# What Does the Net Asset Value (NAV) of a Fund Mean?

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Mutual funds and exchange-traded funds (ETFs) provide investors with the opportunity to put their money in a professionally managed fund. Like any investment, it pays for investors to become as knowledgeable as possible about how funds work, including understanding the terminology. One key term that beginning fund investors should learn more about is net asset value, or NAV.

### What is net asset value?

Simply defined, NAV is the fund’s total assets minus any liabilities. Mutual funds calculate the fund’s NAV daily after the close of the market. The fund’s NAV is the price of each share of the fund.

The types of securities where NAV calculation is required include:

• Mutual funds (open-end)
• ETFs
• Closed-end funds
• Unit Investment Trusts (UITs)

### How to calculate NAV

A fund’s net asset value is calculated by taking the total assets of the fund and subtracting any liabilities. This number is then divided by the total number of outstanding fund shares to find the NAV per share.

NAV = (total fund assets – liabilities) / number of outstanding fund shares

Here’s an example of how a mutual fund NAV calculation works for a hypothetical fund.

Fund XYZ has total net assets of \$100,000,000 (total assets less any liabilities). The fund has a total of 5,000,000 shares. Dividing the \$100,000,000 in net assets by the 5,000,000 shares would yield a NAV per share for the fund of \$20.00.

Mutual fund companies perform this calculation at the end of each day that the markets are open.

### Does the NAV matter to investors?

Knowing how a mutual fund’s NAV is calculated is important to understand how mutual funds work, but in reality, it’s a rather meaningless number when you’re evaluating whether or not to invest in a given mutual fund. Typically, an investor would look at the fund’s total returns. If you’re researching more than one fund, a comparison might better be made on relative returns or comparative expenses. Comparing the NAVs of one or more funds would not yield anything of value.

The NAV for an ETF or closed-end fund is a more meaningful number. These funds are traded continually on the stock exchange while it’s open. The price at which these securities trade can be at, above or below the fund’s NAV. A fund trading above its NAV trades at a premium. In other words, if the fund is trading at a price that is 10% above its NAV, you could say that investors are paying \$1.10 for one dollar’s worth of assets.

The same holds for a fund selling below its NAV. If a fund is selling at a discount to its NAV, it could be said that an investor is paying less than \$1.00 for a dollar’s worth of assets.

### Mutual fund NAV vs. total return

The NAV of a mutual fund doesn’t tell investors anything about the fund’s performance; it is strictly a calculation of the fund’s value. Unlike the share price of a stock, the NAV per share is based upon an ever-changing number of shares where an open-ended mutual fund is concerned.

New shares of a fund are created when an investor buys additional shares. As long as the fund is open to new investors, there are no additional restrictions on the creation of new shares. Also, when a fund makes a distribution, the NAV decreases for two reasons. First, some shareholders will take the distributions in cash, reducing the fund’s total assets. Second, other shareholders will reinvest the distributions into new shares. While this will not reduce the fund’s total assets, it will result in a larger number of shares, serving to reduce the NAV per share.

All of this can be difficult for most investors to follow and make sense of. Even then, drawing a conclusion about the change in a fund’s NAV can be difficult.

That’s where a fund’s total return can be useful. Total return captures the capital appreciation, capital gains and dividends earned by holdings of the fund (in the case of a mutual fund that invests in stocks). A bond fund will likely earn more of its total return from interest and dividends than from the fund’s underlying holdings — though capital gains can come into play here as well.

Total return is the most important measurement of performance for a mutual fund, since returns earned by investors come from sources beyond capital appreciation. The contribution of dividends to the total return of the S&P 500 over time has been around 40% in the aggregate. The impact of dividends on total return will, of course, vary widely by individual stock and even the industry the company is in.

Mutual fund total returns are widely available from Morningstar, Zacks and other sources. It is an easy way for investors to track how their fund is doing. The most relevant comparison is among mutual funds in the same asset class or category.

For example, comparing the performance of two funds in Morningstar’s large-blend category is more meaningful than comparing the performance of a large-blend fund to a small-cap foreign stock fund. The factors influencing performance and risk would be drastically different for these two types of funds.

### Bottom line

Understanding how a mutual fund’s net asset value is calculated is important for investors who are gaining an understanding of how mutual funds work. However, it is a relatively unimportant metric in tracking the results of their fund, where a metric like total return would probably work better.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

# Best Online Brokers for May 2020

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone and is not intended to be a source of investment advice. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

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The easiest way to start investing from home is through an online broker. A broker’s main job is to buy and sell stocks, bonds, exchange-traded funds (ETFs) and other securities that make up your portfolio. When choosing an online broker it’s important to consider your investment experience and style, your trading needs and your financial goals.

### Our Background

Our investing experts have been tracking the fees, features and capabilities of dozens of online brokerage accounts since January of 2019. Beyond that, our team of in-house experts consists of both financial analysts and journalists who collectively have more than 20 years of experience across the investment industry, encompassing financial advisory services, asset management, financial journalism and investment banking.

### Our Thoughts on the Market

Investing is fraught with risk, as indicated by recent volatility in the markets due to the COVID-19 crisis. History shows that events in the capital markets are beyond your control as an individual investor, and it’s almost certain this will continue to be the case in the future. During these uncertain times, we’d like to remind our readers to keep an eye on the things that they can control, such as broker fees and risk exposure, when picking the right online brokerage account to fit your needs.

Again, there are no guarantees when it comes to investing and the right asset allocation will depend on both your unique financial goals and your individual risk tolerance as an investor. No matter what your goals are, our team of financial experts is ready to help you select the best fit for you from a selection of dozens of the most popular online brokerage accounts on the market today.

Start by checking out our picks for the top brokerage accounts below, which we’ve selected for a variety of investor types. Regardless of whether you’re just starting your investing journey or are a seasoned investing veteran, there’s a brokerage account out there that will suit your needs. Check out our rankings below.

## Summary of MagnifyMoney’s Best Online Brokers for May 2020

### TD Ameritrade: Best Overall Broker

Visit TDSecuredon TD Ameritrade’s secure site
Key Features:

• Fees per option trade: \$0.65 per contract
• Minimum Deposit: No minimum

Why we picked it: TD Ameritrade pairs \$0 equity trades with a high-quality platform that aims to target investors of all types, regardless of whether you’re a beginner or an investing veteran. There is no minimum deposit requirement, which makes this broker highly accessible, and its ThinkorSwim trading platform provides an industry-leading tool for both researching and executing advanced trading strategies.

Highlights:

• Exclusive courses and webcasts for investor education.
• Extensive selection of investments (bonds, foreign exchange [forex], options, futures) with \$0 commissions across online stock, ETF and option trades, with option fees of just \$0.65 per contract.
• 24/7 customer service via phone, text and chat and more than 350 brick-and-mortar branches for in-person support.
• Top-of-the line research and analytical tools through fully integrated desktop, mobile and ThinkorSwim platforms.

What to watch out for: Investors who are interested in futures trading should be wary of the steep \$2.25 per contract fee, which is well above the competitor average (Schwab, Interactive Brokers and E-Trade all fall below the \$2.00 mark).

### Vanguard: Best Broker for Beginners

Visit VanguardSecuredon Vanguard Personal Advisor Services’s secure site
Key Features:

• Fees per option trade: \$0-\$1 per contract
• Minimum Deposit: No minimum

Why we picked it: Vanguard has a simple, intuitive platform that’s well-suited for beginners and passive investors who don’t plan on trading frequently and want to minimize their investment fees. Vanguard’s collection of low-cost index funds, which include its Admiral Shares lineup of funds, are among the most popular and well-known funds on the market.

Highlights:

• One of the biggest names in the business when it comes to passive investing.
• Admiral Shares Funds feature some of the lowest expense ratios on the market.
• 160 no-transaction fee mutual funds from Vanguard and more than 3,000 funds from other companies.

What to watch out for: Vanguard imposes a \$20 annual maintenance fee on customers who don’t opt for electronic statements. The broker also requires a hefty \$3,000 minimum investment in its standard mutual funds and \$50,000 for actively managed funds, raising the buy-in significantly for investors seeking sector diversification. Vanguard also does not offer futures trading on its platform.

### Interactive Brokers: Best Broker for Experienced Traders

Visit InteractiveSecuredon Interactive Brokers’s secure site
Key Features:

• Fees per option trade: \$0.15-\$1 per contract, based on contract volume
• Minimum Deposit: No minimum

Why we picked it: Interactive Brokers (IBKR) caters to advanced investors by providing complex trading and analytical tools and one of the most diverse selections of investment options on the market. IBKR is one of the few online brokers that offers exposure to a full suite of investment vehicles that many other online brokers won’t offer, including forex; exchange of futures for physical (EFP); hedge funds; foreign stocks and bonds; and futures.

Highlights:

• Advanced smart-order router seeks optimal price execution making it an excellent choice for day traders.
• Accumulate/Distribute algorithm features customizable logic to help investors fill large-volume orders while adapting to market conditions.
• Professional-caliber Risk Navigator reveals exposure across asset classes and around the globe, helping investors monitor and adjust positions as needed.
• Interactive Brokers’ Traders Academy offers a structured curriculum to advance your knowledge of a variety of financial instruments, complete with tests and recordings offered in multiple languages.

What to watch out for: There is a \$20 minimum yearly trade commission required, so it’s not well-suited to someone seeking a passive investing approach. Some resources are also only available to IBKR Pro customers, and its fee structure is one of the more complex ones on the market.

### Charles Schwab: Best Broker for ETFs

Visit SchwabSecuredon Schwab Intelligent Portfolios ’s secure site
Key Features:

• Fees per option trade: \$0.65 per contract
• Minimum Deposit: No minimum

Why we picked it: Charles Schwab offers one of the largest selections of more than 2,000 commission-free ETFs that cover more than 110 Mornigstar categories. Not only are they covered across a broad range of asset classes, but Schwab investors have access to Schwab Intelligent Portfolios, a robo-advisor platform that automatically builds and rebalances a diversified portfolio of ETFs based on your investing goals.

Highlights:

• All ETFs trade commission-free on U.S. exchange.
• More than 300 branch locations for investors seeking in-person support.
• Intelligent Portfolios robo-advisor service automatically selects and rebalances a diversified portfolio of ETFs based on your investing goals.

What to watch out for: Non-Schwab Mutual Fund OneSource trades are up to \$49.95 per purchase. Additionally, the interest rate on its cash sweep account is relatively low, and the account requires the user to manually transfer their cash if they’d rather hold it in a money market.

### Ally: Best Broker for Options Trading

Visit AllySecuredon Ally Invest Managed Portfolios’s secure site
Key Features:

• Fees per option trade: \$0.50 per contract
• Minimum Deposit: No minimum

Why we picked it: Ally offers one of the lowest contract fees of just \$0.50 per option contract. The broker also features intelligent options trading tools that allow users to forecast theoretical action values and help them identify the best options strategy based on their parameters.

Highlights:

• Extensive tools designed to analyze market performance, including an ETF screener, a profitability calculator, streaming charts, option chains and more.
• Cash transfer reimbursements combined with its integrated mobile and web platforms sync up with Ally’s online bank accounts.
• Managed portfolios, an automated investing option, is available with a minimum deposit of \$100.

What to watch out for: Ally charges \$9.95 per trade for no-load mutual funds and does not have a collection of no-fee mutual funds that many of its top competitors feature. This makes the broker less than ideal for a passive investing strategy.

### Fidelity: Best Broker for Mutual Funds

Visit FidelitySecuredon Fidelity’s secure site
Key Features:

• Fees per option trade: \$0.65 per contract
• Minimum Deposit: No minimum

Why we picked it: Fidelity offers zero expense ratio index mutual funds directly to its customers. Unlike many of its competitors, there is no minimum to invest in Fidelity funds. Fidelity offers access to more than 10,000 mutual funds from Fidelity and other companies across a variety of sectors, styles and assets, with thousands of no-transaction-fee mutual funds available.

Highlights:

• More than 3,700 no-transaction-fee mutual funds.
• More than 500 commission-free ETFs.
• No minimum investment amount required, making it easy to build a diversified portfolio of mutual funds.
• Nearly 200 branch locations for investors seeking in-person support.

What to watch out for: Investors seeking to trade in futures contracts will not have that option through this broker.

### E-Trade: Best Broker for IRAs

Key Features:

• Fees per option trade: \$0.50- \$0.65 per contract
• Minimum Deposit: No minimum

Why we picked it: Beyond the typical Roth and Traditional IRA options offered by many competitors, E-Trade also features specialized IRAs. The broker offers an IRA tailored to minors who want to get a headstart on their financial future. There is also the E-TRADE CompleteTM IRA, which is geared toward those who are 59 ½ and older and not only eases the process of taking required minimum distributions once you hit retirement, but also doubles as an excellent bank account, offering free checking, online bill pay and even a debit card. E-Trade also has designated financial consultants that can help manage your portfolios and give retirement advice.

Highlights:

• More than 9,000 mutual funds available (more than 4,400 of which are no-transaction fee)
• Cash management features, including a debit card, checking and bill pay, available across its brokerage accounts.
• E-TRADE Complete™ IRA offers free checking services and its own debit card, making taking required minimum distributions easy.
• Beneficiary IRA and IRA for minors offer both traditional and Roth contribution options, which makes it easy for younger investors to get started on investing for the future.

What to watch out for: Not all accounts are eligible for cash management features. Investors interested in penny stocks also should be wary of the \$6.95 charge associated with these trades.

## Why Trust Us?

At MagnifyMoney, it is our mission to inform our readers about the best financial opportunities out there. Our insights have been cited by top financial publications including MarketWatch, CNBC and the Wall Street Journal.

Our dedicated team of financial experts spent dozens of hours grading each brokerage account on its features, including fees, minimum balance requirements, analysis tools and investment vehicles. Our method of evaluation not only compared features and cost, but also took into consideration the type of investor using these brokerage accounts.

Even though they did not make our top picks, we also considered the following brokers in our analysis:

## How do brokerage accounts work?

Online brokerage accounts allow retail investors to access the financial markets without the need for a stock broker to act as a middleman. Online brokerage accounts are typically offered through licensed brokerage firms but many banks, money managers and registered investment advisors (RIAs) offer their own accounts.

One of the great benefits of online brokers is that they make investing highly accessible to the average investor, rather than limiting it to the realm of those with lots to invest. Brokerage accounts allow investors to buy and sell assets like stocks, mutual funds, ETFs, options and bonds.

Brokerage accounts can come in many forms but all provide the same basic function: They house your cash and investments and allow you to buy and sell financial assets. Here are some of the most common investment account types:

### Retirement accounts:

• Employer-sponsored retirement accounts: These include 401(k) plans, SIMPLE IRA plans, SEP plans and pension plans (both defined-contribution and defined-benefit) offered through your workplace.
• Individual Retirement Accounts (IRAs): This includes both traditional IRAs and Roth IRAs offered through most large financial institutions including banks, credit unions and large mutual fund companies.

The benefit of retirement accounts like 401(k) plans and IRAs is that they allow individuals to invest on a tax-advantaged basis. The tax treatment will differ depending on whether contributions are made to a traditional or Roth account, but in almost all instances, retirement accounts offer individuals some form of tax relief. The trade-off comes in the form of both deposit and withdrawal restrictions.

Expert tip: “The benefits of a tax-advantaged brokerage account cannot be understated. Taxation is one of the biggest determining factors when it comes to your long-run investment returns. The ability to defer or exempt yourself from some of those taxes can pay major dividends over the long run.” – Kenny X. Zhu, CFA, MagnifyMoney Investing Columnist

### Personal accounts:

Individual taxable brokerage accounts: Individual brokerage accounts are offered by a number of financial services companies, including banks and licensed brokerage firms. These allow you to trade securities within your own private account.

Joint brokerage accounts: Joint brokerage accounts function in the same way as individual brokerage accounts and are offered through the same financial companies. However, joint brokerage accounts allow for shared ownership by two or more individuals.

Personal brokerage accounts operate similarly to IRAs, but offer no real tax benefit, so your account earnings may be subject to interest or capital gains taxes. However, personal accounts typically feature no deposit or withdrawal restrictions, allowing investors greater freedom when using their personal brokerage account.

### What Should I Know About Broker Fees?

When shopping for the best online brokerage account, it’s important to keep costs like commissions and fees to a minimum, as these will eat into your total investment return over the long-run. Here are a few fees you should always be aware of when you’re choosing an online broker:

• Brokerage fee: Brokerage fees can be charged annually or monthly for the overall maintenance of your account. Many of our top brokerage picks do not charge brokerage fees.
• Transaction fee: Also referred to as trade commissions, these are fees charged by the broker to complete your trade. Some firms charge a flat fee per trade while others charge per share being traded. It’s important to remember that for each investment you take a position in, you’ll likely be charged twice in terms of commissions: 1. to buy the asset and 2. to sell the asset at a later date. In a bid to increase competition, many of our top brokerage account picks have decided to waive trading commissions altogether.
• Management Fee: Sometimes called an advisory fee, some brokers may charge you for a percentage of your total assets under management. This is typically charged in exchange for financial advisory or robo-advisor services in your brokerage account.
Expert tip: “When seeking returns, it’s easy to lose sight of minor details like management fees and expense ratios. Much like interest earnings, fees also compound over time and will eat into your total return. “ – Kenny X. Zhu, CFA, MagnifyMoney Investing Columnist
Visit TD Secured

##### \$0 annual fee
Visit Charles Secured

on Charles Schwab’s secure site

### How do I choose which online broker is right for me?

The best brokerage accounts offer low fees and commissions while providing plenty of investor tools and offering a wide variety of no-fee ETFs and mutual funds.

Brokerage accounts can vary considerably in terms of features and prices, so it’s important to consider your unique investing style and financial goals when choosing an online broker. We’ve outlined the key features to look for when shopping around for a brokerage account:

Fees: It’s important to compare the fees levied by each firm in terms of both management fees and trading commissions. Many firms will charge different fees depending on whether you’re trading equities or options. It’s important to take these into account within the context of your own experience as an investor and the securities that you intend to trade most. Keep in mind that if you’re seeking extra guidance or want specialized trading tools beyond what’s available to the average investor, certain brokerage firms may be willing to provide those in exchange for a higher management fee.

Promotions, free trades and account opening bonuses: Many online brokers will try to entice you to sign up by offering promotions in the form of free trades, cash bonuses or even gifted stocks. If you’re looking to open a new brokerage account and narrow your choices down to a few key brokers, it may be worth comparing their bonus offers to see which provides the most compelling offer.

This can be especially enticing for those who intend to invest large amounts, as these promotions can become more lucrative the more you deposit. Keep in mind that most bonus offers will require some level of minimum deposit or trading activity for you to be eligible. Many will also set time limits in which you may qualify, so make sure you read the full terms of these offerings when picking a brokerage account on the basis of its bonus offer.

Investment products: Many large brokerage firms offer their own line of no-fee ETFs and mutual funds, each with its own set of investment strategies, market exposures and specialities. This is important if you’re trying to obtain the greatest level of diversification at the lowest cost.

Also keep in mind that if you’re trying to get access to specific product lines offered through certain brands like Vanguard’s Admiral Funds, Blackrock’s iShares or State Street’s SPDR ETFs, you may not have access or will have to pay a higher fee to gain access to these investments, depending on which online broker you choose.

Additionally, not every online broker allows you to trade every type of investment. For example, some online brokerage accounts may limit or restrict trading in certain specialized assets, like futures contracts, forex or structured products. If you’re a sophisticated investor who’s interested in gaining access to a wider variety of investments beyond just stocks and bonds, it’s worth checking what types of investments are permitted before committing to an online broker.

Resources: Many brokerage accounts offer services beyond filling buy-and-sell orders, and some offer different tiers of service for those willing to pay more or commit a larger amount in cash. You also may want your brokerage to be your one-stop shop for banking or planning services.

Some other features that online brokers may offer in addition to trading include:

Account minimums: Online brokers may differ in the size of the minimum account opening deposit required. If you’re just starting off or don’t have a lot to invest, you may consider shopping for online brokerage accounts with low or zero minimum deposits. Conversely, those willing to deposit large amounts may be able to obtain greater tiers of service through brokers that require high account minimums.

Much like certain checking or savings accounts, some brokers also may require a minimum account balance to avoid service charges. In some cases, brokers will also require minimum monthly deposits to avoid this charge. It’s worth looking into specific brokerage account policies if you intend to invest lower amounts to avoid paying unnecessary surcharges.

Trading software and research tools: If you trade frequently or deal in complex investments, you’ll want to take note of each brokerage account’s investing platform, any specialized software they may offer and how much access they provide in the form of proprietary or third-party research reports and information published by industry experts.

Some brokerage firms may allow you to “tour” their online trading platforms and run a simulated trade so you can get a feel for the experience. If you plan on using your phone to trade on the go, it’s also worth taking a look at the broker’s mobile app to make sure it suits your needs.

Expert tip: “There’s no single brokerage account that’s unequivocally better than all others. The best brokerage account will vary by individual and depends on your personal investment philosophy, the type of exposure you want and how hands-on you intend to be with your investments, among other factors.” – Kenny X. Zhu, CFA, MagnifyMoney Investing Columnist

## FAQs: What should I know about brokerage accounts?

Once you have a brokerage account, you’ll need to deposit money into your account. Online brokers make it easy to transfer funds from your bank account electronically, but many brokers also give you the option of mailing in a check or wiring money. Some well-known brokers like TD Ameritrade, Charles Schwab and Fidelity even have branches where you can deposit your checks in person.When you’re ready to trade, you’ll have a few different options in terms of the orders you can place:

• Market order: Market orders typically offer the fastest execution for investors who want to buy or sell immediately. This order type directs the broker to buy or sell a security at the current market price. It may not always offer the best price though.
• Limit order: A limit order directs the broker to buy or sell a security at a specified price or better. Limit orders give you the most control over the price at which your transaction is executed but take longer to execute depending on where the security is trading. If no counterparties are willing to trade at the price specified, the limit order will sit unfulfilled until the specified price becomes available or the order expires.
• Stop-order: A stop order directs the broker to buy or sell a security once the market price meets the specified “stop” price, or better. Stop orders are similar to limit orders in that they allow investors greater control over where the trade is executed, but unlike a limit order, which allows counterparties to view the price at which you’re willing to transact, a stop order is not viewable by counterparties and automatically converts into a market order once the specified stop price has been reached. Investors typically use stop-loss orders to guard against potential losses.

The next step is calculating how many shares you can buy or sell. This will be based on the current share price minus any trading fees. It’s important to realize that trades aren’t automatic and the actual share price might change from the time you place your order to the time your trade is completed. Your final order can be impacted by factors such as:

• Size of order
• Availability of shares
• Time you place the order

Generally, if your order isn’t huge and is for stocks traded on a major exchange (meaning stocks are readily available for purchase), there shouldn’t be a delay. If you place an order outside of normal trading hours, your order won’t be executed until markets open. Market volatility can cause after-market movements that impact the price of a share at opening, which is called a gap. Trading after hours could mean that you’re bound to a price you weren’t expecting.

You can trade more than just stocks with most online brokers. Given your financial goals, diversifying your investments can be a way to balance your portfolio and protect against losses. Here’s a list of securities types that most brokerage accounts allow you to trade:

Some brokerage firms offer more niche investment opportunities including forex and EFPs.

How much you’ll need to start investing will vary depending on which broker you choose and the type of brokerage account you’re opening. There are plenty of online brokerage accounts with no account minimums, lowering the barriers to entry to start investing for the future. Many 401(k) accounts can be set to automatically allocate your paycheck to mutual funds that your workplace plan allows for, eliminating the problem of minimum purchase amounts.

In theory, all you need to start trading is enough funds to cover the cost of a single stock and the trading commission, but you’ll want to take into account the current market price of the security you want and how big of a position you want to take. Keep in mind that trading fees incurred will eat into your total return.

Most online brokers offer exposure to international markets through mutual funds and ETFs that specialize in international investments. You also may be able to identify specific stocks that give you direct exposure to foreign companies in both over-the-counter (OTC) and American Depository Receipts (ADR) investments.

Keep in mind that international investments may command higher trading fees and additional risks and tax concerns that differ from trading domestic securities.

Any investments you undertake are subject to both gains and losses in market value. In other words, there are no guarantees that you won’t incur losses on either principal or interest when it comes to investing in any asset. It’s important to consider your own risk tolerance relative to your portfolio and overall investing strategy.

If you’re worried about the solvency of your broker or the funds in your brokerage account, know that all brokerage firms registered with the Securities and Exchange Commission (SEC) are also members of the Securities Investors Protection Corporation (SIPC), a non-governmental organization that insures brokerage accounts in a manner similar to the Federal Deposit Insurance Corporation (FDIC). In the event of broker insolvency or misappropriation, the SIPC insures your account for up to \$500,000 per person (including a \$250,000 limit for cash only).

It’s important to note that the SIPC will not cover any losses in market value on your investments, any investments in mutual funds directly held by the brokerage company or brokerage accounts held with non-SIPC member institutions.

Many online brokers offer additional resources and tools for researching, investing and financial planning, in addition to custodial and trading services. Often, brokerage firms will offer greater access or premium services for individuals willing to deposit more money or pay additional management fees.If you’re interested in premium features like personalized financial planning, in-depth investment education and technical and fundamental investment analysis tools, it’s a good idea to inquire with the firms you’re considering when shopping for the best brokerage account to see whether they offer these resources.

Fees

N/A

Account Minimum

\$5000

Promotion

Get up to \$600 when you open and fund a Merrill Edge investment account or IRA.

Fees

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Fees

Account Minimum

\$0

Promotion
N/A

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

# Review of Beacon Pointe Advisors

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone and is not intended to be a source of investment advice. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

Written By

Reviewed By

Beacon Pointe Advisors, LLC is an independently owned, fee-only financial advisor firm offering financial planning and wealth management services to both individuals and high net worth individuals, with a focus on women and clients going through life milestones. The firm employs 113 investment advisors across 20 offices, most of which are located in California, including its headquarters in Newport Beach. It currently oversees about \$9.9 billion in assets under management (AUM).

 Assets under management: \$9,949,699,273 Minimum investment: \$1 million Fee structure: Percentage of AUM for portfolio management; fixed fees; hourly fees Headquarters: 24 Corporate Plaza Drive Suite 150 Newport Beach, CA 92660 www.beaconpointe.com (949) 718-1600

## Overview of Beacon Pointe Advisors

Beacon Pointe Advisors is an independent firm primarily owned by its CEO and founder, Shannon Eusey. In March 2020, Beacon Pointe merged with sister firm Beacon Pointe Wealth Advisors to form a single registered investment firm, Beacon Pointe Advisors. As part of the transaction, private equity firm Abry Partners took a minority stake in the merged firm. Other employees hold a minority interest in the firm.

Eusey founded Beacon Pointe in 2002 based on a business school project, and it has since grown to 20 offices nationwide. Beacon Pointe Advisors has a total of 167 employees who collectively hold more than 100 designations and degrees, such as the highly respected certified financial planner (CFP) and chartered financial analyst (CFA) designations and JD and master’s degrees. Beacon Pointe Advisors currently has \$9.9 billion in assets under management, with plans to keep growing.

## What types of clients does Beacon Pointe Advisors serve?

Beacon Pointe Advisors serves mostly individuals and high net worth individuals. (For reference, the SEC defines a high net worth individual as someone with at least \$750,000 in assets under management or a net worth of over \$1.5 million.) While the minimum account balance required for clients is technically \$1 million, the firm may waive or reduce that minimum at its discretion, as evidenced by the fact that it serves more individuals than high net worth individuals.

Beacon Pointe Advisors has a particular focus on women investors. In 2011, it founded the Women’s Advisory Institute, aimed at helping female clients. Additionally, half of the firm’s leadership team are women. The firm also specializes in helping multi-generational families; entrepreneurs and business owners; and clients going through financial life changes, such as divorce or the death of a spouse.

In addition to individual investors, Beacon Pointe Advisors works with some charitable organizations, businesses, insurance companies, pension and profit-sharing plans and pooled investment vehicles.

## Services offered by Beacon Pointe Advisors

Beacon Pointe Advisors offers both consulting services and a managed account program. Financial planning services fall under the consulting part of the business. Clients interested in financial planning have the option of getting a holistic plan that looks at their entire financial picture and results in the creation of a written financial plan with specific recommendations. Clients can also request limited-scope financial planning focused on a specific goal, such as saving for retirement or paying for a college education.

Other consulting services offered by Beacon Pointe Advisors include assistance with creating an investment policy or asset allocation strategy; recommendations of managers, mutual funds, or custodians; and the monitoring of managers and portfolios on a non-discretionary basis.

Clients in the managed account program have access to the above services as well as investment management on a discretionary basis. That means that the firm invests the money on their behalf and has the authorization to make changes to keep the client’s portfolio in line with their investment policy.

Here is a complete list of services currently offered by Beacon Pointe Advisors:

• Financial planning
• Wealth and retirement planning
• Estate and tax strategy
• Insurance review
• Risk assessment
• Charitable giving
• Education planning
• Tax planning and management
• Life transitions
• Generational wealth transfers and legacies
• Retirement plan consulting
• Workshops and seminars

Beacon Pointe Advisors works with each client to learn about their financial situation to create an individual investment policy based on their goals and risk tolerance and the firm’s models. Typically, the firm will include a mix of stocks (domestic and international), bonds, real estate, private equity, hedge funds and real assets.

When possible, the firm recommends investments with active managers who have undergone a rigorous screening process that includes quantitative and qualitative analysis, portfolio analysis and product evaluation. The firm prefers independent managers who invest alongside their clients.

## Fees Beacon Pointe Advisors charges for its services

Asset management: Clients in the managed account program pay negotiated asset-based fees, typically ranging from 0.50% to 1.15% of assets under supervision. The maximum rate the firm will charge is 1.65% of assets under management. These fees are in addition to any manager or transaction fees that clients may owe custodians.

Consulting services: For consulting services provided on a one-time or project basis, Beacon Pointe Advisors charges either a fixed, project-based fee, with a typical minimum of \$25,000, or an hourly fee that typically runs from \$350 to \$500 an hour. If the consulting services are provided on an ongoing basis, the firm will charge an asset-based fee. The annual retainer fee for discretionary portfolios generally ranges from 0.20% to 0.50%, while the rate ranges from 0.08% to 0.50% for non-discretionary portfolios. Clients with a portfolio worth more than \$500 million typically pay a negotiated fixed fee.

• Minimal conflicts of interest: Beacon Pointe Advisors is fee-only and employee-owned, which minimizes the firm’s potential conflicts of interest. Since the firm only earns money through the fees its clients pay, it doesn’t have financial incentives to recommend certain products or make referrals.
• Customized advice: The firm works with each client to create an individualized investment policy from which it makes asset allocation recommendations. This means that each portfolio reflects its owner’s specific financial situation and risk profile.
• Industry recognition: Together, Beacon Pointe and Beacon Pointe Wealth Advisors have won more than 60 awards in the last 15 years. Recent accolades include appearances on Barron’s list of the top RIA firms in 2019 and Financial Times’ 2019 list of the top retirement advisors. Beacon Pointe Advisors’ CEO and founder, Shannon Eusey, appeared on Worth Magazine’s 2020 list of 50 Women Changing the World.
• No disciplinary disclosures: The firm has a clean disciplinary record (see more below).

• High account minimum: Beacon Pointe Advisors requires a \$1 million minimum account balance to open an account. This may exclude many potential clients, although the firm may waive the minimum. In fact, its current client base includes more individuals than high net worth individuals.
• Expensive strategy: The firm’s preference for active management means that clients may pay higher fees within their portfolio, on top of the fees that they pay to Beacon Pointe Advisors. For comparison, the average total fee in the advisory industry is 1.17%, according to a 2019 study by RIA in the Box. In comparison, clients at Beacon Pointe typically pay up to 1.15% of assets under management (with an absolute maximum of 1.65%), plus any underlying transaction and manager costs.
• Limited geographic footprint: Beacon Pointe Advisors has 20 offices, almost half of which are located in California. While its footprint is growing, clients who want face-to-face service but aren’t located near a Beacon Pointe Advisors office might find it challenging to establish a relationship without convenient access to an office branch.

## Beacon Pointe Advisors disciplinary disclosures

Beacon Pointe Advisors does not have any disciplinary disclosures on its record. Registered investment advisors (RIAs) who face disciplinary action, including criminal charges, regulatory infractions or civil actions, must report those incidents on the Form ADV that they file with the Securities and Exchange Commission (SEC).

## Beacon Pointe Advisors onboarding process

Interested clients can get in touch with the firm by calling the nearest office. The firm provides each office’s contact information on its website.

Once in contact, advisors work with the client to create either a limited-scope or holistic financial plan and an investment policy based on that plan. The firm then recommends custodians to implement the plan, and clients can either implement the strategy on their own or allow Beacon Pointe Advisors to manage their portfolio on their behalf.

Advisors review client accounts quarterly and aim to meet with clients once a year to discuss portfolio performance and any necessary changes to their portfolio. Clients in the managed account program receive monthly reports from their custodian showing their portfolio and quarterly written reports from their Beacon Pointe Advisors. The firm reviews financial plans as needed, on request form the client.

## Is Beacon Pointe Advisors right for you?

Beacon Pointe Advisors may be a good choice for you if you’re located near one of the firm’s 20 offices (or don’t care about face-to-face service), have at least \$1 million to invest and are interested in active management for your portfolio. Women investors, in particular, may be well served by the firm, which has a corporate leadership team that’s 50% women. The Beacon Pointe Women’s Advisory Institute also claims to specialize in many of the financial issues and monumental life events facing women investors.

However, Beacon Pointe Advisors also has a relatively high minimum balance, \$1 million. Another firm may be a better choice if you don’t have the funds, though it’s worth noting that the firm may waive this minimum at its discretion. Additionally, the firm’s preference for active management may mean that you end up paying higher fees than you would if you went with a firm that prefers passive management.

As is the case when choosing any financial product, it’s important to do your research and ask questions of your advisor to make sure you find the best fit for you.

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