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A854321 08-08-2007 08:51 PM

Brokerage fees?
 
What would be a reasonable brokerage fee for a diversified IRA account at a large brokerage house?

My most recent quarterly statement showed a fee of 0.28%. This fee is assessed quarterly

haha 08-08-2007 09:10 PM

Quote:

Originally Posted by A854321 (Post 544863)
What would be a reasonable brokerage fee for a diversified IRA account at a large brokerage house?

My most recent quarterly statement showed a fee of 0.28%. This fee is assessed quarterly

This is definitely not reasonable. Many places it would be free. At others maybe a flat $10 fee.

Give more details and we can make more complete suggestions.

Ha

A854321 08-08-2007 09:18 PM

Yes, more info
 
This an actively managed account established 14 years ago.

11% annual return. Currently at $1.4 mil.

73ss454 08-08-2007 09:22 PM

Pretty cute how they show the expense ratio quarterly. It's still over 1% which is too much. Move it all to Vanguard and make it easy.

Sam 08-08-2007 09:28 PM

How much does Vanguard charge, by the way?

I'm now using Fidelity, it costs me nothing as my employer pays the administrative fees.

73ss454 08-08-2007 09:31 PM

With 1.4M this qualifies for flagship and I don't think there's any costs at all. Just the ER for what ever fund it goes into. Also 12 free trades a year and $8 after that. 500K must be in vanguard funds though.

A854321 08-08-2007 09:51 PM

Just to clarify
 
This is a post-divorce issue. I got handed a big pile of really cute reports from this brokerage, and am trying to make heads and tails.

Neither of us ever actively managed this portfolio- there (obviously) was a broker that did all this. We never made a trade.

So, as I am unsophisticated, and not ready to risk this on webreports and forum trading hints........ would this be an excessive fee for what looks like a reasonable, totally broker-managed portfolio?

clifp 08-09-2007 04:11 AM

Actually 11% is surprisingly respectable return for an brokerage account with a 1%+ fee on the assets plus probably commissions. I am not sure I actually believe it.

A fair number of Vanguard funds index funds were established in the 1992-1994 time frame and most of them have returns in the 10-11% range.

If it is worthwhile to pay a broker almost $16,000/year to manage your IRA fund is question you'll have to answer yourself. But by the standards of the financial "helper" industry it is not unreasonable especially considering the returns, which are quite good if the portfolio contains fixed income investments.

LOL! 08-09-2007 05:28 AM

FWIW, there are places where one can get $1.4million managed for a flat fee of around $3000 a year and places where the fee is 0.25% of assets under management (AUM) or less per year. However, I think a 1% annual fee is fairly typical for assets under 7-figures from large brokerage places.

One should also be aware that all fees are negotiable even if the provider says they are not. Also be aware that there can be other fees such as front-end loads which may not be included in the 11% annual return.

In 2006, a simple all-equities index fund strategy returned about 20%. When the divorcee mentions an 11% return, we would need more info to really characterize that as good, bad, or indifferent. For example, if any trading in the account created taxable events and you ended up paying the taxes out of salary, then things could be quite different. But if the account did significant tax-loss harvesting, then that would be a benefit.

FinanceDude 08-09-2007 08:35 AM

Quote:

Originally Posted by LOL! (Post 544917)
FWIW, there are places where one can get $1.4million managed for a flat fee of around $3000 a year and places where the fee is 0.25% of assets under management (AUM) or less per year. However, I think a 1% annual fee is fairly typical for assets under 7-figures from large brokerage places.

The account is over $1Million, so he definitely can negotiate the fees.

Quote:

In 2006, a simple all-equities index fund strategy returned about 20%. When the divorcee mentions an 11% return, we would need more info to really characterize that as good, bad, or indifferent. For example, if any trading in the account created taxable events and you ended up paying the taxes out of salary, then things could be quite different. But if the account did significant tax-loss harvesting, then that would be a benefit.
He said it was in an IRA account, so there would be no taxable events. However, I am wondering how they are getting the fee paid, separate monthly billing? Management fees are billed quarterly, and they list it as .28% because that's what he paid for that quarter, 25% of 1.12%.........;)

If it was straight stock, and very little trading, he should be able to get that down to 50-60bp or so........

BTW, just telling him to "move it to Vanguard" when he has little or no knowledge is a little premature. I think he needs to learn more about investing before that occurs. You guys may disagree but I think he needs to learn more about his account and what options he has before making quick decisions.......;)

73ss454 08-09-2007 09:32 AM

If he moves more than 250K to vanguard he'll get a free advise from one of the planners. No tax consequence in taxadvantaged account. He doesn't have to know much to move this money. It's a no brainer to me.

FIRE'd@51 08-09-2007 09:53 AM

Quote:

Originally Posted by LOL! (Post 544917)
In 2006, a simple all-equities index fund strategy returned about 20%. When the divorcee mentions an 11% return, we would need more info to really characterize that as good, bad, or indifferent. For example, if any trading in the account created taxable events and you ended up paying the taxes out of salary, then things could be quite different. But if the account did significant tax-loss harvesting, then that would be a benefit.

I interpreted A854321's post to mean the actively managed fund has returned 11% compounded over the past 14 years. If so, this is slightly better than the total return of the S&P 500 over the same time period (10.9%).

Of course, we don't know enough about the fund to make a risk-adjusted comparison to a benchmark, but at first glance, it appears to have been a decent performance if my interpretation of the 11% is correct.

FinanceDude 08-09-2007 10:24 AM

Quote:

Originally Posted by 73ss454 (Post 544994)
If he moves more than 250K to vanguard he'll get a free advise from one of the planners. No tax consequence in taxadvantaged account. He doesn't have to know much to move this money. It's a no brainer to me.

He potentially has estate issues and other things in play, I don't think a Vanguard rep is qualified to answer, perhaps start with a CPA or estate planning attorney.............

A854321 08-09-2007 10:42 AM

Trying to get a grip on costs at this time
 
Yup, financedude has pretty much explained what I was trying to say.

Costs for everything involving lawyers, accountants, advisors are all adding up. Not haveing activly managed this IRA, ( mostly mutual funds, not much in stocks), I was surprised to see how much the charges were.

I just don't know what is realistic % of fees/charges for an account like this. I do not not plan on managing the account myself, and have appreciated having a professional to deal with it, while I dealt with my job and making the money.

Any ideas what other brokerages charge for this type of account?

A854321 08-09-2007 11:55 AM

Aha!
 
I found an article by Richard Ferri called "The Price of Advice".

He has lots of reasonable advice about not being impressed by fancy offices, addresses, and glossy brochures. He says " a fee of 0.50% per year on accounts from $100k to $1 mil is about right and assets over $1 mil should be half of that amount. A minimum fee of $500 per year is reasonable on accounts less than $100K."

FinanceDude 08-09-2007 11:59 AM

Quote:

Originally Posted by A854321 (Post 545089)
I found an article by Richard Ferri called "The Price of Advice".

He has lots of reasonable advice about not being impressed by fancy offices, addresses, and glossy brochures. He says " a fee of 0.50% per year on accounts from $100k to $1 mil is about right and assets over $1 mil should be half of that amount. A minimum fee of $500 per year is reasonable on accounts less than $100K."

I've seen that article. Accounts at $1 million and above are competed for aggressively..........

An advisor I used to work with recently bid on a $30 million account. His "winning bid" was 28bp a year, andf he was competing against Chase Private Bank, Merrill Lynch, Northern Trust, and Smith Barney...........

LOL! 08-09-2007 12:23 PM

Quote:

Originally Posted by A854321 (Post 545047)
\Any ideas what other brokerages charge for this type of account?

Other brokerages and financial advisors charge about 1% of AUM per year. As I wrote before, you should be able to get this done for $3000 or 0.25% of AUM or less.
See e.g.: Bogleheads :: View topic - Ferri, Evanson, or Gorlow as my new advisor? Help please!
It seems to me you could save yourself at least $12,000 a year by moving and perhaps get better performance.

A854321 08-09-2007 12:42 PM

Not me
 
Excellent article, LOL.

It wasn't me with that original post, although it certainly could have been. I will review all this really valuable information. Thanks very much.

Moemg 08-09-2007 12:52 PM

Vanguard charges 0.75 % for the first million It actively manages and 0.35 % for the next million .That is an annual fee .

FinanceDude 08-09-2007 12:54 PM

Quote:

Originally Posted by Moemg (Post 545117)
Vanguard charges 0.75 % for the first million It actively manages and 0.35 % for the next million .That is an annual fee .

Seems high for Vanguard.........;)


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