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Re: fixed fee investment advisor
Old 05-11-2007, 04:55 PM   #21
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Re: fixed fee investment advisor

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Originally Posted by Rich_in_Tampa
Do you think there is net value for this type of investor in using a financial advisor charging 1 to 1.5% percent-of-assets? Fee-for-service may be a different story. I'm not asking in a cynical or challenging way, just curious and open-minded about it.
I think the answer is no.

I've run across too many people that have an "advisor" that takes 1 to 1.5% off the top every year and puts them into high fee (1.5 to 2%) mutual funds. I have always assumed that there was some form of kick back involved for putting people into the high fee funds.

So, my basic experience says that people get put into situations where they are 2 to 3% poorer as a result of the "advisor" versus reading a few books/articles on asset allocation and the impact of fees.

I have never run across anyone with an advisor that was being "taught" anything other than to have blind faith in trust their advisor. I have not run across anyone with an advisor outperforming a broad mixture of asset classes over a long period of time. They were, however, always "outperforming" something. Unfortunately, the people I have talked with really didn't usually have a clue.

The "not having a clue" aspect is the only reason I do not call for making the activity of calling oneself a "financial planner" a capital crime. Education is the key for the great unwashed masses of us poor folks with less than many millions to possibly get there someday. I prefer to think that I'll never make it that high because I'll have the good sense to ER before that time comes.

I do know that back in the days when I had a "broker" that was usually the net result of taking his advice. When discount brokers started to be popular, all of the former brokers became (overnight) "financial advisors" where for a "minimal fee" they would manage your money. I never fell for the pitch so I don't have my personal tragedy to tell. I do know that if I had my return shaved by 2 to 3% every year I would be a lot farther from ER than I am today.

If by some chance I found myself in a complicated tax or estate issue, I would certainly hire the necessary experts to provide me with advice. I can assure this forum that I won't be paying 2 to 3% of my assets every year forward for this consultation.

I know there are a number of "financial advisors" on this forum and there certainly is a place for their input. Maybe, just maybe, some of these advisors provide good value to their clients. If they do, they'll be the first ones I've run across. With that being my history, I will continue to treat their comments with a grain of salt.
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Re: fixed fee investment advisor
Old 05-11-2007, 05:03 PM   #22
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Re: fixed fee investment advisor

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Originally Posted by FinanceDude
It's not scientific, but FWIW, I have only met 3 people with an investable portfolio over $2 million that go it alone. However, I have met MANY MANY people with a portfolio under $1 million that go it alone..................
Whats the percentage of people that you know that have over $2M vs those that have under $1M?

Whats the percentage of people that have over $2M and therefore dont give a hoot how much they're paying someone to do some work for them vs those under $1M?

We might not have the cause and effect straight here

I've got your low fixed fee investment advice right here. Buy a target retirement fund in a date compatible with your risk tolerance and/or date of actual retirement. Now send me five bucks.
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Re: fixed fee investment advisor
Old 05-11-2007, 07:29 PM   #23
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Re: fixed fee investment advisor

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Originally Posted by 2B
I think the answer is no.


I know there are a number of "financial advisors" on this forum and there certainly is a place for their input. Maybe, just maybe, some of these advisors provide good value to their clients. If they do, they'll be the first ones I've run across. With that being my history, I will continue to treat their comments with a grain of salt.
I'm not an advisor per se, but I do work in an advisory (i.e fee only) firm. I can't speak to what you've seen as it isn't the business I know nor typical of what I see. There are many firms who do charge reasonable fees much less than the 100 to 150bps you mentioned. Despite what you say there are many clients who are happy with the service they get, they certainly have many other choices today. I know for a fact that many of the clients our firm works for are employed in other areas of the financial services business. Perhaps they too are just ignorant folks being taken for a ride, but if that were to case the relationships would be short which is the total opposite of what happens.

I'm sorry that you have had bad experiences in the past, but it's no reason to steer other people away from the valuable advice that a good advisor can get. Sadly as is the case for our firm employing good people (hopefully I'm included in that list) is a very expensive proposition. Therfor we aren't able to offer our services to those with less than 1.5-2M in liquid assets (without charging some of those off the wall high fees). Perhaps if you're so intent on it you should go file a form ADV and start advising them for free?
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Re: fixed fee investment advisor
Old 05-11-2007, 07:38 PM   #24
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Re: fixed fee investment advisor

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Originally Posted by saluki9
Many of the client's we work with have a very high level of financial sophistication. There is still a lot of value to be had in a good advisor, something that you can't replicate on an internet forum or by reading a few books.
I read this saluki9 and wondered if you could give a "for instance" of the "lot of value to be had in a good advisor". Should I worry that I am missing something? So far, I haven't seen any benefit from an advisor for me. OK, I can think of one thing: My spouse will not rollover an old 401k with assets of about 0.1% of our net worth and terrible funds. I can nag until the divorce papers are served, so maybe an advisor would be more diplomatic and actually get something done?
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Re: fixed fee investment advisor
Old 05-11-2007, 08:13 PM   #25
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Re: fixed fee investment advisor

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Originally Posted by LOL!
I read this saluki9 and wondered if you could give a "for instance" of the "lot of value to be had in a good advisor". Should I worry that I am missing something? So far, I haven't seen any benefit from an advisor for me. OK, I can think of one thing: My spouse will not rollover an old 401k with assets of about 0.1% of our net worth and terrible funds. I can nag until the divorce papers are served, so maybe an advisor would be more diplomatic and actually get something done?
Because I was trying to be polite and avoid saying that there are a lot of "know it alls" here. It comes down to this, if you feel that you're an expert in everything, or that any topic can be learned by a few minutes of web surfing then you aren't a good candidate for hiring an advisor. That being said, you would be shocked at the variety of questions we get from people.

Should I leave my job?
Is this severance package fair?
What health plan should I take at work?
Can you help my kids with... (NAME ANYTHING)
Can you help me find a realtor
Should I buy a second home
Where should I buy a second home
budgeting
What company should I use for...
Bill payments
please charter me a jet to and from....
Should I contest my property taxes?
should I exercise my stock options?
Should I take this new job?
Will you meet my attorneys, accountants, etc and make sure they are doing what they are supposed to?
Can you arrange to have my car moved from one city to another?
Are my other advisors charging me fairly?
Should I invest in my (sons, BILs, FILS) business?
Can you find me a 1031 exchange property?
Should I keep paying my insurance premiums
should I have an insurance trust?
How should we divide our assets up among our kids?
Who should my trustee be?
Will you be my trustee?
Can you get me a mortgage?
Can you help my relative get out of debt?
Will you set up our Quicken files to download all of our accounts
will you run performance reports for our outside assets?
Can you help find insurance for my Florida, CA, NC, condo, ours has been cancelled?


That's a small list of the questions a good advisor gets. If the average person reading this thinks about what they have learned in this forum about planning and their investments, imagine what you learn when you looks at hundreds of people's personal finances? As for me, I'm just the money guy, so I sure don't have the answers to all those questions. I hit the planners up at my shop with questions almost as much as the clients do.





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Re: fixed fee investment advisor
Old 05-11-2007, 08:42 PM   #26
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Re: fixed fee investment advisor

saluki9: That's a great list of questions. Looks somewhat like family office stuff. Thanks!
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Re: fixed fee investment advisor
Old 05-11-2007, 09:34 PM   #27
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Re: fixed fee investment advisor

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Originally Posted by Cute Fuzzy Bunny
Whats the percentage of people that you know that have over $2M vs those that have under $1M?

Whats the percentage of people that have over $2M and therefore dont give a hoot how much they're paying someone to do some work for them vs those under $1M?

We might not have the cause and effect straight here

I've got your low fixed fee investment advice right here. Buy a target retirement fund in a date compatible with your risk tolerance and/or date of actual retirement. Now send me five bucks.
My average client has a net worth of about $1.5 million. My largest client has $25 million, of which I manage $10 million. I am fairly sure your net worth is over $3m, and you do it yourself, but that's not a good sample either...........

I SAID it was MY sample, NOT a scientific one...........

Most people hire advisors because either:

1)They don't WANT to learn how themselves
2)They don't want to take the TIME to learn how
3)They want someone else to be ACCOUNTABLE or BLAME
4)Their finances are VERY COMPLEX (maybe 1% of all folks)
4)Some combination of the above

Investing in products is easy, the whole industry is commoditized by the Internet, it's GOOD ADVICE that's hard to come by..........

Bogle said almost ALL fund managers NEVER beat the index, and that's true.........however, I don't recall him saying people should NEVER seek advice either, and I've read everything he's ever written............

If a target fund is your cup of tea, that's fine, but I watch all of them and I think most folks could outperform them picking individual funds themselves...................


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Re: fixed fee investment advisor
Old 05-11-2007, 09:41 PM   #28
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Re: fixed fee investment advisor

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Originally Posted by FinanceDude
If a target fund is your cup of tea, that's fine, but I watch all of them and I think most folks could outperform them picking individual funds themselves...................
If you have taxable, tax-deferred and tax-free accounts, then a target retirement fund in all 3 places would not be the most tax efficient.
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Re: fixed fee investment advisor
Old 05-11-2007, 09:47 PM   #29
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Re: fixed fee investment advisor

Quote:
Originally Posted by FinanceDude

Most people hire advisors because either:

1)They don't WANT to learn how themselves
2)They don't want to take the TIME to learn how
3)They want someone else to be ACCOUNTABLE or BLAME
4)Their finances are VERY COMPLEX (maybe 1% of all folks)
4)Some combination of the above
I think there is a third number 4: They are scared $h!tle$$ of screwing up.

Or maybe that's a second number 3...

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Re: fixed fee investment advisor
Old 05-11-2007, 09:57 PM   #30
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Re: fixed fee investment advisor

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Originally Posted by REWahoo!
I think there is a third number 4: They are scared $h!tle$$ of screwing up.

Or maybe that's a second number 3...
Hmmmmmm.....hadn't thought about that............it is VERY DIFFICULT to sue yourself if the you know what hits the fan..........
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Re: fixed fee investment advisor
Old 05-11-2007, 10:42 PM   #31
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Re: fixed fee investment advisor

Quote:
Originally Posted by FinanceDude
Most people hire advisors because either:

1)They don't WANT to learn how themselves
2)They don't want to take the TIME to learn how
3)They want someone else to be ACCOUNTABLE or BLAME
4)Their finances are VERY COMPLEX (maybe 1% of all folks)
4)Some combination of the above
Did you ever think that some people know that there may be some things that they don't know and could use a 2nd opinion? I used the FA to verify that I was ok. Also got some different points of view. Prudent I think.
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Re: fixed fee investment advisor
Old 05-11-2007, 11:31 PM   #32
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Re: fixed fee investment advisor

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Originally Posted by megacorp-firee
Did you ever think that some people know that there may be some things that they don't know and could use a 2nd opinion? I used the FA to verify that I was ok. Also got some different points of view. Prudent I think.
Smart. I think it fits in the factors I listed above...........
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Re: fixed fee investment advisor
Old 05-12-2007, 06:11 AM   #33
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Re: fixed fee investment advisor

I still think that the only reason financial advisors exist is that people don't have a clue about managing their own money and don't really want to learn. They are overwhelmed with the thought of doing it, they think its far more difficult than it is and they need someone to be their "nanny" to take care of them.

I've run across many people that have financial advisors. I am always amazed that they really don't understand how much the advisor is costing them. None of the people I've talked with have ever had a fee only advisors. They have always had the 1 to 1.5% off the top plus high fee investments. Investments range from standard asset allocations not much different than you can find in reasonable books and articles to wild and crazy that makes me wonder what the advisor is doing besides maximizing his fees. The best move I've seen was the variable annuity that was bought inside an IRA. I can't think of any way to justify that.

If I felt lost in the financial wilderness, I'd be happy to spend a few hundred or even a thousand dollars for a real personalized plan. I've consulted lawyers and a CPA for wills and estate planning. I think they were worth the money but after I wrote them their check they no longer had their hands in my cookie jar.
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Re: fixed fee investment advisor
Old 05-12-2007, 06:14 AM   #34
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Re: fixed fee investment advisor

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Originally Posted by 2B


If I felt lost in the financial wilderness, I'd be happy to spend a few hundred or even a thousand dollars for a real personalized plan. I've consulted lawyers and a CPA for wills and estate planning. I think they were worth the money but after I wrote them their check they no longer had their hands in my cookie jar.
I don't know what the cost of living is where you live, but stop and think what kind of person you would be hiring to get a personalized plan for $1K?

Most of the decent planners start at $4-5K as a base fee with update fees each year after that.

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Re: fixed fee investment advisor
Old 05-12-2007, 06:25 AM   #35
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Re: fixed fee investment advisor

depends on ones own depth of knowledge and complexity of the plan. i consider myself investment savy but for varoius reasons i choose to follow 2 newsletters for the last 20 years which serve me well. im also considering seeing a proffessional to get a handle on incorporating the various annuty products avail into my eventual income stream affording me a larger monthly draw.

im weak on knowledge in those areas . my plan is to structure the income buckets with cd's bonds and for extra kickers utilizing index linked annuties with guaranteed floors not as a stock proxy but to enhance the fixed income buckets.

i wouldnt pay an advisor to manage my money though, only to help me sort through products and get ideas.
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Re: fixed fee investment advisor
Old 05-12-2007, 07:11 AM   #36
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Re: fixed fee investment advisor

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Originally Posted by saluki9
I don't know what the cost of living is where you live, but stop and think what kind of person you would be hiring to get a personalized plan for $1K?

Most of the decent planners start at $4-5K as a base fee with update fees each year after that.

I guess I'm going to have to put "fee only planners" in the group of overpriced and not possibly worth their fee.

For a "typical" wage slave with the requisite 401k, Roths and possibly a little after tax money, I can't imagine a personalized plan requiring more than 8 hours of work. An 8 hour plan would also be significantly more complicated than I would need since I have a pretty simple life. That works out to $500 or more an hour. You can get a pretty high dollar lawyer in Houston for that. CPAs are much less expensive.

I guess the cost comes down to how many people walk through the front door in a given day. If I had 1 a day, I could make a great living doing the simple plan 99% of us need. If I had 1 every other week, I'd have trouble getting by on $4000 per plan with reasonable office expenses. Of course, I don't change diapers or wipe noses. I would expect to be dealing with adults which I realize is not always going to happen. I'd want at least $10,000 for a plan for someone that wanted a "nanny."

When I talk to people about their planner situation, they are always worried about the time it would take to do the "work." I tell them I spend about an hour every year rebalancing. Once you pick your asset allocation, you are effectively done. Again from what I've seen, the typical planner is not very active in moving assets around unless there is a commission involved. Depite the fees paid, most people I've talked with that have a planner still do not have a clue about where their money is or what is happening with it.



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Re: fixed fee investment advisor
Old 05-12-2007, 09:41 AM   #37
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Re: fixed fee investment advisor

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Originally Posted by 2B


For a "typical" wage slave with the requisite 401k, Roths and possibly a little after tax money, I can't imagine a personalized plan requiring more than 8 hours of work. An 8 hour plan would also be significantly more complicated than I would need since I have a pretty simple life. That works out to $500 or more an hour. You can get a pretty high dollar lawyer in Houston for that. CPAs are much less expensive.
You've hit on one of the reasons that there aren't many hourly fee only planners. Getting clients in any business is tough. Your attorney, accountant, RE broker etc all have to market their services. Once they have the client they then have to earn some revenue off of them. Once somebody has mastered the skill of obtaining clients they have to either be wealthy already, or a true humanitarian soul to survive on doing $1K financial plans. I suppose if you have a factory assembly line shop it's possible to do them for that price, but I would doubt the quality of advice you would get.



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Re: fixed fee investment advisor
Old 05-12-2007, 10:10 AM   #38
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Re: fixed fee investment advisor

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Originally Posted by saluki9
You've hit on one of the reasons that there aren't many hourly fee only planners. Getting clients in any business is tough. Your attorney, accountant, RE broker etc all have to market their services. Once they have the client they then have to earn some revenue off of them. Once somebody has mastered the skill of obtaining clients they have to either be wealthy already, or a true humanitarian soul to survive on doing $1K financial plans. I suppose if you have a factory assembly line shop it's possible to do them for that price, but I would doubt the quality of advice you would get.



There's a segment in "The Godfather" where Vito says "I don't care how a man makes his living as long as it doesn't affect my family" or something similar. I'm saying the same to you and the other planners that frequent this forum. Personally, I don't have any interest in the service for either a fee or percent of assets. I feel comfortable with where I'm at and where I'm going.

Unfortunately, there is a market for the service because people won't take the time to learn the basics or lack the confidence to take charge of their own money. In the end they turn their money over to someone that has a vested interest in getting it from them. I could never be in the business because I wouldn't be able to take people's money when they should be able to do as well on their own.

I have been a well know "financial prophet" for years and have religiously preached to people to fire their financial advisor, take charge and meet their goals sooner. In all of those years I have seen unbelieveable stunts done by supposed "advisors" and shown many people how their horrific fees are bleeding their returns. In all those years I have only converted one person to do just that.

I suppose I can't object to them being prey.
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Re: fixed fee investment advisor
Old 05-12-2007, 10:34 AM   #39
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Re: fixed fee investment advisor

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Originally Posted by 2B
...In all those years I have only converted one person to do just that.

I suppose I can't object to them being prey.
I'll bet you have finally stopped? Prey are what drive the market economy.
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Re: fixed fee investment advisor
Old 05-12-2007, 12:48 PM   #40
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Re: fixed fee investment advisor

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I'll bet you have finally stopped? Prey are what drive the market economy.
No. I keep trying.

Financial planners and annuities -- they will go on despite me. The most I can hope for is that I make a difference sometimes.
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