FA tries to justify 2% fees.

[nun]

Here is an FA trying to defend fees of up to 2% on managing a retirement account. He says some sensible things that are right out of the Bogle approach and the size of the market will always mean that he will have clients, but I will never understand why people can't spend a hour a month to DIY a couch potato portfolio or just dump it into a Vanguard target retirement/income/payout fund and pay 0.34% max to have things rebalanced.

When it comes to retirement should you manage your own money? | Watch the video - Yahoo Finance

 

[Travelwanted]

Here is an FA trying to defend fees of up to 2% on managing a retirement account. He says some sensible things that are right out of the Bogle approach and the size of the market will always mean that he will have clients, but I will never understand why people can't spend a hour a month to DIY a couch potato portfolio or just dump it into a Vanguard target retirement/income/payout fund and pay 0.34% max to have things rebalanced.

When it comes to retirement should you manage your own money? | Watch the video - Yahoo Finance

It's because the financial industry has a vested interest in making everyone feel it's too complex and risky. You need a FA. While most of us on this site and Bogleheads know better now, many of us were in the dark once too!

 

[travelover]

My dream is still to find 20 busy individuals with 5 million dollars each to invest. I'd be happy to only take 1%. I wouldn't even fire them for testy emails.

 

[Mulligan]

I would love to listen to the conversation concerning the justification for the 2% fees over the portion of the portfolio invested in 2% bonds.


Sent from my iPad using Tapatalk

 

[Donzo]

I am often surprised by how little middle aged people know about investing. They get a look like its rocket science.....thus the need for a FA. So glad it (investing) always really interested me....it freed me

 

[RunningBum]

I had to laugh at the comment from the guy who says he doesn't need the hand holding and manages his own portfolio, but still pays 1% to his investment house.

 

[mickeyd]

David Bach asks "are you qualified to manage your money." I am the most qualified.

Question for David~ "aren't you really on TV just to sell your book?"

 

[2B]

I didn'b bother to watch the video but did he say you also have to invite your FA to your retirement party and make sure they get plenty of champagne? There's a TV commercial I keep seeing that has the smiling FA being a serial attendee of retirement parties.

I can't see how even the most ignorant can still justify 2% to a FA.

 

[Choices]

T-T-Two percent. On a 100k portfolio. Those folks better get used to dog food and catsup now. one question for Mr. Bach "does your mama know what you do for a living?"
At our house, no one was schooled in finance. We both have an interest and have LBOM and saved a lot. Regular investing trumps being a wiz kid in the markets, IMHO.
Any of these guys who appear to be wealthy have not done it through the market, but on the backs of their clients.

 

[Rick_Head]

Bbbutt, it means not selling at the bottom. I can do that. I'm note sure that I've ever sold anything. My AA may be a bit out of balance, but I think if you goole the right stuff you may find I'm not whacco.

 

[haha]

T-T-Two percent. On a 100k portfolio. Those folks better get used to dog food and catsup now. one question for Mr. Bach "does your mama know what you do for a living?"
At our house, no one was schooled in finance. We both have an interest and have LBOM and saved a lot. Regular investing trumps being a wiz kid in the markets, IMHO.
Any of these guys who appear to be wealthy have not done it through the market, but on the backs of their clients.

OK, let's multiply. 2% of $100.000 is $2000. Would you prepare an investment plan and take on the associated obligations and underwrite your responsibilities for less?

Ha

 

[Hermit]

OK, let's multiply. 2% of $100.000 is $2000. Would you prepare an investment plan and take on the associated obligations and underwrite your responsibilities for less?

Ha

I had a Merrill Lynch rep do a plan for me for free about 10 years ago. She didn't get my business (2% was too much for me), but the 18 page report sure was slick.

 

[Helen]

I like to think of the fees in terms of my withdrawal rate. For most of us, 2% would be 50% of our gross investment income.

 

[Lakewood90712]

We have 2 FA's here in the west I know of, 2% with lower rate for large accounts. You pay no trading fees, and they only use no load funds.
KPP financial http://www.kppfinancial.com/investtalk/insider , and COMPAK http://www.compak.com/ .

Both do radio shows and podcasts.

KPP does free seminars with really good cookies.

Very nice folks, just not sure they add that much value.

I'm not a client , so I don't know if they do the birthday card thing like Ameriprise does.

 

[haha]

I had a Merrill Lynch rep do a plan for me for free about 10 years ago. She didn't get my business (2% was too much for me), but the 18 page report sure was slick.

You answered a question I didn't ask. I'm sure you felt great about getting this free workup, and then going home without giving the rep any business, but still, the % doesn't matter when deciding if a task is worthwhile to the vendor. What counts is the cash fee that the client pays- and if the vendor has any experience I would guess they might want it upfront, and cash those checks before they let the customer out the door with anything even remotely useful.

Ha

 

[Midpack]

More and more people are starting to get the picture http://www.nytimes.com/2014/08/23/y...r-in-the-world-of-investment-advice.html?_r=0 , but it's a slow process.

And it's very easy for an unscrupulous financial advisor to scare the masses into paying for their expert guidance. For a variety of reasons, most people's financial literacy is very poor across the world, including the USA. Salespersons get the best of people all the time, it's no different in the financial sector.

 

[ERD50]

OK, let's multiply. 2% of $100.000 is $2000. Would you prepare an investment plan and take on the associated obligations and underwrite your responsibilities for less?

Ha

The way I see it, the 2% (or $2,000 per smallish client) isn't really to pay for the time/knowledge to prepare an investment plan. That can be cookie-cutter, and probably done in less than an hour.

But an FA like that has to spend time finding clients. I don't think that is easy, and I'm sure it takes lots of time and lots of dead ends, and some free coffee, lunches, dinners, etc. And an office and nice car to look 'solid'. If he doesn't charge around $2,000 to those $100,000 accounts, I doubt he can make a go of it.

So I doubt that the $2,000 is buying much expertise, it's paying for all the people who said 'no'.

It would be interesting to see an analysis of the typical work week for these levels of FA (different from CPAs and other more accredited positions). How many hours spent finding/keeping clients, versus hours spent actually doing financial analysis. And I won't count getting sales pitches on products from the home office as 'financial analysis'. I'll make a stab at it as 10:1.

I don't mean that to be judgmental, if someone is in that business, they need to make the numbers work or they get out of the business. We gotta look out for #1 (and our families). But I think it's an indicator that there isn't much value to the client.

-ERD50

 

[urn2bfree]

The Wall Street Journal is joining the chorus

-the title says it all-

"It’s Time to End Financial Advisers’ 1% Fees"

http://www.wsj.com/articles/its-time-to-end-financial-advisers-1-fees-1421545038


Sent from my iPad using Early Retirement Forum

 

[haha]

The way I see it, the 2% (or $2,000 per smallish client) isn't really to pay for the time/knowledge to prepare an investment plan. That can be cookie-cutter, and probably done in less than an hour.

But an FA like that has to spend time finding clients. I don't think that is easy, and I'm sure it takes lots of time and lots of dead ends, and some free coffee, lunches, dinners, etc. And an office and nice car to look 'solid'. If he doesn't charge around $2,000 to those $100,000 accounts, I doubt he can make a go of it.

So I doubt that the $2,000 is buying much expertise, it's paying for all the people who said 'no'.

It would be interesting to see an analysis of the typical work week for these levels of FA (different from CPAs and other more accredited positions). How many hours spent finding/keeping clients, versus hours spent actually doing financial analysis. And I won't count getting sales pitches on products from the home office as 'financial analysis'. I'll make a stab at it as 10:1.

I don't mean that to be judgmental, if someone is in that business, they need to make the numbers work or they get out of the business. We gotta look out for #1 (and our families). But I think it's an indicator that there isn't much value to the client.

-ERD50

Very good points. I have never spent even 10 cents for financial advice, other than accounting and legal. However frequently people show up right here at this DIY site who have an FA, or are planning to consult one. So somebody wants this service. All I am saying, is that if I were in this business, I would want at least $2000 to think about this client. I think a lot of people here have never been close to the sales function in their careers. And many have never been close to any profit driven position at all. I think we once had a survey that showed that somewhere around 20-25% of members are or were public sector workers.

A decent salesman can smell a poor client at 100 yards. And from a salesman's POV, a poor client is anyone who thinks he can do it himself (whether this is correct or not.)

People that have to make a profit can't haul a lot of deadweight around. Hence the posts from FAs that so troubled many of our members- "they just see you as money"!

Maybe the FA business will die, it is very expensive for the client when we no longer see 20% gains year in and year out. But so far many people still value all the benefits of a third party- if only to have someone to blame when you have to explain to your wife why she can't study painting in the south of France this year after all.

If you are a shoe salesman do you want the woman who wants $600 shoes in many styles, or a pair of Birkenstocks that she can resole and repair for 15 years?

Ha

 

[UnrealizedPotential]

I watched the video. There is not much substance there. I can't help but notice whenever a good question is asked it is never answered directly. It is always responded with some drivel that is unrelated to the original question. The interviewer never calls him on it. Makes me wonder who is working for whom.

 

[scrabbler1]

I like to think of the fees in terms of my withdrawal rate. For most of us, 2% would be 50% of our gross investment income.

Similarly, if a FA wants to charge 2% (or even 1%), and the client has a significant amount in an tIRA he can't touch right away because he is under ~59.5, the FA's fee would have to come solely from the non-IRA portion of the overall portfolio. This would raise the fee as a percentage of available funds to pay the FA.

I have told this story a few times but I mention it again (in a shortened form). Back in 2010, I was approached (poached, actually) by a pushy FIDO rep who was not authorized to try to take over as my Account Executive from another AE. Mr. Pushy wanted 1% of my portfolio (at the time about $1M) as a fee to manage it, or $10,000 a year. His fee would by far become my biggest expense and become at least 25% of my investment income. And having to pay for it from only my non-IRA portion (about $700k) would raise the effective fee to 1.4%.

I had no interest in Mr. Pushy's offer and wrote a letter to the FIDO office manager complaining about him. I got switched to another AE who is much more laid back and doesn't try to take over my account.

 

[donheff]

Oh well, all the back and forth drove me to watch the video. Not much there. The guy seemed reasonable enough and I suspect that he is basically a 1%er for sizable accounts. But how the heck can anyone decide if this guy or any other FA will actually help you avoid screwing up your financial life? It seems to me that doing the due diligence needed to pick an FA is more difficult than learning the basics needed to DIY.

 

[CaliforniaMan]

Oh well, all the back and forth drove me to watch the video. Not much there. The guy seemed reasonable enough and I suspect that he is basically a 1%er for sizable accounts. But how the heck can anyone decide if this guy or any other FA will actually help you avoid screwing up your financial life? It seems to me that doing the due diligence needed to pick an FA is more difficult than learning the basics needed to DIY.

+1 Very well said!

 

[2B]

But how the heck can anyone decide if this guy or any other FA will actually help you avoid screwing up your financial life? It seems to me that doing the due diligence needed to pick an FA is more difficult than learning the basics needed to DIY.

The question is what are they saying they can do for you. If they are saying they can put you in assets that can beat the market, you know that is nothing but a sales pitch. If any FA could reliably beat the market, why would they waste their time with tiny $2MM or less accounts? CALPERS and the Harvard Trust would have hired him long ago. If it's market timing, you know where that usually leads. Are they going to hold your hand so you don't sell out when the market drops 50%?

I can't see what a FA that works on a percentage of portfolio fee can do to be superior to a fee-only FA or a CPA. The %FA is basically making their fee by finding people willing to be put into a cookie cutter plan while the FA calls other people to try to have them do the same.

For ~$10 buy Millionaire Teacher. Open an account at Vanguard. Put money into an asset allocation you are happy with. If still concerned or unsure, get the low cost or free Vanguard CFP financial plan. Think of all the savings. Everybody can do it.

 

[HFWR]

OK, let's multiply. 2% of $100.000 is $2000. Would you prepare an investment plan and take on the associated obligations and underwrite your responsibilities for less?

Ha

Maybe 2% to set-up an allocation, describing why and what. It's that ongoing 2% that gets you...


Sent from my iCouch using Early Retirement Forum