In my advisor practice, a client brought up the question as to whether he could save some money by referring a relative or friend and have that person’s assets to be considered when management fees are calculated.
Here’s how it works. All fee-based investment advisors have a sliding fee schedule for their clients. The higher your portfolio value, the smaller the management fee.
For example, let’s say your managed portfolio has a value of $80k and you are referring a family member with a portfolio value of $40k. In my practice, we have fee break points for accounts under $50k, under $100k, under $250k and so on.
In the above example, you, with the $80k portfolio, would benefit greatly by referring your friend with a $40k portfolio. You would both slide into the lower fee bracket between $100k and $250k, which would result in considerable savings.
It’s a win-win situation. Your cost has been reduced, your friend starts out at a much lower fee schedule and the advisor has gained a new client.
If you’re working with a fee-only advisor (and you should), be sure to ask the question about combining assets to reduce your investment management costs.