Like any product or service, financial advisors vary in their quality and expertise. Related to this, many of the most competent professionals choose to earn more by increasing their minimums. Not that there is anything wrong with this, but it is important to be aware of.
Depends on firm structure
Financial advisors can set minimums in a couple of different ways, but it depends a lot on the structure of the firm and its fees. For example, firms that sell financial products may be less stringent about having minimums, because they are not necessarily committing to an ongoing relationship with a client – they may be just selling a product and moving on.
Minimums are typically based on account size
In general, the financial advising industry is moving away from advisors selling products with commissions and toward the advisor managing the client’s investable assets on an ongoing basis and charging an ongoing advisory fee.
As the industry moves in this direction, it is most common for firms to have a minimum account/relationship size for client relationships. For example, a firm may have an investment minimum of $500,000 or $1,000,000.
Not necessarily bad, but be aware of it
The fact that minimums exist is not necessarily a bad thing. Businesses have overhead and costs. And of course, there is nothing wrong with someone earning an income through providing a high level of service and expertise to their clients.
However, I think the problem occurs in that a meaningful number of the competent financial advisors have high asset minimums, so there are not many good options for people who are just starting out or do not otherwise have significant assets. This is not to say that having a high minimum means that an advisor is competent – they could just be very good at sales/marketing.
For the most part, the advisors without minimums tend to be more product (and commission) focused. Individuals who are searching for a financial advisor who are younger or don’t have a significant asset base need to be especially critical of their prospective advisor to make sure they will be served well.
Ulmer Financial’s goal is to help solve this problem
I started Ulmer Financial to help solve this problem of many of the best financial advisors having high asset minimums. Our goal is to provide fee-only financial planning and investment management without asset minimums. We want to help and serve those who are just getting started – we want to grow with our clients, not just serve those who have arrived.
If you have any comments, questions, or ideas for future posts, please let me know
I hope you found this post helpful and educational. If you have any comments, questions, or ideas for future posts, please let me know. You can reach me directly via email at crawford@ulmerfinancial.com.
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