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Old 04-17-2016, 05:15 PM   #41
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Yes, it has occurred to me that, in retirement, my FA fees could be a high percentage of my annual spend. And that sort of bothers me. (The fees are actually somewhat less than the 60 bps x total invested assets because around 20% of what we have is currently outside of the advisor -- but the point is the same).

I may renegotiate the fee arrangement with the advisor when I retire. Or perhaps before. We'll see...

I may also buy a fixed annuity (or several in an effort to manage counterparty risk and stay below the state guaranty limits), which would reduce AUM and management fees (though that is not why I would do it). I don't have to annuitize, of course, but I have somewhat of a "safety first" orientation, and I might sleep better knowing that I have X dollars per year "guaranteed" even in a melt down scenario.

It was my FA who suggested I at least consider an annuity as part of the picture (although one might think an FA would not make that suggestion, since it reduces AUM and therefore management fees...)
Ask the FA if he benefits in any way when you buy an annuity from the insurance company he recommends...
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Old 04-17-2016, 05:55 PM   #42
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Ask the FA if he benefits in any way when you buy an annuity from the insurance company he recommends...
You beat me to it. Annuities usually produce a really nice commission for the person who sells them.

I have an FA. He charges 1% of the assets in the two "Managed" accounts I have with the brokerage (one before- and one after-tax), but we always look at the whole picture, including the non-managed accounts and one I have at Fidelity. That brings it down to about 50 bps.

Frankly, I AM moving to more ETFs and fewer mutual funds, with individual bonds, large holdings of AAPL and BRK.B and some small stock holding sin the Fidelity account that I trade independently. I've been buying a lot of SPY lately. I'm willing to pay for advice because the pile is large and I value his insight on the market. I've dealt with bozos who sell whatever they're told to sell, and parrot whatever their analysts say without processing it through their own brain first. He's not one of them. I have to admit that if he chucked it all to join an ashram, though, I'd probably go it alone rather than try and find someone else.
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Old 04-17-2016, 07:20 PM   #43
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I have no problem with the term "wealth management" it's kinda like "pre-owned" cars eh?

My guy charges 1%. For that I get a guy to talk to and you know what? When I call him he answers the phone. I think that's pretty cool. As I said, I don't own mutual funds, I own large cap dividend paying stocks. I found this very interesting;

With fund expenses, how high is too high? - Ultimate Guide to Retirement

I can also own large cap US stock mutuals and guess what? They charge 1% too.

And I don't get a guy to talk to or help me with "other financials" like writing covered calls on stock I don't want to sell and then buying them back when the price goes the wrong way or doing Roth conversions with a mere phone call.

I like my guy and he makes me dough. Easy.
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Old 04-17-2016, 07:28 PM   #44
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I have no problem with the term "wealth management" it's kinda like "pre-owned" cars eh?

My guy charges 1%. For that I get a guy to talk to and you know what? When I call him he answers the phone. I think that's pretty cool. As I said, I don't own mutual funds, I own large cap dividend paying stocks. I found this very interesting;

With fund expenses, how high is too high? - Ultimate Guide to Retirement

I can also own large cap US stock mutuals and guess what? They charge 1% too.

And I don't get a guy to talk to or help me with "other financials" like writing covered calls on stock I don't want to sell and then buying them back when the price goes the wrong way or doing Roth conversions with a mere phone call.

I like my guy and he makes me dough. Easy.
Glad you are happy.
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Old 04-17-2016, 07:32 PM   #45
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Personally I have no issue with the FA title or function.

For me the choice is simple math.

If I have a million $ and I generate 40K of income. How much of that operating profit am I willing to allocate to SG&A? 10%, 30%?

So if the advisor charges 1% that's 10K so that means my SG&A is 25%. That assumes he does everything... taxes, investing advice, trending fees, legal etc. If he doesn't then maybe that's another 5K so now were at 30%.

That seems high. I think my "family Corp" shouldn't pay more than 15%-20% SG&A.

So let's say I have 20 million. That provides 800K in cash flow so 15% is 120K. At that rate I could start considering hiring people full time.

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Old 04-17-2016, 07:39 PM   #46
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Glad you are happy.
Happy, but misinformed.

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I can also own large cap US stock mutuals and guess what? They charge 1% too.
Vanguard Large-Cap Index Fund Admiral Shares (VLCAX)

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Expense ratio - 0.09%
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Old 04-17-2016, 08:07 PM   #47
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What does the FA do for me? In no particular order: (1) helps me avoid making emotional or "reactive" financial or investment decisions -- which in a perfect world I would not have to pay someone to do, because it is within my own control, but alas we humans are imperfect;
Perhaps we could start a non-profit ER Forum services division. One of the services could be a door that you walk into to help 'deter' you from making emotional decisions....just like another oft-referenced video from the past:

https://youtu.be/kQFKtI6gn9Y?t=237

First visit free! Or even have the service delivered to your home for a small additional fee.
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Old 04-17-2016, 08:07 PM   #48
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Old 04-17-2016, 09:56 PM   #49
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The emotional issue is real.

I own facebook. I hate facebook, I'm not on facebook and I never will be.

I made a lot of dough owning facebook -
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Old 04-17-2016, 10:04 PM   #50
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The emotional issue is real.....
I can relate. I went through the "dot com" boom buying and selling on emotion.......didn't do so well. Lost a good chunk of money. Now I've learned to ignore most of the things that used to worry me. We all live and learn.
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Old 04-18-2016, 07:07 AM   #51
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The emotional aspect of investing is huge and the ability to sit back and do nothing while the market gyrates up and down can not be overstated. In the mean time I'll own the whole market and pay an ER of .05 and sleep good at night regardless of what it does. It ain't rocket science, it's simple math.
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Old 04-18-2016, 08:26 AM   #52
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The emotional issue is real. ...
OK, but what I'm suggesting is it is better to 'cure' it with education (one time cure, at very no/low cost), than to 'treat' it with a hand-holding FA (at very high, recurring costs).

It just seems like paying to abdicate your own responsibility. To say "I can't avoid selling at the bottom", but I can hire someone to tell me "do not sell at the bottom"? Why not eliminate the middle-man? You are just paying them to tell you to do what you are admitting is the right thing to do in the first place. So just do it!

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Old 04-18-2016, 09:43 AM   #53
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I think you guys missed my point.

If it was up to me I would not have bought facebook. Never. Because I hate the Co. Do you remember their little "social experiment" where they found that people fed a negative stream reacted negatively and people fed a positive stream reacted positively? Real rocket science that was eh? They treated people like lab rats.

I own facebook because my adviser thought it was a good financial play. He was right. That play made me a lot of dough that I wouldn't have made all by myself. Because I hate facebook.
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Old 04-18-2016, 10:21 AM   #54
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I think you guys missed my point.

If it was up to me I would not have bought facebook. Never. Because I hate the Co. Do you remember their little "social experiment" where they found that people fed a negative stream reacted negatively and people fed a positive stream reacted positively? Real rocket science that was eh? They treated people like lab rats.

I own facebook because my adviser thought it was a good financial play. He was right. That play made me a lot of dough that I wouldn't have made all by myself. Because I hate facebook.
Not a good reason to use an FA, not just IMO, but the facts bear this out.

If an FA advised a stock that sank, does that mean FAs are no good?

The facts are, studies show that advisors simply do not consistently beat broad market indexes over time. If you invest in a broad index, you are not taking specific stock risk. No way your FA can be right all the time, and unlikely that he will beat the index over time.

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Old 04-18-2016, 10:54 AM   #55
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OK, but what I'm suggesting is it is better to 'cure' it with education (one time cure, at very no/low cost), than to 'treat' it with a hand-holding FA (at very high, recurring costs).

It just seems like paying to abdicate your own responsibility. To say "I can't avoid selling at the bottom", but I can hire someone to tell me "do not sell at the bottom"? Why not eliminate the middle-man? You are just paying them to tell you to do what you are admitting is the right thing to do in the first place. So just do it!

-ERD50
This is one of those cases where you need to get outside of the box and stop thinking of everyone and their personal situation being you and yours.

YOU might be able to cure an issue with emotional or reactive behavior in regard to handling investments, but not everyone can. How can you even begin to think you can accurately place yourself in the shoes of others?

Sometimes personalities and behaviors are not something an individual can modify. For some, and I know a few, just being able to choose a competent, relatively low cost FA (avoiding shark attacks, etc.) is enough of a challenge.
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Old 04-18-2016, 10:58 AM   #56
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That's just one specific reason I like my FA. I also don't pay buy or sell fees.

To each his own I guess, whatever floats your boat.

I'm sure that I could DIY this stuff at less cost and treat it as sort of "another hobby" but I have enough hobbies already and don't want another. So I pay more to have "my guy" keep track of my bag I guess. So far so good. We'll see how it goes down the road.
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Old 04-18-2016, 11:02 AM   #57
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This is one of those cases where you need to get outside of the box and stop thinking of everyone and their personal situation being you and yours.

YOU might be able to cure an issue with emotional or reactive behavior in regard to handling investments, but not everyone can. How can you even begin to think you can accurately place yourself in the shoes of others?

Sometimes personalities and behaviors and not something an individual can modify. For some, and I know a few, just being able to choose a competent, relatively low cost FA (avoiding shark attacks, etc.) is enough of a challenge.
I agree with you - if someone really cannot modify their behavior, than some sort of FA/guidance is probably the right thing for them. I just get the impression that is really very, very few people, and if they took a little time effort to educate themselves, DIY would work for them. I'm trying to encourage people to educate themselves and try to modify their behavior - I get the impression that some of these posters assume it is difficult/impossible, w/o even trying.

I think an analogy I've made in the past goes like this - Flying cross-country is far, far safer than driving cross-country. Emotions don't change that, it is a fact. But if an individual is going to be an emotional wreck, because they have an irrational fear of flying that they cannot overcome (and therefore won't enjoy this planned trip at all), than driving may be the right choice for them. It's still statistically more dangerous though, and they should accept that.

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Old 04-18-2016, 11:03 AM   #58
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That's just one specific reason I like my FA. I also don't pay buy or sell fees.

To each his own I guess, whatever floats your boat.

I'm sure that I could DIY this stuff at less cost and treat it as sort of "another hobby" but I have enough hobbies already and don't want another. So I pay more to have "my guy" keep track of my bag I guess. So far so good. We'll see how it goes down the road.
Fine, but it a myth that this takes much time/effort at all. Set an AA and forget it.

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Old 04-18-2016, 11:16 AM   #59
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I just get the impression that is really very, very few people, and if they took a little time effort to educate themselves, DIY would work for them......


I'm trying to encourage people to educate themselves and try to modify their behavior - I get the impression that some of these posters assume it is difficult/impossible
This just doesn't seem like you ERD50. In thread after thread you have emphasized the extreme importance of researching and knowing the facts concerning a subject and not just going with "impressions."

Are you saying you haven't done the research here? You don't know the data concerning the outcome of efforts to change personality traits that impact investing, including personality traits that could lead one to make "wrong" moves due to reactionary tendencies?

Your impressions here makes about as much sense as the folks who are under the impression that "all" chemicals are bad in agriculture.
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Old 04-18-2016, 11:38 AM   #60
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This just doesn't seem like you ERD50. In thread after thread you have emphasized the extreme importance of researching and knowing the facts concerning a subject and not just going with "impressions."

Are you saying you haven't done the research here? You don't know the data concerning the outcome of efforts to change personality traits that impact investing, including personality traits that could lead one to make "wrong" moves due to reactionary tendencies?

Your impressions here makes about as much sense as the folks who are under the impression that "all" chemicals are bad in agriculture.
I don't know that there is a good source of data on it, emotions are hard to measure objectively, so I'm just expressing my thoughts here, based on the posts I see here. I don't think I ever sad "all" regarding any of this? The chemical discussion is an objective thing, we know that water is a chemical - this discussion isn't even close to that.

I'll add to my previous statement - there is an entire industry, along with 'conventional wisdom', that this is oh so complex, and professional help is needed. So voices here help to provide a counter to that biased view (biased, since those industries profit from the belief, and data does not support their view).

Further, if an individual really does feel they would do better with professional help - why not just pssssst, Wellesley? There you have pros making decisions to buy/hold/re-balance as the market changes, and they have a proven, long term transparent track record. If I were to go seek out a managed account, I would take that over the individual FA that people like me would have access to.

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