Paying your financial adviser: How much is too much?

Q: My late mother had her money managed by a man she trusted completely. We have kept our inheritance with him. For his services, we pay about $500 a quarter. My mother-in-law's portfolio is managed through her bank, and she pays nothing in management fees. I have also heard about management through the Internet with much lower fees. While I'm not dissatisfied with his services, $2,000 a year seems a great deal of money. What are some things to consider when choosing portfolio management services?
M.V.E., via e-mail

A: In general, 1 percent is a normal fee for asset management. In your case, $2,000 would equate to $200,000 in assets. Amounts that small, says certified financial planner Raymond Nasser, of Midlothian, Va., often have fees of about 1.5 percent, so 1 percent might be a bargain.

Mr. Nasser questions cheaper alternatives for asset management. Fees will be assessed one way or another, he says, either directly or, in the case of mutual funds, indirectly by the financial professionals who recommend these investments.

One less expensive way would be to find an adviser who charges by the hour and ask him or her for quarterly advice on what to do with money that you manage. If you go that route, look for an adviser on the National Association of Personal Financial Advisors website (www.napfa.org).

When selecting an adviser, Mr. Nasser says find someone with whom you have some rapport and who understands your risk tolerance, as well as your need for income and/or portfolio growth. Check the adviser's references to make sure he or she isn't in any regulatory trouble.

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