First visit to FN planner- fee shock

[daylatedollarshort]

If you have pension questions, you can hire an actuary from a pension firm on an hourly basis. If you need tax help you can hire a CPA or EA on an hourly basis. For trust and estate help you can hire an attorney by the hour. You can read a lot of investment books, hire a fee only financial planner or possibly get a free retirement plan from places like Vanguard or Fidelity for help. They'd all cost a lot less than 281K, and you'd be getting expert advice in each specific area for way less money.

The problem with the percent of assets people doesn't end with their fee. They could also put your assets into funds with loads or other fees. They could churn your account to generate commissions.

After load fees, sales fees, annual investment fees, taxes and inflation - what real return rate will be left for you?

[zedd]

On the aggregate the financial services industry is to the individual investor/saver what Bonnie and Clyde were to the banks.

Of course there are exceptions. Your challenge is figuring out how to vet candidates. IMHO one of the good guys is Bill Schultheis -> The Coffeehouse Investor. His office is across the lake from you.

Full disclosure: Have never met the man but do enjoy his philosophy on life and investing.

Zedd

[FinanceDude]

Quote:

Originally Posted by daylatedollarshort They could churn your account to generate commissions.

How would you churn an account to generate commissions in a fee account?

[brewer12345]

Quote:

Originally Posted by FinanceDude How would you churn an account to generate commissions in a fee account?

No doubt the likes of Merrill Lynch have managed to do so at some point.

[FinanceDude]

Quote:

Originally Posted by brewer12345 No doubt the likes of Merrill Lynch have managed to do so at some point.

Good Old Merrill Grinch.........

[daylatedollarshort]

Quote:

Originally Posted by FinanceDude How would you churn an account to generate commissions in a fee account?

It depends on what the advisers do with their money but most would not work in a vacuum. They would have a parent company, affiliate or friends that could profit from sales and transaction fees

We saw some guy who worked at one of the full service type big investment companies who wanted an annual fee to "find the right investment manager" to actually manage our money, who would also charge an annual fee. Of course the investment manager is going to do business with the investment company where he gets his referrals from and not Sharebuilder or eTrade. And of course the first guy also had an accountant he wanted to refer us to who could help us save on taxes. And of course the accountant would cost $5K a year to help us "save" money on our taxes, because you have to pay for the best, right?

Gullible investors just get treated like cash cows with these kind of people.

[rodi]

At that fee they shouldn't call themselves a Financial Adviser... they deserve the much fancier name of "Wealth Manager".

(I have a coworker who swears by her "Wealth Manager"... I have a hard time keeping a straight face when she says it.)

[daylatedollarshort]

Quote:

Originally Posted by rodi At that fee they shouldn't call themselves a Financial Adviser... they deserve the much fancier name of "Wealth Manager". (I have a coworker who swears by her "Wealth Manager"... I have a hard time keeping a straight face when she says it.)

They actually are wealth managers - for themselves and their friends. It is the clients who often lose out.

[Mulligan]

Quote:

Originally Posted by daylatedollarshort They actually are wealth managers - for themselves and their friends. It is the clients who often lose out.

Yes, that 1.25% seems outrageous. Then I assume that is in addition to the expenses collected from the mutual funds, also. Next thing you know, you are out almost 2% if he doesn't have you in low cost index funds. You would think anyone extracting that much money from people for any length of time would be retired themselves.

[JoeWras]

Having a few friends and family involved in this business has opened my eyes. I even considered getting into it, but I don't think I could live with myself.

One BIL is a typical brokerage: yes, there is churn. But he swears he does it to achieve the best return. I believe him, but he does make money when chasing the best performing asset.

The other BIL worked through commissions of all sorts of various investments. Let's say he wasn't steering them to Vanguard.

2 friends are fee only. Their fees slide from .5% (hi NW) to 1.5% (medium NW). Great guys. Honest, but all they do is run the numbers, rebalance and print nice reports 4x per year. And they do the work for tax efficiency, etc. I think for many clients, they need the help. These clients don't want to deal with moving the money, worrying about tax efficiency, etc. But the techniques my friends use are all discussed here. I mean, for a $3M portfolio, that's $15k per year. Don't you want to put in the time to "make" or "save" that money?

Last friend works for company. After some wine, he admitted severe guilt about annuity commissions. They are big, big, big. Opened my eyes and if I ever get an annuity, I'm going to proceed with huge caution.

[FinanceDude]

Quote:

Originally Posted by daylatedollarshort It depends on what the advisers do with their money but most would not work in a vacuum. They would have a parent company, affiliate or friends that could profit from sales and transaction fees

Uh, "friends" can not profit from sales and transaction fees in a fee account...........

[supernova72]

Quote:

Originally Posted by Mulligan Yes, that 1.25% seems outrageous. Then I assume that is in addition to the expenses collected from the mutual funds, also. Next thing you know, you are out almost 2% if he doesn't have you in low cost index funds. You would think anyone extracting that much money from people for any length of time would be retired themselves.

One more follow-up. Apparently if I had $1M + to invest then the rate is lower than 1.25% but based on feedback from this forum and my gut I just can't justify that kind of fee.

I realize my statement of having an option to use the same FN advisor that my dad did is being a bit of a "homer" but for $125 a year maintenance fee I like the thought of it given he is smart guy. I know if I make changes he'll get commissions yes. And, I see folks on this post are not real high on Merrill Lynch which I understand is not a "discount" broker.

Thanks for all the help. Cheers.

[samclem]

Quote:

Originally Posted by supernova72 I realize my statement of having an option to use the same FN advisor that my dad did is being a bit of a "homer" but for $125 a year maintenance fee I like the thought of it given he is smart guy. I know if I make changes he'll get commissions yes. And, I see folks on this post are not real high on Merrill Lynch which I understand is not a "discount" broker.

Best wishes. At the very least, I suggest you look very closely at the embedded fees and costs to you of the investments he recommends (they may not be easy to spot). As you say, I'm sure "he is a smart guy." That's good and it's bad.

Let us know how it goes.

[urn2bfree]

Quote:

Originally Posted by supernova72 One more follow-up. Apparently if I had $1M + to invest then the rate is lower than 1.25% but based on feedback from this forum and my gut I just can't justify that kind of fee. I realize my statement of having an option to use the same FN advisor that my dad did is being a bit of a "homer" but for $125 a year maintenance fee I like the thought of it given he is smart guy. I know if I make changes he'll get commissions yes. And, I see folks on this post are not real high on Merrill Lynch which I understand is not a "discount" broker. Thanks for all the help. Cheers.

Ah, my favorite part of the scam that is charging clients by the size of the account. See they tell you that as they make you more and more money, it will cost you less, because after all the percentage they charge goes down... Like most of what these con artists say, it is not true. Anyone charging you a percentage of your assets is getting more of your money the more money you have. "but, gee this aligns their incentives with yours because if your portfolio grows they profit with you and if it shrinks they suffer with you." Hey here is a crazy idea....they should be pointing you to low cost index funds or they are costing you unnecessary costs. The effort to balance $1million into funds vs $2M into funds is not $12,500 worth of effort on the advisor's part. In fact it costs such an advisor exactly ZERO more effort to allocate every extra million. It only is worthy of more money IF he or she is hunting out new investments that are just right for that new money. Such an advisor is claiming active management knowledge that is rarely possessed in reality....so they should not be doing that...,back to passive strategy it is just about a certain percent in this index, another percent in that index fund. Go with an advisor the way you would hire any professional who will charge by the hour of effort they expend. Not one who wants more and more of your money as it grows as they do nothing more to earn it.