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Old 04-28-2010, 11:13 AM   #21
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As far as Fido goes, the results suggests that one should avoid them. Reports here and on bogleheads are that they load you up with 20+ different funds that are not low-expense-ratio. The expenses run above 1% in the end. I could be wrong, but they are not pushing folks into their Spartan index funds.
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Old 04-28-2010, 11:13 AM   #22
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But imagine you could do it yourself and pay 0% and get investment returns of 7%. You have just paid 1% in the first instance for something of no value to you.

Of course he will say that he can do better for you but the evidence to support that in the long term for any advisor is well not compelling. Read The Four Pillars of Investing by William Bernstein.

Again I do think that getting a financial plan from Vanguard or even paying a one time fee for one may be a good thing.
I understand exactly where the op is comming from since I'm doing both, paying a fee and investing on my own. The key point here is what if you don't feel you can do better and after they take your 1% you're still better off. It''s like asking on an automotive forum, is it cheaper to do my own tune up or pay someone to do it? Since most of the auto forum know how to do there own tune ups they would most likely say, "well of course it's cheaper in the long run".

I truly hope I didn't just open up a can of worms, but I can see both sides since I've been there and still am.
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Old 04-28-2010, 11:16 AM   #23
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Again I do think that getting a financial plan from Vanguard or even paying a one time fee for one may be a good thing.
I agree with this. I mean, I know we are very disproportionately a hands-on, do-it-yourself, "pay nothing for advice" crowd but not everyone is inclined to manage their own money or learn how to manage their own portfolio.

And even if if someone is an investing "neophyte" and wants to learn to manage their own money, not everyone is a "self-starter" when it comes to education who can learn by reading and studying on their own. For these people I see nothing wrong with a one-time (or even two- or three-time if necessary) consultation with a competent fee-only investment advisor who has nothing to sell. Hopefully that consultation would help provide the background needed to help them learn how to invest their money, how to evaluate their goals and risk tolerance and how to build and maintain an appropriate asset allocation.

The ongoing "investment advisors" that take (say) a 1% cut each and every year are in many cases "parasites" which continue to take their pound of flesh even after your need for their advice is past. Heck, you're better off just determining an appropriate AA and sticking it all in an appropriate lifecycle or "target" fund if you have no desire to juggle your own investments.
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Old 04-28-2010, 11:17 AM   #24
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I understand the needing help and not wanting to go totally alone. But paying a percentage fee each year until the end of time does not seem good even if you need help. For example, on the Vanguard thing you can get the free plan once a year. I would say come up with what you can on your own (or not), go get the free plan (or pay $250 if you have $100k to $500k there) and implement those recommendations. Go back a year later and get it looked at again and implement those recommendations. Rinse and repeat.

Gives the benefit of having someone help you financially but at no substantial cost.

Link to what Vanguard offers in a financial plan:

https://personal.vanguard.com/us/ins...vfp-transcript
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Old 04-28-2010, 11:30 AM   #25
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I imagine that Fidelity offers similar services. Any Fido clients out there who can confirm this? Fido also has the advantage of local offices, and I imagine the ability to meet face-to face with a real person would be a big advantage to a newbie investor.
Oh, Fidelity will be delighted to hold an investor's hand:
Fidelity Investments: Products: Professional Management

But many do for themselves:
Fidelity Investments
http://personal.fidelity.com/account...df?refpr=cmr15

They used to break their commissions down by assets and number of trades per year but it looks like they have a fairly flat fee structure now. At some level of assets they'll probably assign a dedicated rep (as dedicated as their turnover enables them to be, anyway) which means that a team of 3-4 people oversees a number of accounts. But again that hasn't been an important need.

We've been with Fidelity since the mid-1980s and when our kid turns 18 (in a few months) we'll probably consolidate her assets with them under the family name. Aside from the "relationship investing", another reason is that she'll possibly have an easier time dealing with them from overseas should she need to do that. But plenty of military are able to work with Vanguard as well while stationed overseas.

Fidelity has been known to shut down investor centers. We haven't had one here since the 1990s and they rarely come out for a visit. But we've been fine with e-mailing/phoning our questions to the Seattle center.
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Old 04-28-2010, 11:43 AM   #26
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I The key point here is what if you don't feel you can do better and after they take your 1% you're still better off.
Many folks believe that there is no way to increase yield to compensate for fees without incurring additional risk.

For example, from this thread:
Eggs in one meta-basket? Ameriprise all bad?

Quote:
At Ameriprise, the financial advisor would have to consistently beat the index by 2-3% to get the same result (which means taking more risk).
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Old 04-28-2010, 01:10 PM   #27
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To OP,

Crazy? no.

Buy there's lots of money to save and lot to learn from doing it on your own.

I do see both sides too. It's kind of like buildiing your own computer. On one hand, who in their right mind would want to do that? Why not just buy one? I've done both. From building one, I've learned that now when the tech pros say stuff like,
"the problem must be the motherboard..." I know if they are giving me the business or not.
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Old 04-28-2010, 02:19 PM   #28
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If I were to ask members on this forum, what is more difficult, doing your own investing or rebuilding an engine? Building a house or managing your own money? I can rebuild an engine but can't seem to grasp the concept of investing to the point that I can make more then Private Investment Council can (fee based investing). My father could build a house yet failed at managing his own money. Yes to some rebuilding an engine or building a 4000 sq. ft. house comes easy, while to others either feel it's beyond either there capabilities or find it's something they just don't enjoy. Others may say, why would you want to other then to save maybe $100,000.00 (as in my case more) during there lifetime, when I can pay someone to do it.

I'm not saying either way is the right way, I'm just trying to give you another perspective.


I'm sure in time I will learn and think to myself, nobody can take care of my money better then I can, so I would never pay a fee to someone else.
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Old 04-28-2010, 03:07 PM   #29
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My Dream,

Your point is well taken in that there is no one size fits all when if we need to have a paid advisor or not. We all have areas that we'd prefer do on our own or pay for, but that varies with each individual.

Another simple example I can think of is valet parking. I have this friend who usually opts for valet parking, whereas for me, as long is there is a place to park nearby, I'd rather find a spot myself and save the money. In her mind, the valet parking is well worth the expense. For her, it's so nice to just drop the car off, then have someone pick it up and for her to give a tip. For me, I'd rather do the legwork (litterally and figuratively) and save the money.

When it comes to finances, for me, I tend to be a do it yourselfer (was not always that way). What I've discovered is that having an advisor seems just like an extra layer I'd have to go through. For example, I don't need an advisor to tell me my asset allocation, when I can do that myself.

I do understand that for some, they'd prefer to have someone do that for them and say the expense was well worth it. For me, it's in other areas (getting my car fixed, hiring a good plumber ), but not my finances.
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Old 04-28-2010, 03:25 PM   #30
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There are I think two issues here that are different:

1. Should you do it yourself or get professional investing help?

2. If the latter, what should you pay for it?

I think the answer to No. 1 is very personal and depends on the individual. A lot of people can do it themselves, others can't and some could if they wanted to but they don't want to. I'm sort of on the fence about it personally. I think I will at some point get some professional advice on overall direction which I would then implement.

The second issue is a different issue. Like anything else costs to do this vary a lot. I might very well get a Vanguard financial plan at no or low cost but I would never pay a percentage fee to someone on an ongoing annual basis.
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Old 04-28-2010, 03:59 PM   #31
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The second issue is a different issue. Like anything else costs to do this vary a lot. I might very well get a Vanguard financial plan at no or low cost but I would never pay a percentage fee to someone on an ongoing annual basis.
I'm not familiar with Vanguard, maybe because I'm not finance savy or since they're not as popular or evident in Canada. PIC will constantly relocate funds depending on market conditions for no extra charge, will Vanguard to this at no extra charge, if so then it's something I should consider. PIC only invests in stocks, not mutual funds so there are no MIR fees. Is Vanguard the same? I'm trying to educate myself therefore am curious.

As for "valet parking", I can appreciate the analogy but something that simple, I'm to frugal to pay someone to do it for me. That's not something most people need to educate themselves on. That to me is a matter of perference, convenience, and budgeting.
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Old 04-28-2010, 04:09 PM   #32
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I'm in a zip code and age demographic where they keep offering me free dinners at nice restaurants if I sit through financial planning presentations so I'm eating well, occasionally...

I did sit down with one of them a couple of times and had them (for free) assess my portfolio and give me a clue as to what they had in mind, which was a mix of mutual funds. As far as I could tell it would yield less than I could get on my own. I declined. They wanted a bit more than 1% per year - and leave the worry to them! I like messing with my investments, it's fun for me. It's not worry. They didn't seem to grasp that.

You could make them do something of the sort and see what they come up with and then decide not to have them "help" you. I kind of prefer the idea, for you, of a fee-only planner on an hourly basis. This is only if you are really uncomfortable doing something yourself.

In any case I would NOT use a big bank for this. I have experienced Merrill Lynch's idea of wealth management, and Bank of America's, and they haven't given me any value. But they do charge fees...
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Old 04-28-2010, 04:17 PM   #33
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I understand exactly where the op is comming from since I'm doing both, paying a fee and investing on my own. The key point here is what if you don't feel you can do better and after they take your 1% you're still better off. It''s like asking on an automotive forum, is it cheaper to do my own tune up or pay someone to do it? Since most of the auto forum know how to do there own tune ups they would most likely say, "well of course it's cheaper in the long run".

I truly hope I didn't just open up a can of worms, but I can see both sides since I've been there and still am.
I think that is a good analogy and good perspective.
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Old 04-28-2010, 05:14 PM   #34
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If I were to ask members on this forum, what is more difficult, doing your own investing or rebuilding an engine? Building a house or managing your own money? I can rebuild an engine but can't seem to grasp the concept of investing to the point that I can make more then Private Investment Council can (fee based investing). My father could build a house yet failed at managing his own money. Yes to some rebuilding an engine or building a 4000 sq. ft. house comes easy, while to others either feel it's beyond either there capabilities or find it's something they just don't enjoy. Others may say, why would you want to other then to save maybe $100,000.00 (as in my case more) during there lifetime, when I can pay someone to do it.

I'm not saying either way is the right way, I'm just trying to give you another perspective.


I'm sure in time I will learn and think to myself, nobody can take care of my money better then I can, so I would never pay a fee to someone else.

That is an interesting point and worth exploring a bit more. The issue for those of us advocating getting rid the middle man has as much do to with the fees they charge for the services they provide. You are right I'd never rebuild an engine and having my watched my dad build houses, airplanes and such I know I can't do stuff like that. It is clear that different people have different skills, and a lot of us on the forum have high money management skills and look at these problems as being relatively easy, they aren't for many people.

Since you can rebuild engines, I assume you must be a car guy.
Imagine if there was a service call Auto Advisers (AA). In return for 1% annual fee of the purchase price of the car (so $300 for 30K car) you can go to the the Auto Advisers say on an annual basis and they will tell you what needs to be done to the car, (much like Click & Clack the car guys on National Public Radio),. They don't actually fix the car, but they tell you need a brake job go to Bob's Brakes, or sorry guy, but your transmission is almost gone, Tom's Transmission is tops.

You would say $300 is a rip off , fixing your car isn't that hard, but even if you can't fix it, just find a honest mechanic and take your car to them. I on the other hand might consider using them if they had a good reputation, because the obvious question if you don't know much about cars how do you know if your mechanic is any good?

There are a fair number of similarities between a service like Auto Adviser and a financial adviser the most important is the fee structure. Imagine 5 years later you buy a new car for $30,000 you go back to the AA and give them your $300 and tell them you no longer need the service for the old car. The say sorry the fees is 1% of the total lifetime car purchase so you owe us $600, 5 years later you buy a $40,000 car. The guys at AA say congratulations you reached the 100K car purchase level so we are offering you a 10% discount now you only owe us $900/year. The reality is they are providing the same level of service but getting 3x the revenue.

This strikes me as being expensive so I decide to find an outside opinion I google and find an automobile forum. I post my experiences with AA on the automobile forum. After the forum regulars (including car buffs and mechanics) get over the craziness of somebody paying $900 a year to find a mechanic, and I getting lots of offers that they'll do AA job for 1/2 price. I find some important facts such as Tom's Transmission is one of the biggest rip offs in the city, odds are good I didn't need an expensive transmission, that AA was get a $200 kick back every time they sent a customer. I get angry and vow to discourage people from every using AA.

The reality is that is not much more work to manage a $1 million portfolio, than a $100K yet financial adviser often get nearly ten times the money. All of the forum regular understand this reality, and so we have the same reaction to people defending their 1% of the assets financial advisers, as automobile guys would have to me defending the nice people at Auto Advisers who have helped me with my car troubles for more than a decade.
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Old 04-28-2010, 05:32 PM   #35
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Well stated Clifp. More detailed that my valet parking analogy.

One more point I'd like to add. The advisor shoots of surpass the 1% fee they charge. But in a bear market, if they don't, they won't say, "Well, it was a bad year, we won't charge you." More likely, they'd say, "there are no guarantees, that's the nature of the market, some good years, some bad.." So, on top of paying the fee, your portfolio also goes down in the declining market.

I'd rather lose money on my own in a bear market then feel like I'm paying someone to help me lose money.
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Old 04-28-2010, 05:39 PM   #36
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I think that a key point is that while one may need more advice initially to set up an asset allocation and over all strategy, continuing to pay $10,000 a year on a million dollar investment is unnecessary. The financial wizards would like you to believe that it is necessary to be constantly on your toes jumping in and out of investments to responsibly invest. To me, that is just churning. +1 on the Vanguard suggestion.
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Old 04-28-2010, 06:33 PM   #37
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I'm not familiar with Vanguard, maybe because I'm not finance savy or since they're not as popular or evident in Canada. PIC will constantly relocate funds depending on market conditions for no extra charge, will Vanguard to this at no extra charge, if so then it's something I should consider. PIC only invests in stocks, not mutual funds so there are no MIR fees. Is Vanguard the same? I'm trying to educate myself therefore am curious.
I would guess that most folks here would say that to "constantly relocate funds depending on market conditions" is a good way to perform poorly. There is absolutely no need to do that. Even if they tell you there is a need to do that, there is no need to do that.

Vanguard is not the same. Thank goodness!
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Old 04-28-2010, 06:54 PM   #38
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For the kind of money you are talking about Vanguard will do a complete financial plan for you with an individually assigned adviser, and help you implement the plan (average in over a period of time). You can also get complementary annual "tune-ups".
I think this may be what I do ... although, I am not sure I should be taking financial suggestions from someone with the tag name "IndependentlyPoor" .

I did meet with a free Fidelity advisor once and honestly I was not all that impressed. The advisor at Chase was much more impressive. Although, after reading these posts ... I am probably not going to go that route.

If I wanted to find a one time fee based advisor to get me started, I honestly do not know how to go about finding a good one. If anyone has suggestions, please let me know. I live in Dallas by the way, so there has to be some good ones since it is a major city - I just don't know how to go about finding one.

Otherwise, I think I will try the Vanguard free advisor route. I assume the Vanguard advisor will want to set me up with as many Vangaurd funds as possible (although that may not be a bad thing since they are no load).

Thanks again everyone for the advise ... lots of great points. This is exactly what I was looking for.
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Old 04-28-2010, 06:54 PM   #39
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I would guess that most folks here would say that to "constantly relocate funds depending on market conditions" is a good way to perform poorly. There is absolutely no need to do that. Even if they tell you there is a need to do that, there is no need to do that.

Vanguard is not the same. Thank goodness!
I reviewed the funds with the advisor approximately 6 months afterwards and if I would have stayed then I would be 4.6% lower then I am now. He also had some money in a money market account and purchased when the market was lower and rode it on the way up. I wouldn't have thought of that.

I must be missing something since it seemed to have worked yet you're saying it's a good way to preform poorly. I don't understand, maybe that's why I'm willing to pay a fee.
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Old 04-28-2010, 07:26 PM   #40
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I think this may be what I do ... although, I am not sure I should be taking financial suggestions from someone with the tag name "IndependentlyPoor" .

I did meet with a free Fidelity advisor once and honestly I was not all that impressed. The advisor at Chase was much more impressive. Although, after reading these posts ... I am probably not going to go that route.

If I wanted to find a one time fee based advisor to get me started, I honestly do not know how to go about finding a good one. If anyone has suggestions, please let me know. I live in Dallas by the way, so there has to be some good ones since it is a major city - I just don't know how to go about finding one.

Otherwise, I think I will try the Vanguard free advisor route. I assume the Vanguard advisor will want to set me up with as many Vangaurd funds as possible (although that may not be a bad thing since they are no load).

Thanks again everyone for the advise ... lots of great points. This is exactly what I was looking for.

Link to fee only planners if you choose this route:

Home Page - NAPFA - The National Association of Personal Financial Advisors

You should be able to narrow down to some in your area.
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