Is it possible to pay advisor AUM fees with cash/monthly billing?

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
hoofaman
Posts: 1047
Joined: Tue Jul 14, 2020 3:39 pm

Is it possible to pay advisor AUM fees with cash/monthly billing?

Post by hoofaman »

I don't use an advisor and don't plan to, but I do know others who use them.

My question is, if someone uses an advisor why would they choose to have the fees withdrawn from tax advantaged accounts given that there are contribution limits to those accounts. Can they request a monthly bill and pay in cash? I wasn't sure how that would work or what the trade offs would be
User avatar
retired@50
Posts: 13662
Joined: Tue Oct 01, 2019 2:36 pm
Location: Living in the U.S.A.

Re: Is it possible to pay advisor AUM fees with cash/monthly billing?

Post by retired@50 »

hoofaman wrote: Mon Jun 10, 2024 1:06 pm I don't use an advisor and don't plan to, but I do know others who use them.

My question is, if someone uses an advisor why would they choose to have the fees withdrawn from tax advantaged accounts given that there are contribution limits to those accounts. Can they request a monthly bill and pay in cash? I wasn't sure how that would work or what the trade offs would be
One can ask for anything they want, but getting the advisor to submit an invoice to a single client doesn't seem likely to me.

Advisors are in the habit of dipping into the "cookie jar" of client portfolios all the time to collect fees. I have a hard time imagining they would alter their business practices for a single client.

Regards,
"All of us would be better investors if we just made fewer decisions." - Daniel Kahneman
Yarlonkol12
Posts: 1016
Joined: Thu Apr 11, 2019 4:28 pm

Re: Is it possible to pay advisor AUM fees with cash/monthly billing?

Post by Yarlonkol12 »

They could ask, but I doubt this is common for 2 reasons:

1.) For people with large portfolios, it would be a large amount of cash that most people would have to specifically budget for and likely couldn't afford. 1% AUM on a 4m portfolio would be what, $3,333/month? Assuming the client is still working, that's a large percentage of their monthly takehome

2.) Each time the "client" is actually writing checks or charging those fees to a credit card, they are probably more likely to say to themselves, "why am I paying these fees again?" I should drop this person
My posts are for entertainment purposes only.
student
Posts: 11091
Joined: Fri Apr 03, 2015 6:58 am

Re: Is it possible to pay advisor AUM fees with cash/monthly billing?

Post by student »

Yarlonkol12 wrote: Mon Jun 10, 2024 1:56 pm They could ask, but I doubt this is common for 2 reasons:

1.) For people with large portfolios, it would be a large amount of cash that most people would have to specifically budget for and likely couldn't afford. 1% AUM on a 4m portfolio would be what, $3,333/month? Assuming the client is still working, that's a large percentage of their monthly takehome

2.) Each time the "client" is actually writing checks or charging those fees to a credit card, they are probably more likely to say to themselves, "why am I paying these fees again?" I should drop this person
This is exactly correct. If you don't write a check, it is "free."
Workinprogress
Posts: 309
Joined: Wed Mar 06, 2019 8:25 pm

Re: Is it possible to pay advisor AUM fees with cash/monthly billing?

Post by Workinprogress »

My spouse had a Roth with Meryll Lynch that had the fees extracted every month.
I was able to open and fund a CMA account and they took the fees from the CMA every month instead.
It was only around $50 a month, but $600 a year.
Roth stayed fully funded and I felt less anxious.
flyingcows
Posts: 729
Joined: Sat Apr 20, 2019 8:13 am

Re: Is it possible to pay advisor AUM fees with cash/monthly billing?

Post by flyingcows »

I don't use an advisor, but if I did I think I'd rather pay the fees with pre-tax funds vs cash I've already paid tax on. Although to be honest I'm not sure how that actually works

I definitely wouldn't want them pulling out of Roth though
This content is for entertainment purposes only
User avatar
Stinky
Posts: 14708
Joined: Mon Jun 12, 2017 11:38 am
Location: Sweet Home Alabama

Re: Is it possible to pay advisor AUM fees with cash/monthly billing?

Post by Stinky »

Yarlonkol12 wrote: Mon Jun 10, 2024 1:56 pm Each time the "client" is actually writing checks or charging those fees to a credit card, they are probably more likely to say to themselves, "why am I paying these fees again?" I should drop this person
Of course this is exactly right. It’s kind of like payroll withholding - if you never “see” the money, tax payment to the government (or fee payment to the asset manager) doesn’t hurt as much.

If the advisor is drawing from tax advantaged money, that’s perfectly awful for the client. If it’s IRA money, I would think that would be a withdrawal, which would generate taxable income and could generate penalties. If it’s Roth IRA, that’s pretty terrible too.
Retired life insurance company financial executive who sincerely believes that ”It’s a GREAT day to be alive!”
gavinsiu
Posts: 5080
Joined: Sun Nov 14, 2021 11:42 am

Re: Is it possible to pay advisor AUM fees with cash/monthly billing?

Post by gavinsiu »

I think it would depend on the advisor. They might do it if you ask. I don't know if certain asset for example would cost money to do more transactions.

My mom's advisor pulls their advisory fee quarterly. They will try to pull it from cash and if it's not available, sell assets. I suppose they could pull money out of her ira via RMD, but her IRA is so small that the RMD won't be able to cover the fee.
Post Reply