Financial advisor fee

[gerntz]

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Originally Posted by urn2bfree These forums have been wonderful for educating me. We have a fee only financial advisor and have about $2.5M under management... All in passive investments -DFA stock funds and Vanguard bond funds. Reading the various posts and links found here I am concerned that our advisor may be overpaid. The fee structure is 0.5% of assets plus $2000 "planning fee" every year. This seems excessive to me as I have learned of other alternatives, alas all out of my state but available nonetheless. With passive investing the whole notion of charging more just for a bigger portfolio seems dubious to me. How much more work is needed to manage $2 million vs $1 million? $5000 more work? HOW? Today -in anticipation of our portfolio review next month my advisor called to let me know they are looking to RAISE my planning fee! "Funny," I said, "because I intended to ask why it should not be lower." They hemmed and hawed claimed more money creates more liability. but come on, that still cannot justify these levels of fees. How much could liability cost for them? They are by statute protected by arbitration requirements and Fidelity is my custodian carrying liability as well. Is it worth thousands of dollars to have an in town, face to face advisor rather than a similarly passive. FAM FRENCHmodel/philosophy advisor with low fees but out of state like Portfolio Solutions,or Evanson or Cardiff? Seems for a fraction of those thousands I could fly to those advisors if I really wanted to. they all seemed to do DFA fund mixes, tax leveraged and rebalanced regularly to maintain AA. Any thoughts or experience working with out of state passive advisors?

I have no problem using a fixed quarterly fee advisor who does passive investing using mainly DFA Funds. He's out of state, way out of state. I've met him once in seven years - three years after we put our assets with him. We had 2-3 1/2-1 hr phone conversations with him before investing thru him. His fees would amount to about 0.05-0.10% in your case I would guessimate. I find that amount worth it from the two minds are better than one view, due my respect for his knowledge, and because he's there for my spouse if I'm not. For 0.5%, I'd probably try to do it myself, but I find the 0.1% rounding error vs. above the benefits.

[frequenttraveler]

Not sure even where to start. FA's get a lot of disdain; may I even say hate?

My question for you: is your advisor providing you value-added performance AND SERVICE? Just like any advisor, whether medical, legal, or whatever, some charge more for more intense service. That should go without saying. Some use mass market technology with no client face time (Vanguard) and their service is not great (the advisor side, not the funds themselves). Some hands-on, high touch advisors are worth it to some folks who want that type of service model.

Not all advisors are crooks. Not all advisors sell things. Some advisors have a very long term record of outperforming at less risk than the market. Not that that will convince the angry ones on this board, but it's true.

Is it worth hiring one? That's an individual decision. If you want passive, it would seem to be a no-brainer to do it yourself.

Some outperform their benchmark. How? By superior asset allocation. By staying a step ahead of the market. It is possible, even with a passive model, to outperform a benchmark that they have given you (if any). Examine their performance over the last 4 years; it has been a roller coaster market and should give you an idea about their allocation skills.

So before you jump, give it some thought and examine: 1. their service provided; and 2. their performance.

And skip the hate you read from a few on this board.

Gray Fox

[73ss454]

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Originally Posted by frequenttraveler My question for you: is your advisor providing you value-added performance AND SERVICE? Just like any advisor, whether medical, legal, or whatever, some charge more for more intense service. That should go without saying. Some use mass market technology with no client face time (Vanguard) and their service is not great (the advisor side, not the funds themselves). Some hands-on, high touch advisors are worth it to some folks who want that type of service model. Not all advisors are crooks. Not all advisors sell things. Some advisors have a very long term record of outperforming at less risk than the market. Not that that will convince the angry ones on this board, but it's true. Some outperform their benchmark. How? By superior asset allocation. By staying a step ahead of the market. It is possible, even with a passive model, to outperform a benchmark that they have given you (if any). Examine their performance over the last 4 years; it has been a roller coaster market and should give you an idea about their allocation skills. Gray Fox

With all due respect, "superior asset allocation" are you kidding me.

If you are paying your so called advisor 2% total of your portfolio and your SWR is 4%. Fees are after everything like the ER's on mutual funds and 12b 1 fees and such. Do you think it's worth it to you to pay someone 50% of your income for advice. I'd love to know about the advisor that can make me 50%+ more on my money with the superior asset allocation, stop it your killing me.

[REWahoo]

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Originally Posted by frequenttraveler Not sure even where to start. FA's get a lot of disdain; may I even say hate?

Many get the same respect as used car, annuity and time share salesmen. And there are as many good, well-intentioned used car, annuity and time share salesmen as there are good and well-intentioned FA's. But who wants to kiss all those frogs to search for a prince when you can easily DIY?

By the way, what do you do for a living?

[LOL!]

We can say that financial advisors have an image problem. If they could somehow fix their Guild and toss out all the Bad Apples, then maybe they would get more respect.

[Bestwifeever]

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Originally Posted by frequenttraveler ...FA's get a lot of disdain; may I even say hate? ...Not that that will convince the angry ones on this board, but it's true. ...And skip the hate you read from a few on this board. Gray Fox

Really? You're seeing hate and anger here? Sad.

[FinanceDude]

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Originally Posted by Bestwifeever Really? You're seeing hate and anger here? Sad.

Disdain? yes Hate? No........

[Packman]

Since the OP is already using Fidelity as a brokerage firm (if I understood correctly), why not use them as a passive advisor as well? They provide that service, and with a 2.5M portfolio, I think the fee will be less than .58%. And I beleive FIDO also absorbs all trading expenses in their fee structure. FIDO has brick and mortar in most larger cities. You get full access to several advisors for questions, and quarterly reviews (some by phone).

I'm a DIY'er using FIDO as a brokerage. I decided to look into this option just a few weeks ago, so I could give my DW some options, should anything happen to me.

[noone]

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Originally Posted by FinanceDude Disdain? yes Hate? No........

Many on this forum disrespect FAs. Noone knows how many hate them.

[urn2bfree]

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Originally Posted by Packman Since the OP is already using Fidelity as a brokerage firm (if I understood correctly), why not use them as a passive advisor as well? They provide that service, and with a 2.5M portfolio, I think the fee will be less than .58%. And I beleive FIDO also absorbs all trading expenses in their fee structure. FIDO has brick and mortar in most larger cities. You get full access to several advisors for questions, and quarterly reviews (some by phone). I'm a DIY'er using FIDO as a brokerage. I decided to look into this option just a few weeks ago, so I could give my DW some options, should anything happen to me.

Would they give me access to DFA? And would they allocate me in the most tax advantaged way?

[LOL!]

Fidelity should have no trading expenses to absorb. Fidelity has respectable Spartan index funds which can be used to build a very nice portfolio. Perhaps add in some of the no-commission ETFs and one should not be paying any commissions at Fidelity.

Other good no-commission places are Vanguard and WellsFargo. TDAmeritrade is also a good no-commission place in my opinion. Anybody who pays commissions nowadays just isn't paying attention.

[Gotadimple]

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Originally Posted by urn2bfree That is the charge for DFA funds as they are not on the no charge lists....it adds little but the difference between them is notable.

It is also the charge for any mutual fund not on the Select List or No Transaction Fee List, such as, Vanguard, and Fidelity.

As someone else said, you have many other choices as Schwab than Fidelity.

[frequenttraveler]

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Originally Posted by 73ss454 With all due respect, "superior asset allocation" are you kidding me. If you are paying your so called advisor 2% total of your portfolio and your SWR is 4%. Fees are after everything like the ER's on mutual funds and 12b 1 fees and such. Do you think it's worth it to you to pay someone 50% of your income for advice. I'd love to know about the advisor that can make me 50%+ more on my money with the superior asset allocation, stop it your killing me.

I would agree with you if the fee was 2% a year. I think the OP said it was .50%; looks like about .58% to me. This is a bogey that could be overcome with good management.

Also not sure whether the funds in question have 12-b1's. Nothing mentioned about any of that. Don't know the DFA funds' structure; wouldn't think they have those.

I am not sure this question is really about money. Seems like they have made up their mind already; they've lost confidence in the FA and that kills the deal.

[MichaelB]

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Originally Posted by frequenttraveler I would agree with you if the fee was 2% a year. I think the OP said it was .50%; looks like about .58% to me. This is a bogey that could be overcome with good management. Also not sure whether the funds in question have 12-b1's. Nothing mentioned about any of that. Don't know the DFA funds' structure; wouldn't think they have those. I am not sure this question is really about money. Seems like they have made up their mind already; they've lost confidence in the FA and that kills the deal.

This question is absolutely about money and confidence. A good financial advisor should know enough about DFA funds to understand their fees and fit in a financial plan, especially a passive portfolio.

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Originally Posted by REWahoo By the way, what do you do for a living?

So, what do you do?

[travelover]

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Originally Posted by MichaelB So, what do you do?

I'll go! I post here.

[km4hr]

Just a couple of thoughts:
1. During the annual planning sessions does the advisor discuss his performance? Are you convinced that he is worth it?
2. The best defense is a good offense. After shopping around, talking to friends, etc, tell your advisor that you are aware of similar services that charge X amount in fee's. If he is willing to accept that amount then you are willing to allow him the privilege of keeping your business. Otherwise you're gone.

[clifp]

A couple of thoughts. Most of the time when people post about adviser and fees it is some clueless bozo from Ameriprise, or Edward Jones which has them in a bunch of overpriced and poorly performing house mutual funds. They add insult to injury by tacking 1-2% fee and host of other silly fees.

The OP situations is significantly different. DFA along with American funds really are only two actively managed fund families that are arguably worth the additional expense. Second management fee of .58% is on the low side for most DFA advisers.

I'd certainly use the knowledge you've gained her to negotiate with them. You are willing to pay for their advice but there is a limit and neither inflation nor the performance of the DFA funds over the last 5 year are justification for paying more.

[urn2bfree]

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Originally Posted by clifp A couple of thoughts. Most of the time when people post about adviser and fees it is some clueless bozo from Ameriprise, or Edward Jones which has them in a bunch of overpriced and poorly performing house mutual funds. They add insult to injury by tacking 1-2% fee and host of other silly fees. The OP situations is significantly different. DFA along with American funds really are only two actively managed fund families that are arguably worth the additional expense. Second management fee of .58% is on the low side for most DFA advisers. I'd certainly use the knowledge you've gained her to negotiate with them. You are willing to pay for their advice but there is a limit and neither inflation nor the performance of the DFA funds over the last 5 year are justification for paying more.

Exactly-- I need help.they do routinely review performance bu I don't have the time to properly balance out the 13 funds held across our 5 accounts- one for each kid, 2 IRA 's and a joint account. Jiggering these to exploit the tax situation and balance value/ growth, International and domestic, bond stock etc, But knowing that they are charging me as much as they do for something that Can lkely be done as well by others using identical tools makes me not lose faith and given that they are thinking of RAISING?! my fees when I am thinking they are too high shows we are NOT on the same page. And they must think I don't know that I have other choices, even if they are better than many, they are not necessarily giving me the best deal.

[clifp]

Urn2bfree.

I have no personal knowledge of this guy, but Rick Ferri is regular on BogleHeads and seems to be respected over there. His company portfolio solutions provides an "efficiently managed portfolio" from a variety of fund families include DFA, and Vanguard for a fee .25%. His typical clients have assets in the 1-3 million. I think it is worth of a phone call and even if you don't switch to him the threat couldn't hurt.

A couple of months ago I got tired of my cable bill going up called up Direct TV and ordered the package. When I called up my cable provider not only did the immediately cut my bill from $122 to $93 for the same service, they through in a free on demand movie a month. They more than beat Direct TV price and I all had to do was threaten to leave.

[Buckeye]

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Originally Posted by urn2bfree Exactly-- I need help.they do routinely review performance bu I don't have the time to properly balance out the 13 funds held across our 5 accounts- one for each kid, 2 IRA 's and a joint account. Jiggering these to exploit the tax situation and balance value/ growth, International and domestic, bond stock etc, But knowing that they are charging me as much as they do for something that Can lkely be done as well by others using identical tools makes me not lose faith and given that they are thinking of RAISING?! my fees when I am thinking they are too high shows we are NOT on the same page. And they must think I don't know that I have other choices, even if they are better than many, they are not necessarily giving me the best deal.

Tell them you are exploring going with Evanson. Fees at Evanson would probably be about .1% or so for your current portfolio and would only go down as your portfolio grows since they are fixed and based on managing the allocations to the 5 funds, not the total amount of your assets.