Fee for Financial Advisor

[jIMOh]

Quote:

Originally Posted by leyland It is about $3M. For no particular reason I was expecting something around 0.5% - was surprised by 1.25%.

If you are going the advisor route, interview another one, as the fees here are higher than industry average. In general once over 500k of assets, .5% would be most I would expect.

If you do not have the time to manage the investments, you should expect to pay someone for their time and expertise.

If you have the time, the people here can really help you do it yourself- but it does take some time to learn the basics and the details which follow.

[73ss454]

Maybe so but if it's 1.25% that's way too much.

[73ss454]

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Originally Posted by leyland A bit more information. We are currently using Fidelity and Vanguard. Our asset allocation is probably not the best - highly slanted towards large US company stocks and also too much is cash. I obviously need to pay more attention or get someone to do it for me. Vanguard is going to work up a new asset allocation for me (for no cost).

Good for you, case closed, you're done! As Brewer said, go play.

[FinanceDude]

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Originally Posted by GregLee No, I want us to tell him which funds to buy, for no charge. Or, say, just you. Can't you tell him which?

How would any of us make a good recommendation now knowing his situation?

[FinanceDude]

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Originally Posted by 73ss454 Leyland, I doubt it's just 1.25%. That may be their annual fee but once they put you into something like Oppenheimer funds you'll pay 5.75 % just for the pleasure of putting the money into the fund. Then there are other yearly fees that the fund company charges.

That's not how it works.............

[FinanceDude]

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Originally Posted by Emeritus He should be paid exactly what it is worth. Lawyers also work on contingent fees.

Which is yet another reason for tort reform..........

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30% of the gains above an appropriate index is a fair fee and he returns 30% of the losses below the index.

So, tell him to buy a hedge fund?

[FinanceDude]

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Originally Posted by leyland It is about $3M. For no particular reason I was expecting something around 0.5% - was surprised by 1.25%.

It should be NO more than .5%, actually it should be .25-.40% depending on the mix. You would be paying 1.25% PLUS the ER of the funds, irregardless of which share class they are in, which is a terrible deal. I would hire someone to manage $3 million if I was uncomfortable doing it myself.........YMMV..........

[leyland]

I should probably expand on a few more details. The advisor fee is 0.9% and there is another "adminstrative fee" of 35 basis points for a total of 1.25% of the assets. The recommended funds are no loads and don't appear to have any particulary high expense ratios. I am thinking of retiring soon and the FA fees would be almost as much as we spend each month.

Quote:

Originally Posted by FinanceDude It should be NO more than .5%, actually it should be .25-.40% depending on the mix. You would be paying 1.25% PLUS the ER of the funds, irregardless of which share class they are in, which is a terrible deal. I would hire someone to manage $3 million if I was uncomfortable doing it myself.........YMMV..........

[FinanceDude]

Quote:

Originally Posted by leyland I should probably expand on a few more details. The advisor fee is 0.9% and there is another "adminstrative fee" of 35 basis points for a total of 1.25% of the assets. The recommended funds are no loads and don't appear to have any particulary high expense ratios. I am thinking of retiring soon and the FA fees would be almost as much as we spend each month.

Still WAY too high. What is the "admininstrative fee" for? Kind of sounds like that overpriced rust-proofing package on a new car..........

[leyland]

The "admin fee" appears to be paid to another company that handles the transactions (i.e. manages the accounts??) - this is different than the FA (whose fee is 0.9% ). The FA fee is actualy 0.97% - read the fine print - it 1% for the first $2M and 0.9% for the next $1M.

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Originally Posted by FinanceDude Still WAY too high. What is the "admininstrative fee" for? Kind of sounds like that overpriced rust-proofing package on a new car..........

[73ss454]

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Originally Posted by FinanceDude That's not how it works.............

When I woke up and checked out what I was paying to Oppenheimer via AGEdwards it was 5.75% for the 1st 100K. Then I paid the yearly fees with the 12B1 and any other nonsense fees they could steal from me.

You wouldn't do anything like that would you?

[Sarah in SC]

Nah, 73, those kinds of ripoffs are more likely from the big boys like Edward Jones and the like! Not your garden variety FA. Glad you woke up, though!
I had a little 403b with EdJones years ago and loved being held hostage to their high fee lousy mutual funds and was so happy when I could transfer it to Schwab and funds of my own choosing.

[FinanceDude]

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Originally Posted by 73ss454 When I woke up and checked out what I was paying to Oppenheimer via AGEdwards it was 5.75% for the 1st 100K. Then I paid the yearly fees with the 12B1 and any other nonsense fees they could steal from me. You wouldn't do anything like that would you?

If you paid the 5.75%, that is an A-share, an upfront load fund. Like all mutual funds, you also pay the ER of the fund, including 12B-1 fees.

I do very little MF business..........

[FinanceDude]

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Originally Posted by leyland The "admin fee" appears to be paid to another company that handles the transactions (i.e. manages the accounts??) - this is different than the FA (whose fee is 0.9% ). The FA fee is actualy 0.97% - read the fine print - it 1% for the first $2M and 0.9% for the next $1M.

Is this a bank, or a brokerage firm you are looking at? Anyway, much too high for $3million...........

[leyland]

It is a financial advisory company.

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Originally Posted by FinanceDude Is this a bank, or a brokerage firm you are looking at? Anyway, much too high for $3million...........

[GregLee]

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Originally Posted by FinanceDude How would any of us make a good recommendation now knowing his situation?

I must be underestimating what is involved in picking mutual funds. Back when I was investing my modest funds, I got the impression from my reading that no investment advisers had ever demonstrated the ability prospectively to pick winning mutual funds, so I might as well just choose at random. Why pay an expert if a random choice will do as well?

[ziggy29]

If financial "advisers" really believe they add value, I'd like to see them put their money where their mouths are and change their fee structure so they only get paid when they beat an appropriate benchmark, and their fee is a percentage of the "market beating" returns.

[FinanceDude]

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Originally Posted by GregLee I must be underestimating what is involved in picking mutual funds. Back when I was investing my modest funds, I got the impression from my reading that no investment advisers had ever demonstrated the ability prospectively to pick winning mutual funds, so I might as well just choose at random. Why pay an expert if a random choice will do as well?

You're right, there's NO knowledge involved, just put $3million wherever and you'll be fine............

[ERD50]

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Originally Posted by ziggy29 If financial "advisers" really believe they add value, I'd like to see them put their money where their mouths are and change their fee structure so they only get paid when they beat an appropriate benchmark, and their fee is a percentage of the "market beating" returns.

Amen! And they should be very willing to do this, since they get to make money off of "other peoples money".

Of course, I'd want a downside cover also. Else, they could just shoot for the stars, take the profit if they hit the jackpot, and leave you with the loss if not. So, to do that, they would need some % in a low-risk investment to cover draws on losses. Which means they'd have to beat the market with maybe only 80~90%% invested. They could use leverage, but that costs something.

-ERD50

[FinanceDude]

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Originally Posted by ziggy29 If financial "advisers" really believe they add value, I'd like to see them put their money where their mouths are and change their fee structure so they only get paid when they beat an appropriate benchmark, and their fee is a percentage of the "market beating" returns.

Do you work for the SEC?