them into a profit center. Ultimately he suggested a competitive advantage of about 30-40 bps.
Perhaps Fred will want to weigh in on that ...Theoretically they should be able to have a much higher competitive advantage than 40 bps. Professional money management tailored directly to the investor’s needs and without the handcuffing of a prospectus that you have to live by should enable greater returns potential.
Most Money Managers indicate that as a Mutual Fund grows in assets it becomes harder to amass extreme returns due to the volume of shares needed to move in any direction. i.e. you can put in trade for 5k shares of XOM and have that executed immediately, but the execution timing and pricing diminishes if you are attempting to move say, 2 million shares.LSU is correct. Trading costs can be limited in an SMA, and if the manager is skilled, can result in quite a bit of return. Factor in taxes and the ability to take a tax loss in a non-qualified account, and you are looking at a significantly higher after-tax return.
Not so sure SMA’s are for everyone. I think they only make sense for certain types of investments. They are not as nimbles as funds (you can’t just trade in and out of them), and it’s tough to get adequate diversification among all asset classes with the best managers, in the right proportions. For example, if you want exposure to emerging markets, but you only want it for say 5% of a 500,000 portfolio, how realistic is that? I could see using SMA’s for the core of a portfolio (bonds, large cap domestic and int’l, etc.), but for some of the “satellite” or niche classes, can you really get the best managers with SMA’s? Some fo the returns I have seen with SMA’s are nothing impressive, so it sort of wipes out the tax/trading cost benefits over funds.
Of course, I don't use them much, so my experience is limited.I would respectfully disagree B24. They are far more nimble than MF’s because of the volume of trading that must be present to move the allocation of the fund. Diversification is not difficult when you have 500m in an account.
Diversification is not having a little of everything. It's having a small piece of a few things that are not directly correlated. Having an equity position in Emerging Markets AND US Conglomerates isn't necessarily diversification due to the impact global demand has on most established large cap companies. Having a position in a non-elastic company like Kimberly-Clarke and one that is subject to elastic demand like say, Ford, would be diversification to some degree. With 500k you can easily establish a diversified portfolio with a professional money manager. Define 'best' money managers? Is one fund with a high sharpe ratio v. another with a low sharpe ratio better or worse? It's all subjective. SMA's allow for that.The main problem with SMAs are the wrap platforms. Most firm’s Wrap trading desks are terrible. You just don’t get that great of execution. More of a nature of “system” then SMAs specifically. Take international equities and bonds for instance - most wrap platforms can’t trade them, so you end up having to go with ETFs.
[quote=Wet_Blanket]The main problem with SMAs are the wrap platforms. Most firm’s Wrap trading desks are terrible. You just don’t get that great of execution. More of a nature of “system” then SMAs specifically. Take international equities and bonds for instance - most wrap platforms can’t trade them, so you end up having to go with ETFs.[/quote]
I thought that SMA’s are independent of the wrap platform that’s why they’re separately managed so that we don’t have to trade them. The other negative aspect of SMA’s in my opinion is the huge statements generated for the client. Will he/she really look at these? For less than a $5million account, I wouldn’t even consider it.
I think that for a million dollar portfolio, price it at 1.25 or 1.5 then lower it as he/she brings in more money as a household or in referrals.
Yeah, I have a different understanding of SMA’s as well. We don’t “trade” SMA’s. We “trade” in MFD/ETF wrap accounts, but that’s a whole different ball of wax.
I agree, I find that SMA's are iniffecient for small accounts, and yes, produce tons of paper if you have several managers. I recently took an SMA account(s) from SB, and my client had like 8 different managers. His SB statement was like 40 pages long, and he had like 250 different positions. Unfortunately they were all basically growth or growth/income equity managers, so the styles were very similar. Didn't make much sense, especially since it was all in IRA money.An SMA is an agreement between your custodian and a third party money manager in which the money manager has full rights to trade the money. they may execute the transactions either through your custodian or through their own institution and transfer it into your system.
I have seen some SMA integrations work flawlessly, others, have been bad.
Source URL:https://www.wealthmanagement.com/forums/rias-independents/fee-structure-million-dollar-portfolio