Fee for Financial Advisor

[leyland]

Hi Folks,

I spoke with a financial advisor recently - thinking about turning all of my assets over to them for management. They would be invested in mutual funds only - fairly low expenses for the funds. Their management fee is about 1.25% of the assets per year. Any thoughts on whether this is a typical fee? Thanks so much.

 

[DblDoc]

Yes it is typical, and it looks like it isn't that expensive until you put it into perspective. The safe withdrawal rate of a portfolio is around 4%/yr adjusted by inflation. 1.25% is 31% of that. How would you feel if the gov't took 31% of your income each year when you were retired?

For how to do it yourself read some of the books recommended here: http://www.early-retirement.org/for...reading-list-with-a-military-twist-46732.html, and here: http://www.bogleheads.org/wiki/Category:Books_and_Authors.

DD

 

[leyland]

Thanks for your reply. I thought it was pretty high but wanted to get some feedback. Is there anyone out there paying this kind of fee and do you think it is worth it? Thanks.

Yes it is typical, and it looks like it isn't that expensive until you put it into perspective. The safe withdrawal rate of a portfolio is around 4%/yr adjusted by inflation. 1.25% is 31% of that. How would you feel if the gov't took 31% of your income each year when you were retired?

DD

 

[Purron]

Hi Folks,

I spoke with a financial advisor recently - thinking about turning all of my assets over to them for management. They would be invested in mutual funds only - fairly low expenses for the funds. Their management fee is about 1.25% of the assets per year. Any thoughts on whether this is a typical fee? Thanks so much.

My husband and I talked to a financial advisor about 7 years ago. Similiar deal. Decided against it. No regrets.

 

[Rich_by_the_Bay]

I'll add my name to the list of us who dabbled with using advisors, then decided against it after educating ourselves. As DD says, their fee can easily eat up 25% of your post-retirement income, since you are really living off the marginal earnings of your investment. Same caution applies when choosing a mutual fund company regarding fund expenses.

If you feel you need to use an advisor until you are more confident, at least confine him or her to equities and keep your fixed income to yourself (total bond funds, TIP fund, whatever).

 

[easysurfer]

When it comes to my money, I like to manage it myself. That way, if things work out I give myself the credit. If things don't work out I know it was me calling the shots

 

[GregLee]

If your prospective financial advisor is going to recommend you invest in a mutual fund, well, that is probably good advice. But why pay for it? Here is my advice, for free: invest in a mutual fund. Which? Just ask us. I'm sure many here have their favorites, but I doubt the choice is crucial. I very much doubt the choice is worth a financial adviser's fee.

 

[jIMOh]

Depending on the amount of money invested, 1.25% sounds high. If you have more than 500k, that is WAY too high. If less than 500k, shoot for no more than 1% and probably close to .5% or .75%.

 

[walkinwood]

If you're not comfortable with your own plan, you could also look around for an advisor who will create a financial plan for you or review yours for a one time fee.

As others have said, it takes a little education, but is definitely do-able. I am our family's financial planner.

 

[FinanceDude]

Hi Folks,

I spoke with a financial advisor recently - thinking about turning all of my assets over to them for management. They would be invested in mutual funds only - fairly low expenses for the funds. Their management fee is about 1.25% of the assets per year. Any thoughts on whether this is a typical fee? Thanks so much.

That's called a wrap account, and the 1.25% is a LOT of money to spend for one of those, since you also have to pay the fund expense, so it has to be added on. Hope it's not The Mutual Fund Store.......

 

[FinanceDude]

If your prospective financial advisor is going to recommend you invest in a mutual fund, well, that is probably good advice. But why pay for it?

SO, you want the FA to tell him which funds to buy, and not get paid for that advice?

 

[GregLee]

SO, you want the FA to tell him which funds to buy, and not get paid for that advice?

No, I want us to tell him which funds to buy, for no charge. Or, say, just you. Can't you tell him which?

 

[73ss454]

Leyland, I doubt it's just 1.25%. That may be their annual fee but once they put you into something like Oppenheimer funds you'll pay 5.75 % just for the pleasure of putting the money into the fund. Then there are other yearly fees that the fund company charges.

Leyland, put your money with Fidelity or Vanguard and call it a day.

If you need help ask your questions here and you'll get plenty, all at no charge.

 

[easysurfer]

Leyland,

Back in the day, having a financial advisor try to manage my money led me to discover the concept of indexing when investing in funds...haven't looked back since.

I think if you wish to invest in funds, you need to determine if you wish to go the passive or active route. If passive, than give indexing a though. If active, then is it better to hire someone to try and beat the indexes or do you have to time/money to try that on your own.

One thing I'd sure would not do is hire someone to invest in low cost index funds while you can easily do that on your own.

 

[Emeritus]

SO, you want the FA to tell him which funds to buy, and not get paid for that advice?

He should be paid exactly what it is worth. Lawyers also work on contingent fees.
30% of the gains above an appropriate index is a fair fee and he returns 30% of the losses below the index.

Since any idiot can match the index, certainly you would not suggest pay without performance ?
Investment Banking

Banks Shared Clients’ Profits, but Not Losses


http://dealbook.blogs.nytimes.com/2010/10/18/banks-shared-clients-profits-but-not-losses/

 

[leyland]

A bit more information. We are currently using Fidelity and Vanguard. Our asset allocation is probably not the best - highly slanted towards large US company stocks and also too much is cash. I obviously need to pay more attention or get someone to do it for me. Vanguard is going to work up a new asset allocation for me (for no cost).

Leyland, I doubt it's just 1.25%. That may be their annual fee but once they put you into something like Oppenheimer funds you'll pay 5.75 % just for the pleasure of putting the money into the fund. Then there are other yearly fees that the fund company charges.

Leyland, put your money with Fidelity or Vanguard and call it a day.

If you need help ask your questions here and you'll get plenty, all at no charge.

 

[brewer12345]

Put your money into a low cost balanced fund and go play.

That will be 1.25% in perpetuity.

 

[leyland]

It is about $3M. For no particular reason I was expecting something around 0.5% - was surprised by 1.25%.


]

Depending on the amount of money invested, 1.25% sounds high. If you have more than 500k, that is WAY too high. If less than 500k, shoot for no more than 1% and probably close to .5% or .75%.

 

[Sarah in SC]

Pro money managers work for around 1%, and that is buying equities in Sep Managed accounts. I think 1.25% is a lot to pay for someone to pick mutual funds.
I'd pass. But you might want to spend a bit of money on a fee-only person to take a look at your allocation if you were interested in a whole-picture checkup.
And, well, it's hard to quibble with Brewer's advice.

 

[jIMOh]

Leyland, I doubt it's just 1.25%. That may be their annual fee but once they put you into something like Oppenheimer funds you'll pay 5.75 % just for the pleasure of putting the money into the fund. Then there are other yearly fees that the fund company charges.

Leyland, put your money with Fidelity or Vanguard and call it a day.

If you need help ask your questions here and you'll get plenty, all at no charge.

This comment is probably wrong.

If 1.25% is the ER of the funds, maybe
but if you paid for a wrap fee on the account, the financial plan is probably free, and the loads on the fund are probably waived (per industry standard).

A planner is paid one of three ways

1) for a fee only plan
2) wrap fee on account (usually planning is free and ongoing with this arrangement)
3) loads on funds (this would have a very low level plan done to make sure investments were suitable, but it would not be the same scope of plan provided in #1)

 

[jIMOh]

It is about $3M. For no particular reason I was expecting something around 0.5% - was surprised by 1.25%.

If you are going the advisor route, interview another one, as the fees here are higher than industry average. In general once over 500k of assets, .5% would be most I would expect.

If you do not have the time to manage the investments, you should expect to pay someone for their time and expertise.

If you have the time, the people here can really help you do it yourself- but it does take some time to learn the basics and the details which follow.

 

[73ss454]

Maybe so but if it's 1.25% that's way too much.

 

[73ss454]

A bit more information. We are currently using Fidelity and Vanguard. Our asset allocation is probably not the best - highly slanted towards large US company stocks and also too much is cash. I obviously need to pay more attention or get someone to do it for me. Vanguard is going to work up a new asset allocation for me (for no cost).

Good for you, case closed, you're done! As Brewer said, go play.

 

[FinanceDude]

No, I want us to tell him which funds to buy, for no charge. Or, say, just you. Can't you tell him which?

How would any of us make a good recommendation now knowing his situation?

 

[FinanceDude]

Leyland, I doubt it's just 1.25%. That may be their annual fee but once they put you into something like Oppenheimer funds you'll pay 5.75 % just for the pleasure of putting the money into the fund. Then there are other yearly fees that the fund company charges.

That's not how it works.............