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Old 04-30-2010, 07:03 AM   #61
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Thanks! - I need some ammo like this to persuade DW that Morgan Stanley isn't the best route. I found it interesting that the person in the thread is questioning loads as the source of "discretionary fees for the quarter". I asked our Morgan Stanley guy and he said the only fees were the 1% of assets fee - with no fees for trades.

I'm setting up an account through Vanguard that I'll use to compare results to Morgan Stanley's results in our IRA's.
Wow, talk about some drama queens in that thread!

You're MS rep is correct. you can't charge a fee AND charge commissions (loads). Many large brokerage firms use load funds with the fees waived.
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Old 04-30-2010, 11:40 AM   #62
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If my ethics were lower, I think I could be much wealthier.
Getting back to the OP and ChaseBank. let's say he invests the $1,000,000 at 85bp, or $8500. Forget about the advisor for a minute, what does the BANK make? 65% of that $8500 or $5525 of that fee that year and every year. So the rep gets W-2 income of $2975 that he gets to pay taxes on. A bank rep doesn't make a 90% payout.............

I realize noone here would pay a rep even $2975 to manage their $1 million portfolio, but based on the MS post on Bogleheads, it shows most folks don't know how reps are compensated. I doubt that bank rep is driving a Ferrari and stealing $50 billion like Bernie Madoff did.........
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Old 04-30-2010, 12:16 PM   #63
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I suspect I know the response I am going to get, but need some advice. I just met with a Financial Advisor at Chase who would charge fees to advise and actively manage my portfolio with the following rates:
first $250k 1.6% fee
next $250k 1.35% fee
next $500k 1.1% fee
over $1M .85% fee
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Originally Posted by FinanceDude View Post
Getting back to the OP and ChaseBank. let's say he invests the $1,000,000 at 85bp, or $8500. Forget about the advisor for a minute, what does the BANK make? 65% of that $8500 or $5525 of that fee that year and every year. So the rep gets W-2 income of $2975 that he gets to pay taxes on. A bank rep doesn't make a 90% payout.............

I realize noone here would pay a rep even $2975 to manage their $1 million portfolio, but based on the MS post on Bogleheads, it shows most folks don't know how reps are compensated. I doubt that bank rep is driving a Ferrari and stealing $50 billion like Bernie Madoff did.........
Methinks you miscalculated a bit.

1.60% of $250K = $4,000
1.35% of $250K = $3,375
1.10% of $500K = $5,500

Total $12,875 or about 50% more than $8500.
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Old 04-30-2010, 12:45 PM   #64
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I think we of the forum tend to forget that there is a large swath of the populace that is positively phobic about money and investments. They view it as mysterious and/or scary and therefore best left to experts (the way I feel about plumbing and electric wiring). They will never feel comfy managing their money and most won't dream of it.

I think most of these people either get fleeced, leave a lot of money on the table, or blow themselves up, which is a shame. I toy with the idea of a financial planning business when I ESR, but I am not sure I want to market against the flash b@stards and liars. What would be a reasonable flat annual fee? A thousand bucks a year regardless of portfolio size sound reasonable?
From the POV of the client, yes. From your POV no.
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Old 04-30-2010, 01:18 PM   #65
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Hmmm, churning. Did she give permission to make the trades? If so, she should rescind permission now. I do not know how to bring a case for churning.
She said that sometimes he [Morgan Stanley FA] calls and she gives him permission to "move things around" but she doesn't think she gives permission as often as it seems like it happens.
Watch out for this! Red flag!

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Old 04-30-2010, 01:34 PM   #66
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I think we of the forum tend to forget that there is a large swath of the populace that is positively phobic about money and investments. They view it as mysterious and/or scary and therefore best left to experts (the way I feel about plumbing and electric wiring). They will never feel comfy managing their money and most won't dream of it.

I think most of these people either get fleeced, leave a lot of money on the table, or blow themselves up, which is a shame. I toy with the idea of a financial planning business when I ESR, but I am not sure I want to market against the flash b@stards and liars. What would be a reasonable flat annual fee? A thousand bucks a year regardless of portfolio size sound reasonable?
What is so sad about this is that there are so many reasonably good "one fund" solutions out there with fairly low ERs. Balanced, target retirement, or whatever. You just put you money in and not worry about asset allocation or anything.

But I guess it's not that easy for the nervous novice to find these solutions and to know that they are a "good deal" for their circumstance.

To me the main issue with FAs seems to be the cost. The conventional percentages paid seem way out of proportion to the service rendered. If the conventional % fees (at least for >$1M accounts) were much lower, it wouldn't be such an issue.

Um - that is if the issue of fiduciary responsibility is also addressed. And the tendency to put clients in funds with high ERs due to conflict of interest. And the temptation to "churn" accounts.

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Old 04-30-2010, 02:17 PM   #67
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Methinks you miscalculated a bit.

1.60% of $250K = $4,000
1.35% of $250K = $3,375
1.10% of $500K = $5,500

Total $12,875 or about 50% more than $8500.
Uh no......I am familiar with how Chase Bank charges clients...........

It should have been posted as:

$0 - $249,999 = 1.60%

$250,000 - $499,999 = 1.35%

$500,00- $999,999 = 1.10%

$1 million = .85%

This is how fees are charged, it is not divided out into pieces of a pie like you stated. Perhaps the OP was confused on the fee structure........

No comment on how much the rep makes versus the bank? Interesting..........
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Old 04-30-2010, 02:22 PM   #68
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Watch out for this! Red flag!

Audrey
We don't know the nature of the case so it is difficult to call this churning. There are two types of accounts, discretionary and non-discretionary. Assuming that churning is going on without material facts is just speculating.........

It is not hard to get on the FINRA website and download a complaint form and fill it out and submit it...........
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Old 04-30-2010, 02:25 PM   #69
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Um - that is if the issue of fiduciary responsibility is also addressed. And the tendency to put clients in funds with high ERs due to conflict of interest. And the temptation to "churn" accounts. Audrey
A lot of clients are put into high ESR's because that's what the investment platform of approved funds has on it. A bank rep can't just sell any fund he wants, neither can an Ameriprise rep. Not using a rep is fine, but misinformation is another matter..........
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Old 04-30-2010, 03:09 PM   #70
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We don't know the nature of the case so it is difficult to call this churning. There are two types of accounts, discretionary and non-discretionary. Assuming that churning is going on without material facts is just speculating.........

It is not hard to get on the FINRA website and download a complaint form and fill it out and submit it...........
This woman was getting frequent calls to recommend "move something around" and apparently there were several moves a month and she didn't think she had agreed to that much. Red flag to me! - a red flag to look more carefully and why the FA is doing it.

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Old 04-30-2010, 03:12 PM   #71
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A lot of clients are put into high ESR's because that's what the investment platform of approved funds has on it. A bank rep can't just sell any fund he wants, neither can an Ameriprise rep. Not using a rep is fine, but misinformation is another matter..........
Same difference in my mind - whether the motivation is coming from the FA himself, or the brokerage is immaterial. There is a reason it is a platform of "approved funds".

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Old 04-30-2010, 07:10 PM   #72
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Originally Posted by kumquat
Methinks you miscalculated a bit.

1.60% of $250K = $4,000
1.35% of $250K = $3,375
1.10% of $500K = $5,500

Total $12,875 or about 50% more than $8500.


Uh no......I am familiar with how Chase Bank charges clients...........

It should have been posted as:

$0 - $249,999 = 1.60%

$250,000 - $499,999 = 1.35%

$500,00- $999,999 = 1.10%

$1 million = .85%

This is how fees are charged, it is not divided out into pieces of a pie like you stated. Perhaps the OP was confused on the fee structure........
I believe kumquat is correct. I initially interpreted it as ... if my total invested assets were over $1M then it would only cost .85% for the entire investment ... but the Chase FA corrected me and said that it was cumulative and I would pay 1.6% for the first quarter million, 1.35% next quarter, etc. So, I believe Kumquat is correct in what the fees would be. For whatever that is worth.
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Old 04-30-2010, 07:12 PM   #73
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Same difference in my mind - whether the motivation is coming from the FA himself, or the brokerage is immaterial. There is a reason it is a platform of "approved funds".Audrey
Really? Blame the rep when he can't sell Vanguard or Fidelity? The platform comes from the Investment Policy Comittee, senior management types that don't ask the rep what he/she thinks........

You are entitled to your opinion, of course, but there tends to be a lot of emotional content in these threads and the facts get left behind in a lot of ways.....of course that is MY opinion........
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Old 04-30-2010, 07:14 PM   #74
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I believe kumquat is correct. I initially interpreted it as ... if my total invested assets were over $1M then it would only cost .85% for the entire investment ... but the Chase FA corrected me and said that it was cumulative and I would pay 1.6% for the first quarter million, 1.35% next quarter, etc. So, I believe Kumquat is correct in what the fees would be. For whatever that is worth.
Well, that is interesting.........I know several higher level folks at Chase and they have done it the way I laid out for 7-8 years........

Best advice? Stay far away........
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Old 04-30-2010, 07:38 PM   #75
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Well, that is interesting.........I know several higher level folks at Chase and they have done it the way I laid out for 7-8 years........

Best advice? Stay far away........

I don't know FD your way seems odd. If I have $999,999 I pay $11,000/year if I have $1,000,001 I pay $8500. That isn't how most fee structures work I've seen in the financial world.
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Old 04-30-2010, 08:27 PM   #76
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To me the main issue with FAs seems to be the cost. The conventional percentages paid seem way out of proportion to the service rendered. If the conventional % fees (at least for >$1M accounts) were much lower, it wouldn't be such an issue.

Um - that is if the issue of fiduciary responsibility is also addressed. And the tendency to put clients in funds with high ERs due to conflict of interest. And the temptation to "churn" accounts.

Audrey
The problem is that the services rendered can vary so much. It runs the gamut from firms that don't even return phone calls all the way to firms offering family office type services. For the latter I've seen and worked at places where people get every cent and more than they pay for.

Also, I can't see the temptation to churn a fee based account. What would there be to gain?
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Old 05-02-2010, 01:39 AM   #77
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The only reason I could see paying $10-20k/year for a financial advisor would be if they were able to convince the client to do better timing moves than the client would be able to do themselves. That comes down to making sure the client is comfortable and knows the long term reasons for their positions, so they can buy and hold. Novice investors even if they may be able to get the original assett allocation right simply don't have the cojones to buy and hold through a downturn without handholding.
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Old 05-02-2010, 07:48 AM   #78
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Uh no......I am familiar with how Chase Bank charges clients...........
Apparently not
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Originally Posted by Earl E Retyre View Post
I believe kumquat is correct. I initially interpreted it as ... if my total invested assets were over $1M then it would only cost .85% for the entire investment ... but the Chase FA corrected me and said that it was cumulative and I would pay 1.6% for the first quarter million, 1.35% next quarter, etc. So, I believe Kumquat is correct in what the fees would be. For whatever that is worth.

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No comment on how much the rep makes versus the bank? Interesting..........
Who cares about the division of costs I'm not going to have.

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Best advice? Stay far away........
From Chase, or all FA's?
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Old 05-02-2010, 08:07 AM   #79
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Why use an investment adviser?

One can get a basic investment book and replicate the generic knowledge by themselves... provided they just follow the advice.

Whadaya you thinkin'?? Your gonna to get Warren Buffet? If you want Warren... just invest in Berk Hatty... it's cheaper without a middle man scoupin' out "A Taste" [ in my best impersonation of Tony Soprano's voice]

I believe that the average adviser will not yield better results than the indexes the underlying investments track... If this is true (and I believe it is), then (aside from luck), I would need to land the long-term above average investment adviser to improve my investment performance... not to mention to cover the additional fee.

What do you think the chances are that you (or any other middle class IRA/401k investors) will wind up with the above average adviser in "Podunk Wherever USA"... or even in a large Metro Area?

IMO - An actively managed VG fund is lower cost and likely to be more effective over the long haul. Using financial and estate planning advisers for issues other than handling or managing investments is another matter.

I do not use them, I prefer self education. If I did use one, it would be for a fee for specific advice and it would probably not be a recurring event/fee structure.

I would never give an adviser direct control of my assets.

If for some reason I felt compelled to turn over control of my assets, it would only be with a very large, well known, well regarded and regulated financial institution.
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Old 05-02-2010, 09:08 PM   #80
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If for some reason I felt compelled to turn over control of my assets, it would only be with a very large, well known, well regarded and regulated financial institution.
Well, there you go..........Chase Bank gets another client........
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