Advisory fees can be some of the highest fees you’ll pay — depending on your investment. While financial advisors need to eat and pay rent just like anyone else, the rhetoric they use to express how much you’re being charged might be hard to decipher. Advisors often talk in “basis points,” which simply means “tiny fractions of a percent.” So for example, 1 percent comprises 100 basis points, and 50 basis points equal 0.5 percent.
An advisory fee of 1 percent of assets is typical, but you need to understand what 1 percent will cost you. Let’s say your portfolio is valued at $500,000. If you’re being charged a 1 percent advisory fee, you’ll have to pay $5,000 annually.
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