Is there a way to account for an asset management fee that a "fee only" financial planner charges?

If I am using a fee-only financial planning service, there is often a fixed percentage of assets under management fee charged by the financial planner. In ESPlanner I cannot find a way to account for such a fee, that changes each year since the value of my assets change each year. Thanks.


dan royer's picture

There's no way I know of to have the program automatically look at your account balance each year and then list a 1% fee based on those end-of-year balances. But if you are using economic mode, which I would do, you can just lower your assumption by 1% (or whatever the fee is for assets under management). If the planner tells you that he or she expects you to earn 6% a year, set your assumption at 5% since the planner is going to take 1%.

Thanks Dan, that is helpful. I wanted to see what my discretionary spending would be using Asset Builder Portfolio #9, for example, which requires Monte Carlo planning. I simulated the management fee by manually entering the first year Asset Builder fee as a special expenditure into every year over our lifetime, then specifying dollars vs. today's dollars to simulate a gradually reducing fee. That was close enough for a "couch potato" like me.

My understanding is that the financial planning fee can be directly deducted from an IRA account, thus avoiding additional taxes on that amount over the life of the relationship. Even though the entire balance under adivisement is made up of Reg Assets and IRA type assets, the fee can be fully taken from an IRA account as an expense. Any thoughts on how to reflect this and still get a reasonably legitimate result? Thanks!

dan royer's picture

If it's a percent of assets under management, you'd just lower the assumed nominal rate of return by that said percentage amount. If it's a flat fee, I'd enter it as a series of special expenditures.

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