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Re: Another advisor horror story
Old 11-30-2006, 06:33 AM   #41
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Re: Another advisor horror story

Very interesting, FD. What do you do for professional liability insurance?

Do you invest in individual stocks and bonds for your clients, or stick strictly to funds?
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Re: Another advisor horror story
Old 11-30-2006, 06:56 AM   #42
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Re: Another advisor horror story

Quote:
Originally Posted by FinanceDude
.... I realize there is an unabashed hate of advisors from you and others on this board...........the reason I am on here is because my clients are not a lot different than the people on this board...........the big difference being they believe FAs like me can help them, and you guys believe people that have money that fire advisors are lazy and uninformed.
That "fire" above should be "hire", right?
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Re: Another advisor horror story
Old 11-30-2006, 07:26 AM   #43
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Re: Another advisor horror story

I may be one of those select few on this board that actually uses an advisor. The reason I do that is that beyond a specific liquid net worth, I did not want to manage my own portfolio on a day to day basis. Of late, I have started taking more vacations and spend more time on my boat.

I pay a 0.5% wrap fees to the advisor to manage the accounts. As all funds are not made equal(high load / low expense), neither are the advisors. Similar to funds, there are more bad advisors than good.

Do I view the fees paid to the advisor as an expense. Yes. But as long as he beats the portfolio's asset allocated average index after charging for the advisory fees, it works for me. For the same time and effort that I put in now, I would have matched the index by putting it in a low expense/no load index funds.


The cheapest and most reliable option is not always the best one.

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Re: Another advisor horror story
Old 11-30-2006, 07:46 AM   #44
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Re: Another advisor horror story

Quote:
Originally Posted by FinanceDude

There are two kinds of advisors, IMO. Fee-based advisors and Hourly-fee advisors. I think "fee-based" is over-used and misunderstood, so I'll differentiate:
FD, I appreciate your honesty and enjoy your view on the situation so this is not a dig at you but in my experience the distinction always used to be:-

Commission-based - no up front fee to client, advisor paid by the investment companies, often a large chunk of the initial up-front load

Fee-based - a fee charged for planning and if on-going management included then transparency on payments received from investment companies, which are often used to offset fees.

I think your description is an obfuscation of the term "fee-based" which sounds like an industry response to the public realising they are being excessively charged.
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Re: Another advisor horror story
Old 11-30-2006, 08:52 AM   #45
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Re: Another advisor horror story

Quote:
Originally Posted by Bourne
[...]
But as long as he beats the portfolio's asset allocated average index after charging for the advisory fees, it works for me.
I wonder how one determines that the advisor beats his benchmark? We have seen in the YTD threads that there are numerous ways to calculate a return-on-investment. And we also know that one cannot beat a benchmark that has no fees while paying fees. So something is fishy here.

I see nothing wrong with paying fees, but one should be getting the best value for those fees and not just throwing money away.
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Re: Another advisor horror story
Old 11-30-2006, 10:46 AM   #46
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Re: Another advisor horror story

Quote:
Originally Posted by brewer12345
Very interesting, FD. What do you do for professional liability insurance?

Do you invest in individual stocks and bonds for your clients, or stick strictly to funds?
We have E&O through our firm, I pay $200 a month for that.

I started out big in individual stocks. I never relied on our research department becuase their recommended list was pretty bad........... :P :P I used to build portfolios of mutual funds based on the client: Aggressive Growth, Growth and Income, Income, Fixed Income. Our firm had a good wrap program than used primarily insitutional and no-loads with low ER's, and allowed us a lot of leeway in what fee we charged. That was my first foray..........my goal was to get these wrap accounts under 1% as much as I could.............

For a time I did a lot of managed money accounts. However, as a lot of people have discovered, these accounts were quite expensive a few years ago. The manager would take 75 bp, the firm would take 50 bp, and the broker had to charge 50-75bp just to make any money at all................ :P With the Internet, and growth of online shops, the managed money platforms have discounted their minimums to get in (as low as $25,000) and some managers will take as little as 25bp to manage the assets.

I have found a niche, and it's not the "Ten Hot Stocks to Buy Now".............
2007 is my target year for the CFP. I don't know that I will change my practice to go on an hourly consultative basis, hey I gotta pass the test first.

Much like the MBA helped Brewer, and the CFA helped saluki, the CFP will help me................
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Re: Another advisor horror story
Old 11-30-2006, 11:14 AM   #47
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Re: Another advisor horror story

FD, just so I understand: you pretty much stick to funds these days?
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Re: Another advisor horror story
Old 11-30-2006, 03:12 PM   #48
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Re: Another advisor horror story

Quote:
Originally Posted by Bourne
But as long as he beats the portfolio's asset allocated average index after charging for the advisory fees, it works for me. For the same time and effort that I put in now, I would have matched the index by putting it in a low expense/no load index funds.
I'm not clear on what the bold portion means. Do you go back and figure out what your return would have been if you had invested in a mix of low cost index funds similar to the ones your FA invested your $$ in and see if you came out ahead? If so, I would submit that is more trouble than just actually investing in these funds yourself and saving .5% every year in fees. If you NOT doing this cross-check yourself and are instead relying on your FA's annual depictions of what your return would have been without his help, then I think there's a real potential you aren't getting an unbiased appraisal. To put it charitably.





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Re: Another advisor horror story
Old 11-30-2006, 03:36 PM   #49
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Re: Another advisor horror story

FD -

Thanks for the response. Glad you didn't take offence! Maybe when you are a CFP you will charge by the hour? or offer it as an option? Anyway, if I used your services, I would feel badly to get the "free" plan and just walk away - it doesn't seem fair. I guess it is like a free estimate (my husband is a retired builder) - you win some, you lose some, but if you don't give them, you won't win any!

Have a great day!

Jane
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Re: Another advisor horror story
Old 11-30-2006, 04:48 PM   #50
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Re: Another advisor horror story

Quote:
Originally Posted by brewer12345
FD, just so I understand: you pretty much stick to funds these days?
No, it's about 50/50. The stock portfolios I constructed are composed of companies I have been following for 6-7 years. A number of them are the boring blue chips like Pfizer, Altria, and Proctor and Gambel. I like using funds for international exposure because I feel the info you can get your hands on sometimes about Russian and Chinese stocks in particular is a little sketchy.

I remembered something about mutual funds. A guy I used to work with (since left the business) used to sell Vanguard Funds and wrap them with a fee. He was doing quite well with it, and I have no idea why..........but I know for sure he is out the business now, and that may have been a contributing factor............ :P :P :P
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Re: Another advisor horror story
Old 12-01-2006, 12:22 PM   #51
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Re: Another advisor horror story

Quote:
Originally Posted by samclem
I'm not clear on what the bold portion means. Do you go back and figure out what your return would have been if you had invested in a mix of low cost index funds similar to the ones your FA invested your $$ in and see if you came out ahead? If so, I would submit that is more trouble than just actually investing in these funds yourself and saving .5% every year in fees. If you NOT doing this cross-check yourself and are instead relying on your FA's annual depictions of what your return would have been without his help, then I think there's a real potential you aren't getting an unbiased appraisal. To put it charitably.
Let me explain it with an example of 100K for simplicity sake.

My advisor and I sit down every year and review an asset allocation for the next 3-5 year window. For the record, his approach is more conservative than mine.
For 2006, it was a 80/20 mix with 80 having 15% international. I do measure the stock portfolio at Large/Mid/Small level but will ignore it for this example.

Amount Allocation Split Asset Class Performance ( For example only)
100, 000 = 65000 - S&P 500 - 10.0%(YTD)
15000 - International - 20.0%
20000 - Bonds - 5%

Based on the numbers used above, the portfolio performance should be 10.5%. Again, there are some tweaks that are made during the year but they are easy to track. At this point, the mix is 70/20/10 with some stock gains taken off the table into cash(money market). Also, the small cap holdings were liquidated to move into mid-cap.

Bottom line is that I can track the performace percentage i.e. 10.5% with relative ease using multiple tools available in the market. Add the 0.5% to it and 11.0% is the number to beat.

If he beats 11.0% in the above example, I am more than happly to allow him to manage the money. And he has for four years running...
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Re: Another advisor horror story
Old 12-01-2006, 05:38 PM   #52
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Re: Another advisor horror story

Quote:
Originally Posted by Bourne
If he beats 11.0% in the above example, I am more than happly to allow him to manage the money.
I am one of those who is of the opinion that anyone who beats the market over a long period (and most of us are in this for the long haul) either takes more risks to do so, or got lucky. I allow for the possibility that there may be a few exceptions, but I have no way of knowing, in advance, who that will be.

Although I wouldn't do it, I can understand why someone might use an adviser for convenience. I can't see any solid reason to use an adviser based upon past performance, however. In other words, you seem to be saying that you are "more than happy" (eager?) to allow him to manage your money in the future - based on the performance of the portfolio he constructed for you in the past. If that's what you're saying, you won't be the first to take that approach.
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Re: Another advisor horror story
Old 12-01-2006, 05:51 PM   #53
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Re: Another advisor horror story

FD,

You're not helping yourself ...

Quote:

A guy I used to work with (since left the business) used to sell Vanguard Funds and wrap them with a fee. He was doing quite well with it,
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Re: Another advisor horror story
Old 12-01-2006, 07:41 PM   #54
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Re: Another advisor horror story

Quote:
Originally Posted by FinanceDude
I remembered something about mutual funds. A guy I used to work with (since left the business) used to sell Vanguard Funds and wrap them with a fee. He was doing quite well with it, and I have no idea why..........but I know for sure he is out the business now, and that may have been a contributing factor............ :P :P :P
Hey, I think FD is doing us a favor by sharing this info. He also said he thinks the practice is shady.

I'd even add that there are many FAs doing worse things to their clients than puting them in a solid mix of low-cost MFs and charging them a fee. If this guy didn't churn their accounts or put them in an inappropriately risky mix of funds, then they might have come out better than many other victims. That doesn't make it a good practice by any means, but not the worst thing happening, either.
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Re: Another advisor horror story
Old 12-01-2006, 07:57 PM   #55
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Re: Another advisor horror story

Quote:
Originally Posted by tryan
FD,

You're not helping yourself ...
No offense, but you gotta learn to read what I'm writing.........
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