Financial advisor fee

[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]

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]

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]

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.

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

So, what do you do?

 

[travelover]

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]

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]

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.

 

[urn2bfree]

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.

The cable analogy is EXACTLY the same one I made to my wife when she asked why we are even going to talk to our current advisor about this and not just switching to a lower cost advisor...we had the same experience with threatening to switch from cable to U-VERSE.

 

[REWahoo]

The cable analogy is EXACTLY the same one I made to my wife when she asked why we are even going to talk to our current advisor about this and not just switching to a lower cost advisor...we had the same experience with threatening to switch from cable to U-VERSE.

Of course this might lead to the conclusion that if your FA really had your best interest at heart he'd have lowered your fees long ago. Perhaps you should consider the possibility your wife may (curse the thought!) be right.

 

[jIMOh]

There are DFA advisors who charge .50 but do not require a $2000 or whatever "financial planning fee" every year. They may not be in your town but so what? is the $2000 fee a requirement? I would ask them for an contract that says you are waiving the annual planning fee.

Charging someone $2000 a year just to do AA and meet with you is ludicrous. If they hem and haw, tell them you're going to move the account unless they drop the fee. That line about "more money causes more liability" is pure BS. It doesn't cost them any more to manage $250,000 than it does to manage 10 times that much. They are already getting $12,500 a year from you in management fees, that should include ANY financial planning help you would possibly need........

I would add you should ask about the difference between
a) investment planning
b) financial planning
c) comprehensive financial planning

Paying $5000 or $10,000 for comprehensive financial planning every year is normal. Comprehensive accounts for all goals, all tax implications, all estate planning situations and managing debt too.

If you only focus on tax planning and asset allocation, I would not call that a comprehensive plan.

If you look at the fee you pay, as what rate are you paying per hour?

 

[haha]

I think that there is an appeal to paying a certain amount for something - sort of an implied value.

I was always amazed at the people that "just felt better" in a higher priced Mercury even though it was a Ford with a different grill.

Not really true. There were many years when Mercuries were more reliable than Fords; likely better assmbly. Also the dealers may have treated owners better. I had an Acura Integra GSR-I've been to Honda dealers and I've been to Acura dealers and I'll take Acura dealers.

Ha

 

[travelover]

Not really true. There were many years when Mercuries were more reliable than Fords; likely better assmbly. Also the dealers may have treated owners better. I had an Acura Integra GSR-I've been to Honda dealers and I've been to Acura dealers and I'll take Acura dealers.

Ha

I'll defer to your expertise. I only spend 27 years designing Fords and Mercurys, most assembled on the same line. Maybe some truth to the dealer experience.

 

[gerntz]

I'll defer to your expertise. I only spend 27 years designing Fords and Mercurys, most assembled on the same line. Maybe some truth to the dealer experience.

 

[jerome len]

Trust me......where have you heard that before? But......if you're not really an active investor, go with Vanguard. It's cheap and honest. I don't know much about AF and 50 basis points is far less expensivee than others. So, if you want advice stay with AF, if you hate paying, drop AF and go to Vanguard. very simple choices but for you, it could be a difficult decision. Good luck.

 

[urn2bfree]

I would add you should ask about the difference between
a) investment planning
b) financial planning
c) comprehensive financial planning

Paying $5000 or $10,000 for comprehensive financial planning every year is normal. Comprehensive accounts for all goals, all tax implications, all estate planning situations and managing debt too.

If you only focus on tax planning and asset allocation, I would not call that a comprehensive plan.

If you look at the fee you pay, as what rate are you paying per hour?

well I guess that begs another question...what do they do in a COMPREHENSIVE PLAN--because they did suggest that I have an estate plan (I already have a lawyer for that) I don't have any debt to manage, they did review my insurance needs and said I should get rid of all of my life insurance policies because I had more than enough $$$ to cover my obligations should I croak and I was wasting the premiums. But that is all done...so why should I go on paying $14000+ a year and more as my nest egg grows? I am also thinking it would save some little bit to remove my kids's college accounts as one will start this fall and one in 3 years and so there is little advantage to be gained from their "expertise" or even the DFA advantage in such a short run before I start depleting those accounts that have to be conservatively invested at this point anyway....

 

[Gonzo]

Travelover...

How did Lincoln fit in the Fords and Mercury mix?

 

[jIMOh]

well I guess that begs another question...what do they do in a COMPREHENSIVE PLAN--because they did suggest that I have an estate plan (I already have a lawyer for that) I don't have any debt to manage, they did review my insurance needs and said I should get rid of all of my life insurance policies because I had more than enough $$$ to cover my obligations should I croak and I was wasting the premiums. But that is all done...so why should I go on paying $14000+ a year and more as my nest egg grows? I am also thinking it would save some little bit to remove my kids's college accounts as one will start this fall and one in 3 years and so there is little advantage to be gained from their "expertise" or even the DFA advantage in such a short run before I start depleting those accounts that have to be conservatively invested at this point anyway....

You decide what fee is appropriate for comprehensive analysis, and how often you want the analysis done.

And how many hours will it take to put this analysis together?

For example, an estate plan is not one and done, it should be looked at every second or third year- make sure beneficiaries are still alive and if you named an executor to your will and no longer have that person in your life, get that updated... maybe you named a charity you don't work with anymore...

Insurance is a good way to leverage wealth... it does not always make sense to get rid of it, even with higher wealth. Is this a fee only advisor, or a fee based advisor? If you don't know the difference, start there and you might discover why the fees are so high (fee only is the only way to go, that is what I do for a living...)

A financial plan covers one of 4 disciplines:
Accumulation
Distribution
Protection
Legacy (estate planning).

For example you might have 7 accumulation goals, its possible a financial plan only covers one of the 7 goals (retirement). If the plan is comprehensive, it covers all issues in all 4 disciplines.

 

[walkinwood]

Is the investment in DFA giving you enough added return over a similar portfolio comprised of ETFs or low cost index funds, to pay your financial advisor? If the answer is NO, then maybe you should give your adviser his $2000, have him create a financial plan, and then implement it yourself.

If you can spare a couple of hours a week to do some study, track your portfolio and re-balance when necessary, you can do this yourself with the same asset allocation you have today. Implement the plan using ETFs or no-load, low cost index funds.

Maybe start with a small amount and when you feel confident in your ability to match your financial planner's performance, take on the whole amount.

You'll have to take a deep look at yourself and determine if you can manage your own money & still sleep. A financial planner does give you a person to blame when things go south - however, that does nothing for your financial reality.

 

[FinanceDude]

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

No, only certain firms can use DFA, and they are only distributed through DFA advisor network.

All you have brought up is the fees. Are you happy with DFA and/or American Funds or not??

 

[urn2bfree]

No, only certain firms can use DFA, and they are only distributed through DFA advisor network.

All you have brought up is the fees. Are you happy with DFA and/or American Funds or not??

I am very satisfied that DFA adds value enough to generally pay up for the privilege. that said I don't feel any need to Overpay if I can get the same for less. I am fairly certain I have neither the time nor the inclination to myself at this time...and without DFA I don't believe I can match the returns... their funds are extremely well run and have very low expense ratios that are hard to beat even with Vanguard.

I pay an attorney a yearly retainer to manage my estate and had him long before I had this advisor, so I don't see how this planner earns anything on that front....and I do believe the advice to get out of my insurance plans was a wise use of my money. So that was food, but not worth on going payment.

I am learning that outside of my little community there are plenty oft advisors who are fee only as my advisor is... But whose fees are more reasonable... I really failed to look outside of my area when I settled on this one, my bad. But I am learning and I have these forums to thank.