Another Financial adviser story

[Blue Collar Guy]

A little later in the year 2007, after my 8.5 % bonds that never materialized i was watching tv late one night. I have all this money sitting in the checkbook. I see the actor Hal Holbrook advertising for Fischer investments. You need 500,000. I like hal holbrook. i dont know him but he seemed happy, he never lied to me before so i figure this is good stuff. Im in the big time. According to the infomercial im considered high net worth, and i should be a special client. Well we all no i already dont like my at the time current financial guy so im calling this Fischer. I get the free brochure its nice. Pretty colors. I made an appointment with this guy at my "office". It was actually my friends tax office but i had a office there that he gave me to maybe start a security business (never even printed cards, it was all talk). Any how this gentleman shows up, dressed nice. Told me how the plan will be tailored to my personal situation. The part i couldnt get over was they wanted some percentage of my portfolio for this advice. I honestly couldnt remember if it was 1.25 % or 3 %. But it was more than 1 %. I told him , ill tell you what ill write you a check right now for 500k but ill give you 1 % of my profits not 1% of the money i already have. This was a no go for him. Ill never know how i would have made out. I might have made a mint, but within a few months the markets took a bath.

 

[aja8888]

One of my "high net worth" retired friends (Former HR VP for a large oil company) is with Ameriprise. He brags to us ROMEO guys (The Group) about how his "guy" doesn't charge his account any fees for doing his "stuff" and how he got a great deal on the $500K Variable Annuity he bought. We all chuckle under our breath. I asked him if he read his monthly statements and he said he can't understand all that mumbo-jumbo financial stuff, but he is "doing great". No we all know that he is being tagged over 1% on his AUM and that the VA cost him 4% per year in fees.

Who is really "doing great" here?

 

[braumeister]

i already don't like my at the time current financial guy so I'm calling this Fisher.
...
I'll never know how i would have made out. I might have made a mint, but within a few months the markets took a bath.

You and plenty of others.
Ken Fisher is a billionaire, so he's doing something very right (for himself).

But here's a quote from himself (from his column in Forbes magazine in 2015):

Calculated by Forbes, taking a hypothetical 1% brokerage commission haircut, my basket lagged the S&P 500 (without any brokerage haircut) by 5% equal dollars invested. This is the seventh year out of 20 that my picks have lagged and the third year in a row.

Another take on Ken:
Ken Fisher's Dirty Little Secret

 

[Ready]

Find me a financial advisor who only earns a fee when my investments outperform the S&P 500, and who agrees to share in the losses when his decisions cause me to lose more than I would have lost in an S&P 500 index fund, and I'll be happy to meet with him.

 

[frayne]

Find me a financial advisor who only earns a fee when my investments outperform the S&P 500, and who agrees to share in the losses when his decisions cause me to lose more than I would have lost in an S&P 500 index fund, and I'll be happy to meet with him.

Good luck and let me know how that works for you and pass me his/her name.

The FA industry is full of snake oil and associated salesmen but hey, beats working for a living.

 

[Rustward]

Find me a financial advisor who only earns a fee when my investments outperform the S&P 500, and who agrees to share in the losses when his decisions cause me to lose more than I would have lost in an S&P 500 index fund, and I'll be happy to meet with him.

Here we go again with portfolio vs S&P 500.


Would YOU be willing to be a financial advisor on this basis?

 

[Gumby]

Here we go again with portfolio vs S&P 500.


Would YOU be willing to be a financial advisor on this basis?

I surely wouldn't want to make that bet if I were an FA. It would be more reasonable if you used something like a weighted 60% Dow Jones U.S. Total Stock Market Index and 40% Lehman Brothers U.S. Aggregate Bond Index

 

[Ready]

Here we go again with portfolio vs S&P 500.


Would YOU be willing to be a financial advisor on this basis?

Yes, I would, actually.

I would advise my clients to invest their money in index funds and stop trying to beat the market. Then I would focus the rest of my time on helping them in areas where they really need help, like tax planning, budgeting, legal/estate planning, retirement readiness asessment, etc. And I would charge hourly for my time and let the client decide how much of my expertise they really need.

I've spent my entire career in sales, and I've always approached selling this way. And I have many clients who have done business with me for years because of my willingness to be completely honest and transparent with them, and I've done quite well with this approach. I bet I've done far better than many of these snake oil people who call themselves financial advisors.

 

[Terryjm51]

Ready - heart of a teacher. That's the way it should be. Thanks for sharing


Sent from my iPhone using Early Retirement Forum

 

[Bestwifeever]

Yes, I would, actually.

I would advise my clients to invest their money in index funds and stop trying to beat the market. Then I would focus the rest of my time on helping them in areas where they really need help, like tax planning, budgeting, legal/estate planning, retirement readiness asessment, etc. And I would charge hourly for my time and let the client decide how much of my expertise they really need.

I've spent my entire career in sales, and I've always approached selling this way. And I have many clients who have done business with me for years because of my willingness to be completely honest and transparent with them, and I've done quite well with this approach. I bet I've done far better than many of these snake oil people who call themselves financial advisors.

I'd hire you but otoh the question involved earning a fee only if you outperform the S&P so you wouldn't be able to charge me

 

[Red Badger]

My neighbor is also a cow*rker. During my pre-retirement party, she expressed her desire, but inability, to attain ER. Then she told me that she had $200K sitting with a WF FA. I walked her through the cost of active management, the empirical mountain of data that demonstrates the folly of active management, and how trillions of $$$ have flowed away from FA's and to passive index investing. I closed by saying that between inflation, FA fees, and the eventual loss from active management, breaking even might be a struggle (whereas index investing averages 6-7% over time).

Her response was something like, "But he gives me such good advice."

Well, I tried.

Another adult beverage was in order.

 

[Blue Collar Guy]

My neighbor is also a cow*rker. During my pre-retirement party, she expressed her desire, but inability, to attain ER. Then she told me that she had $200K sitting with a WF FA. I walked her through the cost of active management, the empirical mountain of data that demonstrates the folly of active management, and how trillions of $$$ have flowed away from FA's and to passive index investing. I closed by saying that between inflation, FA fees, and the eventual loss from active management, breaking even might be a struggle (whereas index investing averages 6-7% over time).

Her response was something like, "But he gives me such good advice."

Well, I tried.

Another adult beverage was in order.

mine used to send me Birthday and Christmas cards.

 

[Moemg]

Two of my friends rave about the dinner their Fa treats them to once a year .

 

[Rustward]

Well, I guess we must be outliers. Except for a very few index funds that make up less than 5% of the portfolio, we have been using active management for over 30 years for funds and stocks and have a very healthy portfolio. We have never taken an IRA distribution. The last five years expenses have been financed by selling shares of Fidelity Contrafund that we bought in the late 80's and through the 90's and paid a 3.5% load on those shares until the fund went no-load. Most of the gains have been long term capital gains which are taxed at 0% if you can manage to stay in the 15% bracket. There is enough left to cover the next six years. By then one of us will be taking RMD's and the other will be 3 years from RMD's. . . . and unless something drastic happens, by then the taxable part of the portfolio (some call it personal savings, or non-IRA) should still be well into seven figures.

SS will be an additional $48K (today's dollars) if we take it in one year and 5 years, but we will probably not take it as long as we are working down the Contrafund. Of course we will start SS by 70 no matter what else is happening.

One could paint a very negative picture about the fees we have paid over the years, but that said, we have been satisfied. We have heard the horror stories (mostly here, and a lot of it is FUD), but we have managed not to be actors in such stories.

You can take just about any profession and find something negative about it.

​

Edit to add: We don't get birthday cards, free dinners, or even a phone call on any special days. It's business.
And maybe it's just me, but I think the comments about the cards and dinner are in poor taste, but if that is all you have to add to the exchange . . . well, I guess you made your contributions.

Another edit: No, I am not saying that active management is better than passive investing. What I am saying is that active management is not always the disaster that it is generally portrayed as in these forums.

One more edit: The Contrafund was bought from '94 to '04 and the load was 3%, not 3.5%. The post was written from memory but I later looked at the confirmations.

 

[Blue Collar Guy]

Well, I guess we must be outliers. Except for a very few index funds that make up less than 5% of the portfolio, we have been using active management for over 30 years for funds and stocks and have a very healthy portfolio. We have never taken an IRA distribution. The last five years expenses have been financed by selling shares of Fidelity Contrafund that we bought in the late 80's and through the 90's and paid a 3.5% load on those shares until the fund went no-load. Most of the gains have been long term capital gains which are taxed at 0% if you can manage to stay in the 15% bracket. There is enough left to cover the next six years. By then one of us will be taking RMD's and the other will be 3 years from RMD's. . . . and unless something drastic happens, by then the taxable part of the portfolio (some call it personal savings, or non-IRA) should still be well into seven figures.

SS will be an additional $48K (today's dollars) if we take it in one year and 5 years, but we will probably not take it as long as we are working down the Contrafund. Of course we will start SS by 70 no matter what else is happening.

One could paint a very negative picture about the fees we have paid over the years, but that said, we have been satisfied. We have heard the horror stories (mostly here, and a lot of it is FUD), but we have managed not to be actors in such stories.

You can take just about any profession and find something negative about it.

​

Edit to add: We don't get birthday cards, free dinners, or even a phone call on any special days. It's business.
And maybe it's just me, but I think the comments about the cards and dinner are in poor taste, but if that is all you have to add to the exchange . . . well, I guess you made your contributions.

Another edit: No, I am not saying that active management is better than passive investing. What I am saying is that active management is not always the disaster that it is generally portrayed as in these forums.

Im confused, just how low do you need to make to be in the 0 % tax bracket?. One would think a "very Healthy portfolio " would throw off a ton of earnings that would surely propel you into a higher tax bracket." My portfolio threw off 105k in dividends and capital gains, interest last year and its not a very healthy one .

 

[Rustward]

Im confused, just how low do you need to make to be in the 0 % tax bracket?. One would think a "very Healthy portfolio " would throw off a ton of earnings that would surely propel you into a higher tax bracket." My portfolio threw off 105k in dividends and capital gains, interest last year and its not a very healthy one .

Yes.

Maybe you should reread the post. Long Term Capital Gains are taxed at 0% for those who are not above the 15% bracket.

Consult a tax table. You can google that.

And the dividends across all accounts are more than enough for our yearly spend, but many of them are in IRA's and we are not taking distributions yet -- we are taking money from the taxable accounts as I explained. Most of the dividends in the taxable accounts are qualified dividends, which are also taxed at 0% for those who are not above the 15% tax bracket.

Consult a tax table. You can google that, also.

Maybe you should reread the post.

 

[Blue Collar Guy]

Yes.

Maybe you should reread the post. Long Term Capital Gains are taxed at 0% for those who are not above the 15% bracket.

Consult a tax table. You can google that.

And the dividends across all accounts are more than enough for our yearly spend, but many of them are in IRA's and we are not taking distributions yet -- we are taking money from the taxable accounts as I explained. Most of the dividends in the taxable accounts are qualified dividends, which are also taxed at 0% for those who are not above the 15% tax bracket.

Consult a tax table. You can google that, also.

Maybe you should reread the post.

Not only did i re read your post, i read some of your more recent posts . It seems you are a defender of Financial Advisers. , Thanks for the info about re reading. I seem to have picked up your slant on the subject. Oh thanks.

 

[Curmudgeon]

The part i couldnt get over was they wanted some percentage of my portfolio for this advice. I honestly couldnt remember if it was 1.25 % or 3 %. But it was more than 1 %.

I talked with Fischer (the firm, not the person) last year and I think they quoted me 1.5%. Pretty steep, when I'm trying to figure out if I can live on a ~4% WR. His cut would take nearly 40% of what I planned to withdraw, on a yearly basis! I passed.

 

[Fedup]

At least I was told to stay away from no load mutual funds so I never invested in any.

 

[Blue Collar Guy]

I talked with Fischer (the firm, not the person) last year and I think they quoted me 1.5%. Pretty steep, when I'm trying to figure out if I can live on a ~4% WR. His cut would take nearly 40% of what I planned to withdraw, on a yearly basis! I passed.

yup, i agree.

 

[frayne]

Two of my friends rave about the dinner their Fa treats them to once a year .

No doubt probably one of the most expensive dinners they have ever paid for.

Ignorance is bliss.

 

[redduck]

Well, I guess we must be outliers. Except for a very few index funds that make up less than 5% of the portfolio, we have been using active management for over 30 years for funds and stocks and have a very healthy portfolio. We have never taken an IRA distribution. The last five years expenses have been financed by selling shares of Fidelity Contrafund that we bought in the late 80's and through the 90's and paid a 3.5% load on those shares until the fund went no-load. Most of the gains have been long term capital gains which are taxed at 0% if you can manage to stay in the 15% bracket. There is enough left to cover the next six years. By then one of us will be taking RMD's and the other will be 3 years from RMD's. . . . and unless something drastic happens, by then the taxable part of the portfolio (some call it personal savings, or non-IRA) should still be well into seven figures.

SS will be an additional $48K (today's dollars) if we take it in one year and 5 years, but we will probably not take it as long as we are working down the Contrafund. Of course we will start SS by 70 no matter what else is happening.

One could paint a very negative picture about the fees we have paid over the years, but that said, we have been satisfied. We have heard the horror stories (mostly here, and a lot of it is FUD), but we have managed not to be actors in such stories.

You can take just about any profession and find something negative about it.

​

Edit to add: We don't get birthday cards, free dinners, or even a phone call on any special days. It's business.
And maybe it's just me, but I think the comments about the cards and dinner are in poor taste, but if that is all you have to add to the exchange . . . well, I guess you made your contributions.

Another edit: No, I am not saying that active management is better than passive investing. What I am saying is that active management is not always the disaster that it is generally portrayed as in these forums.

One more edit: The Contrafund was bought from '94 to '04 and the load was 3%, not 3.5%. The post was written from memory but I later looked at the confirmations.

I am guessing that you are referring to having a financial advisor in your above post. If that's not the case...well, it's yet another wrong guess on my part. However, if the guess is correct...

You seem to have a good handle on your finances. Did you work closely with your financial advisor? Did you ever veto any purchase/sell idea? And, did you keep track of fees, expenses, etc. that it cost you to work with your financial advisor?

 

[MRG]

At least I was told to stay away from no load mutual funds so I never invested in any.

?? you mean Loaded funds??

 

[RobbieB]

Just had my review with my adviser "team" and am up 9% YTD. Last year was 12.75%. Fee is 1% AUM / yr and the results include the fees.

Merrill Lynch Rocks!

 

[rayinpenn]

When I'd consider use a financial advisor.
1. They charge by the hour
2. They do not sell anything ever!
3. It never takes more then a couple of hours.
4. I am so totally uncomfortable with financial transaction and I can't feel comfortable opening an account with Vanguard and dumping my investments into 4 low cost index funds.

Otherwise for the average person I'd avoid them like the plague.

RobbieB ...are your results after the fees? It is unclear.
S&P YTD +10%
2016 +12%

So your results could actually be poor given the amount of risk you've taken.

Study after study show the professional investors won't beat the S&P
Over time.