Are excessive financial fees eating your returns?

[Ready]

A nice article in today's edition of USA Today. It summarizes how excessive fees can become over time, and how overpriced financial advice really is. I know this is not new information to the members of this forum, but I thought it was nice to see an article with such a strong opinion published in a mainstream newspaper. Hopefully it will catch the attention of those who don't think about this stuff and allow others to make far too much off their retirement savings.

Are excessive financial fees eating your returns?

[gozer]

Nice article. I'm pleased to see the Motley Fool hasn't completely gone off the rails with the sales pitch and sound bite articles and will still sometimes put out good stuff. Kind of like the old days.

[InParadise]

Hmmm, it's all about net returns after fees. Our FA beats benchmark every time. And we can pay his 1% from our taxed accounts for our IRAs, allowing us to accrue an extra 1% in our retirement accounts year after year, without paying any conversion taxes.

And BTW, we don't get sloughed off to low cost index funds. We have access to top load based funds without paying the loads, and have zero transaction fees. No fees above the 1%, even if we take part of our funds to actively trade, which the FA does not get a percentage of.

Works for me.

[brewer12345]

IP, just out of curiosity: if this guy is such a whiz, why does he settle for your measly 1%? He could be getting 1 & 20 on a billion dollars or better if he is that good.

[InParadise]

Volume? He only does business by word of mouth. We are in our third year with him after friends recommended him. It's nice not to have to deal with investments anymore. He's also with UBS, getting volume access to the top funds that way, as opposed to being an independent. Was wonderful in dealing with transfer of assets when Dad died, and will guide our kids when we pass. They have free accounts with him too.

I drank the TMF cool aide for quite some time, and indeed it was worth my while, but frankly if they try to say you should do it without a FA, these days it tends to be about steering you towards a for fee subscription of their own.

[photoguy]

My default view on someone who consistently "beats their benchmark" is that they have the wrong benchmark. Don't know about InParadise's FA, but this is a game played by many.

[InParadise]

Quote:

Originally Posted by photoguy My default view on someone who consistently "beats their benchmark" is that they have the wrong benchmark. Don't know about InParadise's FA, but this is a game played by many.

Except that I did my own investing and know how to check his figures. I would agree that there are some pitiful FAs. Trying to get MIL to change hers to ours, but IMO ours is the real deal.

[Dash man]

Beating a benchmark the past three years is not an indicator of a good financial advisor, but how you perform in the down years when he still takes his 1 percent will tell volumes.

[CaliforniaMan]

Quote:

Originally Posted by InParadise Hmmm, it's all about net returns after fees. Our FA beats benchmark every time. And we can pay his 1% from our taxed accounts for our IRAs, allowing us to accrue an extra 1% in our retirement accounts year after year, without paying any conversion taxes. And BTW, we don't get sloughed off to low cost index funds. We have access to top load based funds without paying the loads, and have zero transaction fees. No fees above the 1%, even if we take part of our funds to actively trade, which the FA does not get a percentage of. Works for me.

I don't understand your point at all. Beats the benchmark every time? How long is every time, what benchmark? We have been in a rising market for five years now. "we don't get sloughed off to low cost index funds. We have access to top load based funds..." How are your "top" funds better than indexes? Greater returns always require greater risk and a replay of the last 5 years is not guaranteed.

[brewer12345]

Quote:

Originally Posted by InParadise He's also with UBS, getting volume access to the top funds that way, as opposed to being an independent.

When I worked in asset management, UBS was referred to as "U Be Stoopid" for good reason.

I hope you have beaten the odds. Good luck.

[gozer]

If I could beat the market benchmarks every time I would be so rich, Bill Gates would personally handle my tech support, Larry Ellison would clean my yacht, Carlos Slim would mow my grass and the Walton family would do my grocery shopping.

[samclem]

Quote:

Originally Posted by brewer12345 IP, just out of curiosity: if this guy is such a whiz, why does he settle for your measly 1%? He could be getting 1 & 20 on a billion dollars or better if he is that good.

He's probably got a gig like that. He just takes some small retail clients as a way to pay back society for all it has given him. He'd charge them nothing at all, but then they wouldn't appreciate the fantastic value of what they are getting.
The generosity of some people is heartwarming.

[Ready]

Quote:

Originally Posted by samclem He's probably got a gig like that. He just takes some small retail clients as a way to pay back society for all it has given him. He'd charge them nothing at all, but then they wouldn't appreciate the fantastic value of what they are getting. The generosity of some people is heartwarming.

In all fairness though, someone does have to pay for his yachting expenses.

[Animorph]

Quote:

Originally Posted by InParadise Hmmm, it's all about net returns after fees. Our FA beats benchmark every time. And we can pay his 1% from our taxed accounts for our IRAs, allowing us to accrue an extra 1% in our retirement accounts year after year, without paying any conversion taxes. And BTW, we don't get sloughed off to low cost index funds. We have access to top load based funds without paying the loads, and have zero transaction fees. No fees above the 1%, even if we take part of our funds to actively trade, which the FA does not get a percentage of. Works for me.

You make it sound like a good thing...

[M Paquette]

Quote:

Originally Posted by InParadise Hmmm, it's all about net returns after fees. Our FA beats benchmark every time. And we can pay his 1% from our taxed accounts for our IRAs, allowing us to accrue an extra 1% in our retirement accounts year after year, without paying any conversion taxes. And BTW, we don't get sloughed off to low cost index funds. We have access to top load based funds without paying the loads, and have zero transaction fees. No fees above the 1%, even if we take part of our funds to actively trade, which the FA does not get a percentage of. Works for me.

I'm glad it works for you.

It sets off alarm bells for me.

Quote:

Our FA beats benchmark every time.

Um. Is the benchmark appropriate? Risk level matches the risk of your actual portfolio? Similar volatility?

BTW, I have a good grasp of mathematics and statistical analysis. I'm pretty sure I know how this story ends, to an 80% probability over the next five years.

[gozer]

Quote:

Originally Posted by M Paquette BTW, I have a good grasp of mathematics and statistical analysis. I'm pretty sure I know how this story ends, to an 80% probability over the next five years.

SEC investigation and indictment or just under performance?

[InParadise]

Quote:

Originally Posted by Animorph You make it sound like a good thing...

I get zero benefit from trying to convince you guys, and have zero desire to do so. After all, I know how hard I was to convince and that is way more work than I care to do.

But the one thing I just don't understand is the desire to put your funds in an index fund. I've never been a fan of them and never used them when I was handling our investments. The result was that when the market plunged, acerbated by all the lemmings who had thrown their retirement accounts into these well publicized funds panicking and pulling their assets from the market, my account was not badly impacted. IMO index funds are the McDonalds of investing. Everyone knows about them, and many eat there for convenience.

Please realize that I am not calling you a lemming for using these funds, but it seems to be the investment tool of choice for the general public who has not yet learned what else they can do with their money. And when so many people who don't realize the market doesn't only go up, nor understand that panic selling can be the very worst thing own this investment vehicle, they can trigger irrational declines. So if you invest primarily in index funds, how do you protect yourself from the actions of the lemmings throwing themselves off the cliff when the volatility got to be too much for them?

[Shanky]

This sounds like the pitch at the beginning of every episode of American greed. It never ends well.

[InParadise]

Quote:

Originally Posted by Shanky This sounds like the pitch at the beginning of every episode of American greed. It never ends well.

Is there a way to see who a poster is responding to when they don't include a quote?

[MichaelB]

Quote:

Originally Posted by InParadise Is there a way to see who a poster is responding to when they don't include a quote?

There is no SW tool to do that, and once in a while it does lead to confusion. In this case I understood this

Quote:

Originally Posted by Shanky This sounds like the pitch at the beginning of every episode of American greed. It never ends well.

was referring to this

Quote:

Originally Posted by InParadise Hmmm, it's all about net returns after fees. Our FA beats benchmark every time.