Historically, independent advisors have had a hard time bringing themselves to charge enough for financial advice. I think that’s been a large part of the attraction of loaded packaged products: The commission is set by someone else, and you get what you get.

But when it’s come to setting their own fees, advisors have tended to be pretty shy. In the old days, fees for financial plans typically ran from $3,000 to $5,000, which almost never covered the time and effort involved. Annual retainers were no better; usually based on an estimate of AUM, subject to a greatly discounted fee. When advisors have gone to charging hourly, their rates are often closer to what they charge to work on my Harley rather than to those charged by a lawyer or accountant.

In recent years, of course, all the noise is about fees on AUM, but I suspect advisors still suffer from the same inferiority complex. And sadly, I have to admit to having been part of the problem. For years, I’ve told advisors that at 100 bps, they were charging too much. My reasoning stemmed from the fact that the wealthy typically pay 100 bps inclusive of advice, portfolio management, and trading expenses. So if you’re charging 100 bps and the fund companies are charging another 100 to 150 bps, that seemed like a lot.

But I’ve changed my tune about advisor fees. For one thing, the very wealthy aren’t a good standard. Sure, their advisors charge around 50 bps, but on $30 million, that’s pretty good money ($150,000). Point is, their finances may take a little more time and sophistication to sort out than say, a $2 million client. But not ten times more: At 70 bps, the smaller client pays you $14,000, yet they get the same client-centered, fiduciary, fee-compensated professional attention that HNW folks get. How much is that worth? Certainly more than $14k. From this angle, 150 bps looks pretty fair to me.