I just don't see it that way at all. My guy makes me more dough than the S&P 500 index including paying his fee. Plus the big dividends to blow.
I hope that’s the case. ....
Honestly, Jerry1 - it just isn't reasonable to expect your FA to reliably beat a benchmark. I know RobbieB reports this, but he is the exception. You can research this, there have been dozens of academic studies on the issue. A small number (~ 15% IIRC) beat the benchmark over a 5 year period, and even fewer of those repeat that over the next 5 year period.
... It was mentioned in another post and I would like to make sure I have some reasonable benchmark to evaluate him on. The S&P would not be a good fit given the conservatism built into my plan. I’ll need something that is closer to a 40% equity 60% bond index. Did I say I was conservative (i.e. very afraid of sequence risk right now). I expect my equity percentage to increase over time.
No problem, your benchmark would be 40% VTI, 60% BND. Simple.
VTI Vanguard Total Stock Market ETF
BND Vanguard Total Bond Market ETF
And you can test at this site:
www.portfoliovisualizer.com
https://goo.gl/VqEqe3 << with a 40%/60% VTI/BND and annual rebalance entered.
While I do not care what anyone does with his/her money, 1% is really a big bite. Since I own my home outright, 1% of my portfolio would be very similar to what I spend on all the rest of my life.
I think I would just spend a day reading and deciding what broad low cost equity funds I wanted, and the rest would be Bills up to 1 year. ....
Ha
The effect of a 1% AUM fee has been discussed - I'd like to put a finer point on that. OP mentions that theyu are conservative, and that the fees are -
"Yes. It’s expensive. That did not go unnoticed by DW and I." So discuss this with your wife:
Since you (OP) are conservative, I assume you use a conservative WR. Have you discussed this with your FA? I'll assume 3.33% for now. So that is $33,300 annually from a $1M portfolio. But if you pay a 1% AUM fee, you only get $22,300 - the $10,000 cost was mentioned. That's 1/3rd of your annual spend.
Now look at it another way -
say you still want that original $33,300 to spend. That is really the apples-apples comparison. In that case,
instead of a $1,000,000 portfolio, you need a $1,429,185 portfolio! Let that sink in. You need to save up 1.42x to pay your FA and still have the same spend in your pocket. You need to save an additional $429,185! How many years would that take you? Is that worse than spending a few hours a year reviewing your account, and maybe rebalancing?
Are you and DW comfortable with turning over $429,185 to your FA? In effect, that is what you are doing. You can buy a lot of CPA and tax advise with that!
The math:
A $1,000,000
B 3.33%
C $33,300 <<< Withdraw
D 0.00% <<< Fee %
E $0
F $33,300
A $1,429,185 <<< worked backwards to get to $33,000 in F, $ after Fee
B 3.33%
C $47,592
D 1.00% <<< Fee %
E $14,292 <<< Fee $
F $33,300 <<< $ after Fee
-ERD50