FA - The Exception That Proves the Rule

[sakowitzm]

Just wanted to let ya'll know that there are good guys out there. I've been with my FA for about fours years, but have known him for more than 15 years. He's a % of AUM guy, and I recently came into a large sum of money, and so I reached out to him to remind me what his fee schedule was. His answer was 60 bps, so I asked him to clarify - was that 0.60% on everything, or was 0.60% the fee on the last $XXX? His answer was that it would ordinarily be the latter (the lowest rate on the last dollars), but he appreciated our relationship, and was charging me 0.60% on everything. Thanks, Joe.

 

[OldShooter]

FWIW, I was involved in the RFP process for a nonprofit looking for an advisory firm to run about $4M. The RFP was fairly demanding of good support activities, including a trip by one of the FA principals to the annual board meeting.

60bps was in the middle of the range (8 firms IIRC) that was proposed. Vangiuard was best at 40bps but the nonprofit wanted a higher touch relationship that Vanguard could propose, so they went with another FA.

 

[Dtail]

Just wanted to let ya'll know that there are good guys out there. I've been with my FA for about fours years, but have known him for more than 15 years. He's a % of AUM guy, and I recently came into a large sum of money, and so I reached out to him to remind me what his fee schedule was. His answer was 60 bps, so I asked him to clarify - was that 0.60% on everything, or was 0.60% the fee on the last $XXX? His answer was that it would ordinarily be the latter (the lowest rate on the last dollars), but he appreciated our relationship, and was charging me 0.60% on everything. Thanks, Joe.

What % bps was he charging you with your prior assets?

 

[gerntz]

Just wanted to let ya'll know that there are good guys out there. I've been with my FA for about fours years, but have known him for more than 15 years. He's a % of AUM guy, and I recently came into a large sum of money, and so I reached out to him to remind me what his fee schedule was. His answer was 60 bps, so I asked him to clarify - was that 0.60% on everything, or was 0.60% the fee on the last $XXX? His answer was that it would ordinarily be the latter (the lowest rate on the last dollars), but he appreciated our relationship, and was charging me 0.60% on everything. Thanks, Joe.

60 bp isn't bad for someone doing a good job for you imo. More than the upper limit of 50 that I would think about paying. And if it's higher for much of my investments, he'd be out of the ?.

 

[sakowitzm]

Rather not say, as it would give away my total AUM.

 

[Dtail]

Rather not say, as it would give away my total AUM.

Yes understand. Wasn't going after that, but yes understand.

 

[jazz4cash]

Just wanted to let ya'll know that there are good guys out there. I've been with my FA for about fours years, but have known him for more than 15 years. He's a % of AUM guy, and I recently came into a large sum of money, and so I reached out to him to remind me what his fee schedule was. His answer was 60 bps, so I asked him to clarify - was that 0.60% on everything, or was 0.60% the fee on the last $XXX? His answer was that it would ordinarily be the latter (the lowest rate on the last dollars), but he appreciated our relationship, and was charging me 0.60% on everything. Thanks, Joe.

I think it takes more than a reasonable fee to make him a “good guy”. A lot more. I’m someone that believes FAs can be truly valuable for some investors but its not just about the fees.

 

[TwoByFour]

They're all "good guys", they know that you catch more flies with honey rather than vinegar. I am not against using a FA, but it should be based on hard, quantifiable results rather than just being a good guy. We had a FA for a while but it was during a time in my career when I was way too busy to want to devote time to investing. And before I discovered index funds and passive investing.

 

[target2019]

He will truly be a nice guy when your measured performance beats the benchmark by his fee, and a bit more for you being a nice person.

 

[NYEXPAT]

We shut down our family business in the early 2000's when AUM fee's dipped below 1%. We were running about 60 million at the time and the risk of lawsuits was becoming too great!

 

[Onward]

There are actually lots of good FA's out there. There are also a lot of bad ones.

The good ones are a huge net benefit to people. Just not people like us on this forum.

The biggest benefit good FA's offer is not market-beating returns. It's keeping people from making stupid decisions when markets plunge.

 

[braumeister]

My FA charges me around 3% most years, and his performance has been kind of variable. Sometimes I wonder if I should dump him, but then I see his smiling face when I shave in the morning and I always decide to keep him.

 

[NYEXPAT]

My FA charges me around 3% most years, and his performance has been kind of variable. Sometimes I wonder if I should dump him, but then I see his smiling face when I shave in the morning and I always decide to keep him.

I have a strict rule against doing business with a housemate and I always close the bathroom door as I would find that a bit creepy!

 

[Golden sunsets]

My FA charges me around 3% most years, and his performance has been kind of variable. Sometimes I wonder if I should dump him, but then I see his smiling face when I shave in the morning and I always decide to keep him.

LOL[emoji41]

 

[VanWinkle]

Just wanted to let ya'll know that there are good guys out there. I've been with my FA for about fours years, but have known him for more than 15 years. He's a % of AUM guy, and I recently came into a large sum of money, and so I reached out to him to remind me what his fee schedule was. His answer was 60 bps, so I asked him to clarify - was that 0.60% on everything, or was 0.60% the fee on the last $XXX? His answer was that it would ordinarily be the latter (the lowest rate on the last dollars), but he appreciated our relationship, and was charging me 0.60% on everything. Thanks, Joe.

I always try to figure out how much per hour the FA is being paid. If that seems fair, then you have a good one.

 

[Doribe]

My FA charges me around 3% most years, and his performance has been kind of variable. Sometimes I wonder if I should dump him, but then I see his smiling face when I shave in the morning and I always decide to keep him.

+1

 

[RunningBum]

I always try to figure out how much per hour the FA is being paid. If that seems fair, then you have a good one.

I don't think that's a good method. If they're getting you 2% worse than the index returns, they aren't worthwhile even if they're getting $10/hour. If they're beating the market by 2%, I don't care how much time they spend on me.

An FA is worthwhile if they can consistently beat the market even with their fees, keep you from making mistakes, and give good tax/estate advice. Maybe a few other things I haven't thought of. Beyond that, I don't see the value. If you get peace of mind from it, fine, but I would lose sleep if I was paying someone a lot to get the same returns I could with minimal work.

 

[ERD50]

A 0.60% fee isn't enough information to determine if he's a 'good' FA or not.

What service is he providing to justify any % of anything? Perhaps he is, but you gave no indication of it.


Hmmm, and apparently he is not helping you with financial questions like this?

http://www.early-retirement.org/for...-ltcg-no-brainer-right-92329.html#post2060106

-ERD50

 

[Montecfo]

Just a nit: it is unclear in what sense an exception can ever "prove" a rule.

Certainly there are good ones but in no sense does that "prove" most are bad.

Exceptions call the rule into question, but not prove that.

EOM

 

[Dtail]

Another option at least at Fidelity is to DIY, but if you have 1mm and are in their Private Client class, one can get FREE advice anytime one wants from a dedicated FA (with no fees) or from many of their other reps.

 

[Kelor]

Another option at least at Fidelity is to DIY, but if you have 1mm and are in their Private Client class, one can get FREE advice anytime one wants from a dedicated FA (with no fees) or from many of their other reps.

Can you go further into, well, Dtail on that? One thing I don’t get from Fidelity is tax advice. I think that’s a big miss. Maybe I’m not asking for it, but I think they would do good with some webinars, etc. on tax planning.

 

[MarieIG]

My FA charges me around 3% most years, and his performance has been kind of variable. Sometimes I wonder if I should dump him, but then I see his smiling face when I shave in the morning and I always decide to keep him.

 

[Ready]

I don't use an FA, but if I did I would personally be more comfortable paying them hourly for the time they spend with me. I don't see why they should get a raise simply because I save more money or the stock market just goes up.

I've argued the same thing with realtors though. It doesn't take ten times the effort to sell a $2M house versus a $200K house, so it never seemed fair to me to base compensation on sale price rather than effort.

That being said, I'd be curious to hear what services your FA is providing to you. I'm assuming the basics on investment selection/allocation. How about tax planning, budgeting, college planning, long term care, capital gains minimization strategies, estate planning, etc...?

 

[Scuba]

Another option at least at Fidelity is to DIY, but if you have 1mm and are in their Private Client class, one can get FREE advice anytime one wants from a dedicated FA (with no fees) or from many of their other reps.

Having had an FA and then switched to DIY at Fidelity, there is a big difference between the in depth analysis our FA did for us vs what our Fidelity advisor does. In our case our CPA is filling the gap at a much lower cost than the FA, since we decided we didn’t need investment help. I like our Fido guy, and he gives us input on asset allocation, but nowhere near to the comprehensive advice from our FA.

 

[Dtail]

Can you go further into, well, Dtail on that? One thing I don’t get from Fidelity is tax advice. I think that’s a big miss. Maybe I’m not asking for it, but I think they would do good with some webinars, etc. on tax planning.

Kelor - see below from Scuba. That response is basically my response, although in addition to AA concepts, he/they provide(s) responses on any product and how to use or find applications on Fidelity. I have not tried using Fidelity for tax info, as I also use a CPA for some advice.

Having had an FA and then switched to DIY at Fidelity, there is a big difference between the in depth analysis our FA did for us vs what our Fidelity advisor does. In our case our CPA is filling the gap at a much lower cost than the FA, since we decided we didn’t need investment help. I like our Fido guy, and he gives us input on asset allocation, but nowhere near to the comprehensive advice from our FA.