If you ever take financial advice and invest money. There are a few things about fees to be aware off.
It is very easy to pay too much to someone to help manage your investments and most likely you also would not know how much this is costing you.
The financial advisory businesses are experts at creating impossible to understand agreements. These agreements are designed to hide how much you are being charged and how much you are paying. Try reading and understanding a typical UAE savings plan policy! I had difficulties despite my 30 years plus in the investment industry. They tend to work on the 80/20 rule, which is that 80% of the clients will not query the cost structure.
Paying a fee for a service is normal, but it should be relevant to the service being offered.
If you have a managed account then the fees should typically be between 1 and 2% p.a. This will cover trading costs, underlying fund fees, advisory fees, platform fees etc. When investing higher amounts, the fees should be lower. The fees may sound high, however at least you should be getting something for the fees. I have seen in the UAE some lump sum investment charges of 8%., how they can ever justify this morally is beyond me.
If the investment is more complex, it is obvious that the costs would be higher to the investment structure managed. This would be due to the higher operational costs.
However, many financial institutions have added a wrap fee or wrapper which can add another 1% or more on top of the fees you pay. In the UAE I have seen investment accounts with a 4-6% p.a. in fees. You have to question what value do I get out of these higher fees? Better service? Better returns? Instant access to my advisor? Lower risk?
The first thing is to start off talking to your advisor, have the advisor detail exactly the fee structures involved, from platform fees, internal fee structure in funds, commissions, exchange rate fees, credit card fees, redemption fees, simply all fees that are being paid by you the client, and most importantly how is the advisor being compensated and by how much is the compensation.
If you are not happy with the answers, or if they refuse to bring the fees to a fair level, then it may be time to move on.
The advisor is your employee, make sure you know how much you are paying your employee and what you get for this fee?
Investme Financial Services LLC