Oz investor
Full time employment: Posting here.
hopefully Warren is obeying Rule 1. ( DON'T lose money )
if not losing capital the returns MIGHT improve later
if not losing capital the returns MIGHT improve later
Yes. Schwab has something similar.As mentioned in other threads, if one has Private Client Status at Fidelity, one can effectively receive some form of investing advice for ZERO advisory fees.
Oh, no. Very unlikely. Check the fine print, but in most cases the advisory fee is just that. All the fees within the products themselves (expense ratios for funds/ETFs, etc) will be extra. So, in total you could easily be paying 1.2% per year, which likely amounts to about 30% of the total amount you'd want to withdraw from a portfolio every year. That's the best way to think of it at this point: You are about to give this advisor and his products 30% of the annual amount that your portfolio is paying out to you every year--money you could be spending. It is outrageous (IMO).This pays for expense fees, any other fees, correct?
Yes and yes. You'd save 0.85% but you still need to pay the expenses on the individual products. If you choose low-cost investment vehicles, they will be >much< less than 0.4% per year.Would I save the 0.85% or still end up paying 0.4% or so on my own?
Normally, yes (and there's no reason to stay with the same brokerage, either). There can be a sticking point (causing a taxable event) if any of the investments are of a type that can't be transferred in kind, but that is unusual.Can I just exit the relationship and keep my cash with the same brokerage firm?
Now that you negotiated to .85% fee, possible next steps:Interesting... about half our investment is with him, so minimally I will withdrawal from there and pay college from there these next few years.
Can I just exit the relationship and keep my cash with the same brokerage firm?
So I plan to announce my FIRE decision next week and am looking at this expense.
First the tip.
Once our assets with him approached $2M, I explained how rational and low maintenance we are and how I was tempted to do this myself if not for the time. I negotiated the fee from 1 to 0.85%. I didn’t see anyone mention that, like anything, things are negotiable.
My wife is not finance savvy so an advisor is an advice plan if I pass first.
The question.
If I did this myself, how much do I really save? This pays for expense fees, any other fees, correct? Would I save the 0.85% or still end up paying 0.4% or so on my own?
Yes that’s the story here. I would submit that Buffett learned about investing on his own; Through his many early childhood businesses he ran: newspaper routes, pinball machines, selling Coke in the neighborhood and buying stock from age 11! He did his own taxes at 14!I find Buffets experiences ages 6 yr old - 19 yr old much more interesting. What kid thinks that way? And that's why finance should be taught from 1st grade. I've always thought that.
It is some of the easiest money you'll ever "earn" (save).https://www.bogleheads.org/wiki/Bogleheads%C2%AE_investing_start-up_kit
With a portfolio of $2M, you'll save $17K per year. And it takes virtually no time or effort on your part outside of a little reading.
They are negotiable, especially with the smaller shops. Big banks and insurance companies are likely to be less flexible, but for them you are a trivial account so you don't want to be there anyway.... I explained how rational and low maintenance we are and how I was tempted to do this myself if not for the time. I negotiated the fee from 1 to 0.85%. I didn’t see anyone mention that, like anything, things are negotiable. ...
Establish a relationship with a good FA on a dollars-per-hour rate. Involve your wife in the meetings and communications. Then, if she feels she needs ongoing help she can consider an AUM relationship when you are paws-up.... My wife is not finance savvy so an advisor is an advice plan if I pass first. ...
If you take the passive investment approach that is popular here (and which we use) your mutual funds will have internal fees ranging from zero to maybe 50bps, the latter for international funds. Assuming your FA is buying mutual funds for your portfolio, their fees are on top of his/her fees, so you are already paying them. Odds are, too, that the FA is using funds with higher fees that you will pay with passive funds. So, yes you will really save the 85bps plus probably a little more.... If I did this myself, how much do I really save? This pays for expense fees, any other fees, correct? Would I save the 0.85% or still end up paying 0.4% or so on my own?
I think an hourly fee is much more appropriate. The real work is in the initial setup of the portfolio (what--maybe 3-5 hours total for an average situation, incuidng time for the sit-down with the client to understand their risk tolerance, etc?), with another hour every year.I think it would be very interesting for managers to just charge a monthly fee for their services. I wonder how investors would respond. At 1% per year, that would work out to $83.33 per month for a $100K portfolio (or $416.65/mo. for a $500K account). This is whether the market is going up or down, every month; for, pretty much, the rest of your adult life.
I think an hourly fee is much more appropriate. The real work is in the initial setup of the portfolio (what--maybe 3-5 hours total for an average situation, incuidng time for the sit-down with the client to understand their risk tolerance, etc?), with another hour every year.
It's roughly the same amount of work for a $100K portfolio as for a $2M portfolio.
It explains why there are so many people who have very little savings. Investing requires knowledge and expertise - there's no question. But it doesn't require a degree to become a perfectly capable investor at a very basic level. If you can master that basic level, then the math of an advisor becomes hard to swallow when you see the long-term impact on the portfolio.
Or stated another way, ‘by the time you know enough to pick a great/value added advisor, you don’t need one.’
Many/some pros may outperform short term (some just at random), but do you have some evidence to support that “many pro’s” can over the long term - more than 2-3 years? Everything I’ve read is about 80% don’t, and it’s not obvious who the good 20% are in advance (see adage above). If it was, the underperformers would have washed out long ago.
Two acquaintances of mine are EJ advisors, neither of them had any background in finance and all they really do is whatever the back office tells them. When I ask questions, it’s all basically scripted. Both of them had about 7-8 weeks training before being turned loose on clients...and last I heard EJ takes about 1.25% of AUM annually.
I believe that in most cases paid advisors are fiduciaries. Registered investment advisors (RIAs) and their representatives are bound to a fiduciary standard as part of the Investment Advisors Act of 1940.... these paid advisors are not fiduciaries. Paying someone a huge percentage of your annual profit who doesn't have your best interests at heart to manage your money seems dangerous.
Hmm... my calculator makes that about 17.5%. (2.65^0.16)... I am up like 165% over past 6 years...which is around ~ +27.5% ...
Actually, the math is true for all time. No expiration date.... No matter if the math has held true for the past 100 years.
Another twist on a 1% AUM fee is when you've retired and are withdrawing according to the 4% rule. That's 3% to you, 1% to the adviser. In other words, the adviser is getting 25% of your retirement income. If your WR is less than 4% the adviser is getting relatively an even larger chunk.