Why Working with a Fee-Based Investment Advisor Makes Sense
Investing can be complex, and choosing the right mutual funds is key to growing your wealth. One of the best ways to ensure you’re getting the most out of your investments is by working with a fee-based investment advisor. Unlike commission-based advisors, fee-based advisors charge a flat fee or a percentage of assets under management, which aligns their interests with yours—prioritizing your long-term financial success.
Access to Institutional-Grade Mutual Funds
One of the main advantages of working with a fee-based advisor is access to institutional-class mutual funds. These funds, typically reserved for large institutions or high-net-worth individuals, tend to have lower fees and better performance potential than retail-class funds. Advisors have relationships with fund managers and custodians that allow them to offer you these superior investment options, which can help reduce your costs and boost returns.
Enhanced Investment Opportunities and Lower Costs
Retail investors are often limited to mutual funds offered by major brokerages, which may lack the diversification, risk management, or sophistication of institutional funds. Fee-based advisors, however, can access a broader range of funds—whether niche markets, emerging sectors, or specialized strategies—that can better align with your investment goals. These institutional funds often have lower expense ratios, helping preserve more of your investment for growth over time.
Reallocation and Quarterly Rebalancing for Optimal Performance
Investing is not a “set-it-and-forget-it” strategy. The markets change, and so do your investment needs. Fee-based advisors continuously monitors your portfolio and adapts your investment strategy as market conditions evolve. This might include reallocating to different sectors, increasing exposure to emerging markets, making tactical shifts in response to changes in interest rates, inflation, geopolitical events or even when the markets are thought to be over-priced or under-priced.
A fee-based advisor typically also offers quarterly rebalancing, meaning they regularly review your portfolio and rebalance the funds to the recommended allocation percentages if they get out of balance. This can happen if one asset class has significant gains while another class has losses, the new percentages will become out of alignment. By rebalancing back to the target percentages, you are effectively selling one asset class when it is high, and buying the other asset class when it is low. Consider this example:
Stocks have increased from 60% to 66.1% (now over-weighted).
Bonds have decreased from 30% to 24.8% (now under-weighted).
Cash has slightly decreased in proportion from 10% to 9.2%.
To bring the portfolio back into alignment with your original target allocation of 60% stocks, 30% bonds, and 10% cash, you will need to rebalance. Through rebalancing, you’ll sell stocks when they are “high” and buy bonds when they are “low,” effectively buying low and selling high—one of the core principles of successful investing
Conclusion: A Stronger, More Tailored Investment Strategy
By working with a fee-based investment advisor, you gain access to better mutual funds, lower fees, and ongoing professional management, including quarterly rebalancing. With their expertise and institutional resources, fee-based advisors can help you build a more sophisticated, diversified portfolio that’s tailored to your financial goals and designed for long-term success.