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How much would you have to have to pay an FA
Old 06-14-2017, 01:01 PM   #1
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How much would you have to have to pay an FA

Is there a size of portfolio that makes it sensible to employ a Financial Adviser? My response was always "NO"......but as I get older and my portfolio increases I can see asking for advice on estate planning....but not investing.
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Old 06-14-2017, 01:06 PM   #2
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Yes...when it becomes so large that it takes teams of people to manage. You think Ted Lerner does and keeps track of all of his investments, lol. The largest property owner in washington dc...I think not.

For the rest of us who have $0 to multi millions...we cant even begin to imagine what it takes to keep track of a billionaires investment portfolio.
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Old 06-14-2017, 01:32 PM   #3
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I applied for a job once, it paid 105k a year (2007)to work 4 days a week to manage the guys art holdings. Needless to say i did not get the job, they wanted to know if i had a full gun carry permit. Would I be interested in driving the family around when they were in town and the regular chauffeur was unavailable. These are the folks that have teams of people managing their stuff.
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Old 06-14-2017, 01:40 PM   #4
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I think that the issue becomes managing the whole financial package, not 'what should I invest in'. Estate planning, tax planning, keeping track of assets, and so forth.
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Old 06-14-2017, 01:55 PM   #5
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FAs are not estate planners even if you find one who thinks he/she is. Find an attorney in your state that specializes in estates.

Re portfolio, my impression is that it takes $1m to interest a true Registered Investment Advisor. These guys are legally fiduciaries and that is what you want. I think sticker prices for FAs like this start at 2% for $1M and slide down from there. I just helped select an FA for a nonprofit and at a $4M level, we were quoted prices ranging from 40 to 75bps from the 8 firms we sent RFPs to. Obviously, they knew they were in a competition and came with sharpened pencils.
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Old 06-14-2017, 06:37 PM   #6
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FAs are not estate planners even if you find one who thinks he/she is. Find an attorney in your state that specializes in estates.

Re portfolio, my impression is that it takes $1m to interest a true Registered Investment Advisor. These guys are legally fiduciaries and that is what you want. I think sticker prices for FAs like this start at 2% for $1M and slide down from there. I just helped select an FA for a nonprofit and at a $4M level, we were quoted prices ranging from 40 to 75bps from the 8 firms we sent RFPs to. Obviously, they knew they were in a competition and came with sharpened pencils.
With less than that, I'm at the upper end of your quotes - think your getting a fair price.
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Old 06-15-2017, 06:22 AM   #7
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I think it depends more on your interests and personality than the size of your portfolio, unless you're talking about $10M+. If you get peace of mind from professional help and you like not spending time managing your portfolio, an FA could be helpful. Also if you tend to panic in a market downturn, an FA will help prevent you from selling at a low point. I managed our portfolio myself for years but got an FA 3 years before planned ER to help me transition our portfolio from purely growth to partly income-generating. It made me feel better having an FA confirm our ER readiness also.

Still have our FA post-ER, and will probably keep the FA for the first few years of ER. Having too much fun traveling and doing other things that interest me right now to want to take that over. Also would feel better taking it back on myself after we get through the initial years of ER. YMMV
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Old 06-15-2017, 06:45 AM   #8
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If I can't visit a FA on a per "issue" basis and pay by the hour, I'm not interested. The kinds of help I need are NOT things like AA or pulling the trigger on an investment. What I would like is someone who can evaluate MY planned major changes for unforeseen issues like taxes and "gotchas" such as MC limits, etc. IOW, I want someone familiar enough with the "Big Picture" to keep me from making a stupid mistake. YMMV
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Old 06-15-2017, 06:58 AM   #9
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Assuming an investment portfolio of stocks/bonds etc only, I don't think there is any point in which a FA would be worth their cost to me. If I had won that $435M jackpot, however, I'd likely utilize a team (including lawyer, CPA, and probably investment personnel) to manage the estate as I'd likely diversify investments into other areas including multiple real estate holdings, possibly some venture capital investments, etc. Then I'd probably want help managing all the various investments instead of doing it on my own.
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Old 06-15-2017, 08:04 AM   #10
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I think that the issue becomes managing the whole financial package, not 'what should I invest in'. Estate planning, tax planning, keeping track of assets, and so forth.


Great point that is seldom mentioned. Most threads go down the active/passive investment rathole and ignore all these other highly significant factors.
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Old 06-15-2017, 08:10 AM   #11
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I'm thinking of $20 million, that's what I was quoted from Barclays Bank in LA a few year ago.
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Old 06-15-2017, 08:19 AM   #12
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If I can't visit a FA on a per "issue" basis and pay by the hour, I'm not interested.
+1

To answer the specific question, I would start thinking about retaining an FA if my net worth were to approach the $10-12 million mark. That's the point at which I'd have so much money to burn, I might as well outsource things like portfolio management to free up the 2-3 hours per month I would otherwise be spending to do it myself.
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Old 06-15-2017, 08:28 AM   #13
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Wow.... some people seem pretty low to me.... I can manage $10 to $20 mill on my own... not a lot more work than I do now (and I am not close)...


BUT, if I won one of those super lotteries and had over $100 mill I would than hire some people... but not pay a % of NAV unless it was really low... like 25 to 50 BPs..... that is still $250 to $500K to them.... I should be able to get a lot of service for that kind of scratch.... but since you should be making anywhere between $5 and $10 mill a year in profits it becomes a minor expense to you...
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Old 06-15-2017, 08:48 AM   #14
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Wow.... some people seem pretty low to me.... I can manage $10 to $20 mill on my own... not a lot more work than I do now (and I am not close)...
Well, I could manage $10-$20MM (or more) on my own, too, but when the nest egg gets to be that large, it becomes a simple matter of freeing up more of your time. When your passive income gets to be so high (say, $35,000/month from a $12 million portfolio) that you have, essentially, unlimited discretionary money to spend on whatever you want, wouldn't it make sense to pay someone to manage your money and free up some of the time and "brain space" being devoted to personal financial management? IOW, you use a little bit of something you have an excessive amount of (money) to free up a little bit of something you have a very limited amount of (time).

Using the exact same reasoning, if I had a $12 million net worth, I would hire a maid to come in and clean my house, wash my clothes, do the dishes, etc. several times a week instead of spending time doing those kinds of drudgeries myself.
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Old 06-15-2017, 09:05 AM   #15
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I would think around $100 million. But not sure. I don't see any problem managing up to $25-50million myself. I'm an unusual case though since I am better qualified and interested than most to self manage (MBA, CPA, CFA). I enjoy managing my portfolio. The thought of paying some guy $500,000-$1,000,000 every year kind of puts me off. But everybody is different.
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Old 06-15-2017, 09:11 AM   #16
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Well, I could manage $10-$20MM (or more) on my own, too, but when the nest egg gets to be that large, it becomes a simple matter of freeing up more of your time. When your passive income gets to be so high (say, $35,000/month from a $12 million portfolio) that you have, essentially, unlimited discretionary money to spend on whatever you want, wouldn't it make sense to pay someone to manage your money and free up some of the time and "brain space" being devoted to personal financial management? IOW, you use a little bit of something you have an excessive amount of (money) to free up a little bit of something you have a very limited amount of (time).

Using the exact same reasoning, if I had a $12 million net worth, I would hire a maid to come in and clean my house, wash my clothes, do the dishes, etc. several times a week instead of spending time doing those kinds of drudgeries myself.
Exactly the same thinking for me. I guess if we put 50% in stocks and 50% in bonds, we should be ok.
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Old 06-15-2017, 09:14 AM   #17
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Well, I could manage $10-$20MM (or more) on my own, too, but when the nest egg gets to be that large, it becomes a simple matter of freeing up more of your time. When your passive income gets to be so high (say, $35,000/month from a $12 million portfolio) that you have, essentially, unlimited discretionary money to spend on whatever you want, wouldn't it make sense to pay someone to manage your money and free up some of the time and "brain space" being devoted to personal financial management? IOW, you use a little bit of something you have an excessive amount of (money) to free up a little bit of something you have a very limited amount of (time).

Using the exact same reasoning, if I had a $12 million net worth, I would hire a maid to come in and clean my house, wash my clothes, do the dishes, etc. several times a week instead of spending time doing those kinds of drudgeries myself.
$35,000 per month provides for unlimited discretionary spending? Don't think so.

Hiring a maid, gardener, pool guy, is a little different than hiring an asset manager in my view. Have hired all those services and more but not an asset manager. A lot more expensive for the asset manager too. I enjoy managing my portfolio (not drudgery) and would be constantly second guessing any manager. Agree that my education and experience makes this a little unusual. Doesn't take much time the way I do it (buy & hold, spend divs).
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Old 06-15-2017, 10:50 AM   #18
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$35,000 per month provides for unlimited discretionary spending? Don't think so.
Hahaha... I had a feeling someone would quibble with that statement and take it more literally than I intended. Note that I wrote "essentially unlimited", which I was hoping would imply that, clearly, $35K/month is not literally unlimited. But I think for most on this board, that amount would feel pretty close to unlimited. Of course, it's all relative. I imagine $35K/month would feel like abject poverty to someone like LeBron James.
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Old 06-15-2017, 11:38 AM   #19
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I could say I like to do it myself, which I do, but down and dirty, I guess I'm too cheap.

Even at $5mm, paying 1% is $50,000. Per year. It's hard to imagine receiving $50k of value. Every year. Not going to get it in higher returns or asset allocations.

Estate and other issues are nice to have help with. Paying someone to make sure they're in order is worthwhile. That might cost $5-10k, at most. Once every several years, perhaps. Not every year.

But $50,000 worth? Every year?
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Old 06-15-2017, 12:21 PM   #20
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If anyone is facing such a problem, I'll be happy to invest your money in 3 low cost funds and distribute an annual 3.5% of your money to you at regular intervals of your choosing (broken down to as little as weekly, possibly daily distributions if you'd like) for a low fee of only $500k/year. In fact, I'd even be willing to guarantee that I'd do it for that low fee (adjusted for inflation) until one of us died (for only effectively a few hours of work per year, I'd keep "working" until I died at such an income for the amount of work).
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