34.75% Return since 11/04 VS 1.75% Annual Advisor Fees

[av8r]

I was getting ready to move this account over to Vanguard because of the high advisor fees, but after looking over the account I'm not so sure. The account seems to be well diversified so I don't think the risk is that high, so I'm torn on what to do.

 

[fluffy]

SPY alone returned about 31% since Nov '04. If you mixed in small caps or foreign developed or emerging you could have easily beaten 35%

 

[Alex]

1.75% is highway robbery if you ask me. If you aren't ready to cut the advisor loose yet, you should at least try to renegotiate the fee, or go to another advisor who charges less. The average is around 1%. Are these DFA funds? If they are you can use Cardiff Park for a flat fee that is far less than 1%, depending on assets. If they aren't, you can replicate the funds using almost any family of funds for far less than 1.75%. Good luck!

http://cardiffpark.com/home.aspx

 

[Nords]

I was getting ready to move this account over to Vanguard because of the high advisor fees, but after looking over the account I'm not so sure. The account seems to be well diversified so I don't think the risk is that high, so I'm torn on what to do.

It's easy to pay high fees for high returns. Now you have to decide how you feel about a few tougher questions:

What fee are you willing to pay for years when the returns are low?

Better yet, does the advisor refund their fee in years when the account loses money?

When you're ER'd and withdrawing 4% on $1,000,000, your $40,000 annual withdrawal is also going to have to include the $17,500 for your advisor. Is it worth sending 43% of your withdrawals to your advisor?

 

[eridanus]

SPY alone returned about 31% since Nov '04. If you mixed in small caps or foreign developed or emerging you could have easily beaten 35%

Right. Toss in some EEM, at ~116%+ gain, and 35% is nuttin'.

 

[saluki9]

It's easy to pay high fees for high returns. Now you have to decide how you feel about a few tougher questions:

What fee are you willing to pay for years when the returns are low?

Better yet, does the advisor refund their fee in years when the account loses money?

When you're ER'd and withdrawing 4% on $1,000,000, your $40,000 annual withdrawal is also going to have to include the $17,500 for your advisor. Is it worth sending 43% of your withdrawals to your advisor?

Any advisor that is willing to return fees when returns are bad is not somebody who you should be doing business with.

 

[megacorp-firee]

What fee are you willing to pay for years when the returns are low?

The guy at AG Edwards was trying to get me to sign up for 1.5%... I told him that 1.5% was a little high for him to be the middleman for index funds... he immediately (like 1 nano second) dropped the bid down to .75% ... and said it was negotiatable. I RAN from that one ...

Better yet, does the advisor refund their fee in years when the account loses money?

He did have a decent argument about being able to lose less in down markets... but I am not sure if he could actually do so.

When you're ER'd and withdrawing 4% on $1,000,000, your $40,000 annual withdrawal is also going to have to include the $17,500 for your advisor. Is it worth sending 43% of your withdrawals to your advisor?

Totally agree ... a very eye-opening example Thanks.

 

[av8r]

Thanks for all the input. I will be cutting this guy loose and probably moving into a Vanguard account and doing the fund picking myself using index funds. I've already been doing this in my SEP-IRA.

Yes, these are DFA funds thru Trust Company of America. Their fees are pretty competitive; it's the advisor fees that are outrageous.

 

[saluki9]

Thanks for all the input. I will be cutting this guy loose and probably moving into a Vanguard account and doing the fund picking myself using index funds. I've already been doing this in my SEP-IRA.

Yes, these are DFA funds thru Trust Company of America. Their fees are pretty competitive; it's the advisor fees that are outrageous.

I would find a new cheaper adviser. DFA funds are worth keeping over moving to Vanguard.

There are several good firms that will work on a flat fee.

 

[donheff]

I would find a new cheaper adviser. DFA funds are worth keeping over moving to Vanguard.

There are several good firms that will work on a flat fee.

I am in the process of moving a couple of accounts to Vanguard. We liquidated DW's rollover IRA and invested it in Vanguard funds. With the taxable stuff it is a little more complicated. Some of the funds are pretty good and capital gains are an issue. So we are transferring the funds intact to Vanguard. We will immediately liquidate the biggest losers eating up the remainder of some losses we realized in 2001-2003. I'm still scratching my head about some of the others but by having them at Vanguard I can choose to exchange them for Vanguard funds anytime I choose. At the advisor's firm my only choice would be to by another load fund - ugh. Vanguard can handle a lot - but not all funds. We have one they won't take but it was a loser I want to sell anyway.

 

[Texas Proud]

Any advisor that is willing to return fees when returns are bad is not somebody who you should be doing business with.

Any advisor that is willing to charge 1.75% fee is not sombody who you should be doing business with...

 

[saluki9]

Any advisor that is willing to charge 1.75% fee is not sombody who you should be doing business with...

agreed, but don't throw the baby out with the bathwater.

There is a difference between paying high fees and getting crappy funds and paying high fees and having good funds. Easier to change the latter.

 

[kcowan]

We're up 36% since Dec04 and pay no fees (net of some trading fees). So there is definitely a rising tide happening. Get your advisor to justify his role in your returns when compared to a comparable index. He needs to beat the index by 2% each year just to pay for his fees each year. For me that would mean he would have to making gross returns above 43% (and so be exposing me to more risk).

 

[av8r]

I should clarify and say that the advisor charges 1.25% and the company he contracts with charges .5%. They are called Symmetry Partners. They are intermediary to Trust company of America who runs our DFA funds.

 

[saluki9]

I should clarify and say that the advisor charges 1.25% and the company he contracts with charges .5%. They are called Symmetry Partners. They are intermediary to Trust company of America who runs our DFA funds.

So you're actually paying over 2% when you include all the fees.

 

[Texas Proud]

agreed, but don't throw the baby out with the bathwater.

There is a difference between paying high fees and getting crappy funds and paying high fees and having good funds. Easier to change the latter.

Not easier, you can just take a little more time if you wish..

 

[saluki9]

Not easier, you can just take a little more time if you wish..

I disagree, especially if taxable funds are involved.

If the funds suck you have to first find a new advisor or platform. If you have decent or really good funds (like DFA) you can do an in kind transfer to Schwab or Fidelity (DFA does not let Vanguard custody their funds SHOCKER!) Then you can take your time in finding a new advisor.

 

[Texas Proud]

I disagree, especially if taxable funds are involved.

If the funds suck you have to first find a new advisor or platform. If you have decent or really good funds (like DFA) you can do an in kind transfer to Schwab or Fidelity (DFA does not let Vanguard custody their funds SHOCKER!) Then you can take your time in finding a new advisor.

Sounds like you would do the same thing if funds suck or are good...

Make a decision to leave the high cost advisor..

Find a place to move your money (like kind or not)..

Move them....

Then decide if you even want to waste your time with a financial advisor and find a new one if you do...

If the funds suck, you would want to find better funds/advisor quicker... hence my statement

Now, if the funds are good and it is only your advisor that is ripping you off, then I guess you are right... you don't have to search for good funds...

 

[Nords]

If you have decent or really good funds (like DFA) you can do an in kind transfer to Schwab or Fidelity (DFA does not let Vanguard custody their funds SHOCKER!) Then you can take your time in finding a new advisor.

Let me make sure I understand this.

I thought that DFA only sold their funds through an advisor. Would it be possible to use the advisor to buy an allocation of DFA funds, pay the fees, "fire" the advisor, and transfer the shares in-kind to Fidelity?

 

[saluki9]

Let me make sure I understand this.

I thought that DFA only sold their funds through an advisor. Would it be possible to use the advisor to buy an allocation of DFA funds, pay the fees, "fire" the advisor, and transfer the shares in-kind to Fidelity?

Ummmmm No Comment

 

[lswswein]

Ummmmm No Comment

Interesting...........very interesting!

-h

 

[saluki9]

Interesting...........very interesting!

-h

Let me clarify that what Nords implied is not possible as described

 

[Alex]

Let me clarify that what Nords implied is not possible as described

you really don't need to either. If you are convinced (and I'm not ) that DFA funds are the best for you, you can hire an advisor for as little as $800 per year. There are a few other fees involved, but ultimately for a $1 million portfolio it amounts to very low cost.

 

[Mwsinron]

I figure the fees are one of the few things I can control. So I shoot for the lowest ones. 1.75 is pretty darn steep.

 

[saluki9]

you really don't need to either. If you are convinced (and I'm not ) that DFA funds are the best for you, you can hire an advisor for as little as $800 per year. There are a few other fees involved, but ultimately for a $1 million portfolio it amounts to very low cost.

I am a portfolio manager for a firm that works with DFA. I was trying to save some confusion.

BTW: I have done the research and I am convinced