This is a difficult subject because fee dollars can come out of your account in so many different ways. So let's make sure we're not creating an Apples and Oranges discussion.
There are three major costs for managed accounts: sub-advisor fees or mutual fund expense ratio fees, commissions, and asset manager fees.
When all three fees are consolidated as a single fee, as in a "wrap" account, the total generally ranges from 1.75 to 2.50 percent a year.
If you have a very traditional manager, one who builds his client portfolios from individual securities, the cost is likely to be 1.00 percent a year plus commissions. The commissions DON'T go to the manager, they go to the custodian providing the platform or clearing function. At today's competitive brokerage rates, commission costs can be nominal in such arrangements, particularly if the manager is a buy-and-hold sort.
Finally, there are asset managers who manage portfolios of mutual funds. With these managers you have the expense ratio of the funds, commission costs to the platform, and his management fee that will commonly be from 0.75 percent to 1.5 percent. Like wrap accounts, total costs for these accounts can range from just over 1.00 percent to well over 2 percent.
Your planner's fee, at 0.70 percent, is on the low side by the standards of the industry although $5 million accounts are generally negotiated.
The fee of 0.75 percent that you cite could become very expensive for someone who invests in equities. A 50/50 account, for instance, would have an average cost of 1.30 percent if I understood how the scale works correctly.
Scott
