Investors still don’t fully understand advisor fees

Only 34% feel their advisors effectively delivered



Online only.


In July, investors saw the roll out of the final phase of CRM2, a new set of rules intended to bring greater transparency to investors on how much their advisors are taking and making off their client’s wealth. This means advisors are under greater pressure than ever to justify their fees to clients.

The changes come at a pretty good time: A new J.D. Power survey finds that just 27% of investors say they have complete understanding of their fees. That’s down from 30% in 2012. The survey was conducted in May and June, before the final rollout of CRM2, so we’ll have to wait to see if fee comprehension increases.

While 54% of investors indicated that their advisors helped them set goals and discussed risk, only 34% felt they were actually effective in implementing strategies to meet goals and monitoring progress. Ouch.

“These results don’t speak well for the industry as a whole,” said Mike Foy, director of wealth management practice at J.D. Power, in a press release. “Advisors who aren’t adding value for their clients beyond asset allocation may be in real trouble.”

The survey also marks the growing popularity of robo-advisors: Nearly one-third of those surveyed say they’d be interested if their firm offered them one, a figure that—to nobody’s surprise—rises to 45% among millennials.

Has your advisor been more transparent about fees after CRM2?

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2 comments on “Investors still don’t fully understand advisor fees

  1. Well this brings up an interesting point for me. I am in the process with ombudsmen investigating my portfolio with my last advisor.
    6 years with my previous advisor I made 2800 I moved my money Jan 28th/16 and from then till now aug I have made around 6000 that’s 1000 a month.
    math is easy 6 years (2800) 6 months 6000. WHO IS MAKING MONEY the MIR OR FEES ARE OUT OF CONTROL.
    so with that said its plan to see the average advisor makes 250,000 a year and the investor gets the gears.
    I have done exstensive investigating with lawyers and accountants and advisors that will stay anonymous.
    We all come up with the same result NOT GOOD AT ALL.
    Good luck
    Hope investing will get safer for the INVESTER and not the deep pock people


  2. What a coincidence to read on this new reporting requirements as I have recently enquired from my financial advisor on the monthly account fees that is being charged to my investments.
    After several enquiries, they have replied that since my total investment is less than $500K, they have to charge 1.5% instead of the agreed 1%. However, they are still not being transparent on how the fees are calculated, which is beginning to create a feeling of mistrust on both sides.
    I have left the investments to them to manage and rightfully so they should be paid. However, if the fees are stated upfront as a certain percentage, then they should show the calculation on how the fees are calculated. As many investors are too busy to check their investments, they just hide the fees deducted in a separate statement for which you have to access to view. For those investors who are conscious of the fees and check on their statements, there is no transparency on how the fees are calculated.
    We expect more from our investment professionals and whether the fee is 0.5%, 1% or 2%, show us your worth and we will gladly pay. A majority of them have been laughing their way to the bank with our hard earned money!!


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