Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Old 07-28-2021, 08:15 AM   #21
Thinks s/he gets paid by the post
Tailgate's Avatar
 
Join Date: Jul 2013
Location: Texas
Posts: 1,063
I'm paying a much, much smaller percentage of AUM for Vanguard Personal Adviser Services solely because my wife has zero appetite for financial matters. She will be able to talk to a live person who is familiar with our finances and goals in case of my demise.
Tailgate is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 07-28-2021, 08:28 AM   #22
Thinks s/he gets paid by the post
GalaxyBoy's Avatar
 
Join Date: Jul 2009
Location: The Beautiful Blue Ridge Mountains
Posts: 2,467
+1 to what many others have already said.

Don't forget to consider the expense ratio (ER) of each mutual fund this advisor has you in, which will be in addition to the advisory fee you've already mentioned. If you don't know what the ER is, you can look it up in the prospectus or online. Try googling the ticker symbol if you don't have the prospectus handy. I'd be willing to bet the ERs are quite high. For comparison, index funds are readily available with ERs of less than 0.1%.

Your FA will undoubtedly claim his fees and the high-expense-ratio funds I'll bet he has you in will pay for themselves by outperforming passive, index funds. Tell him to prove it. (Spoiler alert: he can't.) If he shows you numbers documenting performance, make sure he's included the impact of the fees.
GalaxyBoy is offline   Reply With Quote
Old 07-28-2021, 08:28 AM   #23
Recycles dryer sheets
Go-NoGo's Avatar
 
Join Date: Oct 2016
Posts: 360
Quote:
Originally Posted by Kayzmum View Post
I’m such a noob. I have a financial advisor now and he says 1.55% is the going rate and that’s what their fee would be for handling our IRA and 401K. Is this true.

Any advice/comments are appreciated.
1.55% is the "going" rate because The FA's have to make their boat payments. And it is also a very good rate - for him.

As other's have mentioned - the advisor will take about 20% of the gains in your portfolio year after year after year. DIY and with some discipline, you will be able to afford that boat.
Go-NoGo is offline   Reply With Quote
Old 07-28-2021, 08:34 AM   #24
Thinks s/he gets paid by the post
 
Join Date: Mar 2013
Location: Coronado
Posts: 3,135
Quote:
Originally Posted by Kayzmum View Post
Thank you so much for your reply! My balance is about 500,000 including assets like paid off house (Worth at least 250,000, it hasnít been appraised ) and vehicles The total 26,000 worth. And that is their only fee the 1.55% of earnings. They say theyíre a fiduciary company and that the percentage based fee give them incentive for my accounts to grow. Should I move forward and negotiate them down to at least one percent?

This doesnít seem like a lot, but my husband is already retired has pensions and annuities coming in that arenít included in this. I have some survivor benefits they come along with this.
A financial advisor's fee base does not include your house or vehicles. It also may not include your 401k if it's held by your employer. So if your total net worth of $500K includes a $250K house and $26K vehicles, it's really more like $225K that's under the advisor's management, or less if the 401k is also subtracted.

Also, the 1.55% is almost certainly based on Assets Under Management, not earnings, which makes a big difference. Let's say they are managing $225K and your money grows 20% to $270K. If they were charging 1.55% on earnings, they'd take $697.50 out of your accounts. If the fee is based on AUM, they'd take $4185. If the stock market loses 20% and your assets go down to $180K, then the fee will be $2790. (They probably take it quarterly, but this is roughly how much you'd pay over the year.)

You need to make sure you're very clear on what assets they base the fee on and how it's calculated. Ask them for an example like the one I just gave so you're seeing actual numbers rather than percentages. Only you can decide if the advice you'll be getting would be worth the fee. This is a fairly small account and I doubt if they'll negotiate down to 1%, but it's certainly worth a try if you do decide to go with them.
cathy63 is offline   Reply With Quote
Old 07-28-2021, 08:44 AM   #25
Moderator
braumeister's Avatar
 
Join Date: Feb 2010
Location: Flyover country
Posts: 21,700
Quote:
Originally Posted by cathy63 View Post
You need to make sure you're very clear on what assets they base the fee on and how it's calculated.
Quite right. Read all the small print, as always.

I once considered a financial advisor and they were very clear (once I read their whole spiel) that their 1% fee was based on my total net worth, no exclusions. That was so ridiculous that it was easy to dismiss them as a possibility.

Interestingly, this was one of the companies that came up when I used the NAPFA site. NAPFA claims to be just fee-only advisors, so definitions matter.
__________________
I thought growing old would take longer.
braumeister is offline   Reply With Quote
Old 07-28-2021, 08:46 AM   #26
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Chuckanut's Avatar
 
Join Date: Aug 2011
Location: West of the Mississippi
Posts: 14,808
I hope this 1.5% advisor at least invites his clients to a yearly cruse on his yacht.

They probably will never have one of their own with this guy managing their money.

Where are the customer's yachts?

Quote:
The title of this 1955 book refers to a story about a visitor to New York who admired the yachts of the bankers and brokers. Naively, he asked where all the customers' yachts were. Of course, none of the customers could afford yachts, even though they dutifully followed the advice of their bankers and brokers.
__________________
The worst decisions are usually made in times of anger and impatience.

Self proclaimed President for Life of Outliers United.
Chuckanut is offline   Reply With Quote
Old 07-28-2021, 08:56 AM   #27
Dryer sheet aficionado
Kayzmum's Avatar
 
Join Date: Oct 2017
Posts: 49
Quote:
Originally Posted by CRLLS View Post
As has been said, stay away. 1.55% AUM (assets under management) is too high. BTW if I understand correctly, you have to only count the money under his management. You need to subtract the house and cars from that 500K.
Consider if an account has ~250k, and assuming annual returns around 7.5%, he gets paid 1.55/7.5, or ~20%, of your annual earnings. Putting it another way, a year's 7.5% return on 250K is 18.75K and he'll get 20% of that for his "service" leaving you with only 15k earnings. Worse yet, he'll get paid his 1.55% even when your account looses money. Not a fair deal for no risk on his part IMO.

I find the bolded part above to be contradictory. He can't be a fiduciary if he stated his incentive is being paid more. I know it is always in the back of a fiduciary's mind, but the fact that he actually came out and said that, would make me wonder what his primary goal really is.

Please donít get me wrong, Iím going to run away from this deal. Iím only asking this next question to learn. How would he get the 1.55% if that is based on earnings in my account and the account loses money?
Kayzmum is offline   Reply With Quote
Old 07-28-2021, 09:01 AM   #28
Thinks s/he gets paid by the post
 
Join Date: Jun 2021
Posts: 1,048
Quote:
Originally Posted by Kayzmum View Post
Please don’t get me wrong, I’m going to run away from this deal. I’m only asking this next question to learn. How would he get the 1.55% if that is based on earnings in my account and the account loses money?
He gets 1.55% regardless of how your portfolio performs. That is the beauty of the fee commission. You lose money and they still get their money. It is 1.55% of your portfolio, not of the gains.
RetiredHappy is offline   Reply With Quote
Old 07-28-2021, 09:04 AM   #29
Thinks s/he gets paid by the post
 
Join Date: Jul 2004
Posts: 1,524
Quote:
Originally Posted by Kayzmum View Post
Thank you everyone so much! I made a new member post, and I'll email the financial guys right now. They let me put all my info on their eMoney site. I spent a lot of time doing that and should have checked their fees before I did! Should I delete it all before I tell them forget it -- no deal?
I love the statement 'going rate' - yeah, uh-huh.....flashing red light for me as they can't justify their 'rate.'

Lots of good advice here - I used/use a fee only planner, PlanVision, for a chec before I retire (https://planvisionmn.com/who-we-are/) - it is $189 to begin with and then you can pay monthly after that if you wish. He uses eMoney as his financial database and management platform - you could probably port it over somehow if you decide to use his services. He does not charge a percentage of your portfolio amount...just the flat fee.

The document "If You Can" by Bernstein is good.

Head over to Bogleland to see other options - 3 fund, 2 fund, 1 fund portfolios that are DIY, tax strategies, humongous spreadsheets to calculate anything, arguments over the cheapest or best car, coffee, clothes, houses, place to live, all mainly focused on LBYM and/or best value for the dollar, arguments over Vanguard, Fidelity or Schwab...etc. Lots of info that can counter your guy with the 'going rate.' https://www.bogleheads.org/index.php

The Forums have a lot of info (like here, but a little different). The Wiki has excellent information on all things financial. They even have ExPat and foreign info/advice.

Welcome to this part of the world - enjoy!
__________________
Deserat aka Bridget
ďWe sleep soundly in our beds because rough men stand ready in the night to visit violence on those who would do us harm.Ē
deserat is offline   Reply With Quote
Old 07-28-2021, 09:11 AM   #30
Thinks s/he gets paid by the post
 
Join Date: Apr 2010
Posts: 4,758
You are definitely not a noob.

A noob would agree to and continue to pay those fees without ever making the effort to see if they competitive. Let alone whether the results merit any fee.
brett is offline   Reply With Quote
Old 07-28-2021, 09:33 AM   #31
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
easysurfer's Avatar
 
Join Date: Jun 2008
Posts: 11,879
Quote:
Originally Posted by RetiredHappy View Post
He gets 1.55% regardless of how your portfolio performs. That is the beauty of the fee commission. You lose money and they still get their money. It is 1.55% of your portfolio, not of the gains.
Yes. 1.55% may not feel that bad when investments are rolling. But you socked the 1.55% regardless in good times and bad.

Hopefully, the next question from the OP is something like "What is index and passive investing?" .
__________________
Have you ever seen a headstone with these words
"If only I had spent more time at work" ... from "Busy Man" sung by Billy Ray Cyrus
easysurfer is offline   Reply With Quote
Old 07-28-2021, 09:38 AM   #32
Thinks s/he gets paid by the post
skipro33's Avatar
 
Join Date: Sep 2011
Location: Placerville
Posts: 1,701
Quote:
Originally Posted by Kayzmum View Post
Please donít get me wrong, Iím going to run away from this deal. Iím only asking this next question to learn. How would he get the 1.55% if that is based on earnings in my account and the account loses money?
You assume wrong that your FA is collecting 1.55% on the growth of your account. The 1.55% is on the whole value of the account. For every $100,000 the account is worth, he will withdrawal $1,550 every year. If the account earned 5%, then he would withdrawal $1,550 plus 5% for a total of $1,627.50 for the year. If you account lost 5%, then his fee would be $1,472.50.

This does not include any fees for fund buy and sell costs. I'm sure he makes a commission on those as well.
skipro33 is offline   Reply With Quote
FP Percentage earnings even if losses
Old 07-28-2021, 09:43 AM   #33
Dryer sheet aficionado
Kayzmum's Avatar
 
Join Date: Oct 2017
Posts: 49
FP Percentage earnings even if losses

Quote:
Originally Posted by CRLLS View Post
As has been said, stay away. 1.55% AUM (assets under management) is too high. BTW if I understand correctly, you have to only count the money under his management. You need to subtract the house and cars from that 500K.
Consider if an account has ~250k, and assuming annual returns around 7.5%, he gets paid 1.55/7.5, or ~20%, of your annual earnings. Putting it another way, a year's 7.5% return on 250K is 18.75K and he'll get 20% of that for his "service" leaving you with only 15k earnings. Worse yet, he'll get paid his 1.55% even when your account looses money. Not a fair deal for no risk on his part IMO.

I find the bolded part above to be contradictory. He can't be a fiduciary if he stated his incentive is being paid more. I know it is always in the back of a fiduciary's mind, but the fact that he actually came out and said that, would make me wonder what his primary goal really is.
Donít get me wrong. Iím going to run from this deal. Iím only asking to learn but how would they make a percentage if itís only based on growth and the account is losing money? Is it from previous cruise?
Kayzmum is offline   Reply With Quote
Old 07-28-2021, 09:46 AM   #34
Thinks s/he gets paid by the post
iloveyoga's Avatar
 
Join Date: Jan 2017
Location: Des Moines
Posts: 1,183
Never.
__________________
Retired in 2013 and we are living the dream!
iloveyoga is offline   Reply With Quote
Old 07-28-2021, 09:50 AM   #35
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jan 2018
Location: Tampa
Posts: 9,797
You did well in asking this forum.
As you can see, even if one does not DIY, they can pay much less than 1.55%.
However, there are books one can read to educate themselves on DIY investing and it truly isn't hard. There could years where you don't even have to trade in the account.

For example, you can read all you want about removing a gallbladder, but in the end only a doctor can perform the operation.
With investing, many years ago it used to be this way, but investment advisors don't wish to admit that DIY investors can actually manage their own portfolios for no fees and select funds which also have no fees or less than 0.10%.
__________________
TGIM
Dtail is offline   Reply With Quote
Old 07-28-2021, 10:01 AM   #36
Thinks s/he gets paid by the post
frayne's Avatar
 
Join Date: Oct 2002
Location: Chattanooga
Posts: 3,455
I'd be really interested in seeing what kind of investments he would recommend for your IRA/401K. 1.5% fee is not the going rate as it is more like 1% of AUM.
__________________
"My investing style is beauty-in-simplicity, set it and forget it with index funds, along with a little dabbling around the edges for fun and profit" credit to Markola.
frayne is offline   Reply With Quote
How to fire FA
Old 07-28-2021, 10:03 AM   #37
Dryer sheet aficionado
Kayzmum's Avatar
 
Join Date: Oct 2017
Posts: 49
How to fire FA

They already have my Social Security number and account numbers and everything. Do I need to send them a certified letter or will an email and a phone call suffice?
Kayzmum is offline   Reply With Quote
Old 07-28-2021, 10:04 AM   #38
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
SecondCor521's Avatar
 
Join Date: Jun 2006
Location: Boise
Posts: 6,768
Quote:
Originally Posted by Kayzmum View Post
Donít get me wrong. Iím going to run from this deal. Iím only asking to learn but how would they make a percentage if itís only based on growth and the account is losing money? Is it from previous cruise?
As others have said, that 1.55% is charged based on the amount of money in your account. It is charged regardless of whether your account gains money or loses money.

Yes, technically speaking, they'd be happy if your money doubled, because then their 1.55% is multiplied by twice as much, so they make twice as much. That's how they can claim that your interests are aligned.

But this is barely true. Note: (a) it's much harder to double your money when they're taking 1.55% of the balance (which is about 20% of your gains, and between a third to a half of what you can spend), and (b) they don't care that much - they get the 1.55% regardless.

Oh, and the underlying funds they put you in will possibly charge annual fees as well approaching or more than 1%. And those funds will buy and sell stuff, resulting in higher taxes to you. And they might churn your account by buying and selling investments, which will also increase your tax bill and reduce your returns. And there are even possibly front end loads, which means for every dollar you put into an investment, they take 5% off the top and invest the remaining 95 cents.
__________________
"At times the world can seem an unfriendly and sinister place, but believe us when we say there is much more good in it than bad. All you have to do is look hard enough, and what might seem to be a series of unfortunate events, may in fact be the first steps of a journey." Violet Baudelaire.
SecondCor521 is offline   Reply With Quote
Old 07-28-2021, 10:22 AM   #39
Thinks s/he gets paid by the post
walkinwood's Avatar
 
Join Date: Jul 2006
Location: Denver
Posts: 3,331
Quote:
Originally Posted by Kayzmum View Post
I’m such a noob. I have a financial advisor now and he says 1.55% is the going rate and that’s what their fee would be for handling our IRA and 401K. Is this true.

Any advice/comments are appreciated.

If you have index mutual fund options in your IRA/401k, you can do this yourself.


My suggestion - don't do anything right away. zero out all the information you've entered into the advisers website. If you're very uncomfortable with your portfolio, move it all to very safe investments for a couple of months while you investigate options.


Spend some time reading a book or two on index fund investments and see if you feel you can do it yourself. I'm no rocket scientist but have been managing my own money without it being too much of a burden on my time.

Good luck.


Your "location" confused me. For a while I thought you were in the UK. But then you wouldn't have a 401k.
walkinwood is offline   Reply With Quote
Old 07-28-2021, 10:34 AM   #40
Thinks s/he gets paid by the post
 
Join Date: Jun 2017
Location: Chicagoland
Posts: 1,127
Quote:
Originally Posted by Kayzmum View Post
I have a financial advisor now and he says 1.55% is the going rate ...
That is the "going" rate - as in when you go out the door and don't look back.

Quote:
Originally Posted by Kayzmum View Post
They already have my Social Security number and account numbers and everything. Do I need to send them a certified letter or will an email and a phone call suffice?
Just send them an email. If they get you on the phone, they will try to try to talk you out of dumping them, because, despite their fancy titles, they are first and foremost, slick salesmen.
CoolRich59 is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Embarrassing My Kids CoolRich59 Life after FIRE 2 01-21-2019 02:35 PM
Embarrassing situation. Help appreciated. gindie Other topics 66 04-04-2016 10:04 AM
Macbook Question/Printer Question kaneohe Other topics 5 10-15-2009 07:35 AM
Embarrassing Question ricthemic Hi, I am... 9 03-01-2008 02:43 PM

» Quick Links

 
All times are GMT -6. The time now is 03:28 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2022, vBulletin Solutions, Inc.