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02-23-2012, 11:08 PM
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#1
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Full time employment: Posting here.
Join Date: Feb 2011
Posts: 852
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Financial advisor fee
These forums have been wonderful for educating me. We have a fee only financial advisor and have about $2.5M under management... All in passive investments -DFA stock funds and Vanguard bond funds.
Reading the various posts and links found here I am concerned that our advisor may be overpaid. The fee structure is 0.5% of assets plus $2000 "planning fee" every year.
This seems excessive to me as I have learned of other alternatives, alas all out of my state but available nonetheless.
With passive investing the whole notion of charging more just for a bigger portfolio seems dubious to me. How much more work is needed to manage $2 million vs $1 million? $5000 more work? HOW?
Today -in anticipation of our portfolio review next month my advisor called to let me know they are looking to RAISE my planning fee! "Funny," I said, "because I intended to ask why it should not be lower." They hemmed and hawed claimed more money creates more liability. but come on, that still cannot justify these levels of fees. How much could liability cost for them? They are by statute protected by arbitration requirements and Fidelity is my custodian carrying liability as well.
Is it worth thousands of dollars to have an in town, face to face advisor rather than a similarly passive. FAM FRENCHmodel/philosophy advisor with low fees but out of state like Portfolio Solutions,or Evanson or Cardiff? Seems for a fraction of those thousands I could fly to those advisors if I really wanted to. they all seemed to do DFA fund mixes, tax leveraged and rebalanced regularly to maintain AA.
Any thoughts or experience working with out of state passive advisors?
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02-24-2012, 03:32 AM
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#2
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Thinks s/he gets paid by the post
Join Date: Jun 2007
Posts: 2,657
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So you are paying $14,500 a year for someone to maintain an asset allocation and rebalance periodically? That seems like a lot. Is there a reason you do not do it yourself and save the fee entirely? What would your portfolio look like with an extra $14,500 investment every year?
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02-24-2012, 04:34 AM
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#3
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Administrator
Join Date: Jan 2008
Location: Chicagoland
Posts: 40,715
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Quote:
Originally Posted by urn2bfree
could liability cost for them? They are by statute protected by arbitration requirements and Fidelity is my custodian carrying liability as well.
Is it worth thousands of dollars to have an in town, face to face advisor rather than a similarly passive. FAM FRENCHmodel/philosophy advisor with low fees but out of state like Portfolio Solutions,or Evanson or Cardiff? Seems for a fraction of those thousands I could fly to those advisors if I really wanted to. they all seemed to do DFA fund mixes, tax leveraged and rebalanced regularly to maintain AA.
Any thoughts or experience working with out of state passive advisors?
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If you are asking, then what you are paying probably isn't worth it. The other advisors you name can probably do just as well, especially if you want passive management. Out of state? Travel? With Skype you can have all the face to face contact you need, even of you are vacationing. Your money, your rules. Sounds like time for a change.
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02-24-2012, 05:02 AM
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#4
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Mar 2007
Posts: 14,328
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OK, I'll say it. You are overpaying, especially given your investment choices.
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02-24-2012, 05:19 AM
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#5
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Full time employment: Posting here.
Join Date: Jul 2011
Posts: 723
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So you're paying .58% for investment mgt and financial planning. That wouldn't be too bad for active mgt with planning included but not for passive. As you can see, most of us on the forum (or many of us) are do-it-yourself-ers but if you like the basic structure you have but don't like the cost, I suggest talking to Vanguard about their passive management option. I believe they will maintain your asset allocation using some kind of systematic rebalancing for .35% or so. If you feel you need additional planning, consider hiring a fee-only planner for a couple of hours each year (maybe $400) to make sure everything remains on track. Annual savings: about $5,000. Also, keep all cash out of the equation- no need to pay anyone to manage cash passively or actively.
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02-24-2012, 06:29 AM
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#6
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 36,373
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Agree with others. Seems like too much for what you are getting.
You could easily DIY and your investment earnings rate would have a .6% head start each year.
If you VG their free annual financial planning service and Financial Engines will provide AA advice for you.
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02-24-2012, 07:45 AM
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#7
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Mar 2003
Posts: 18,085
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I am in the wrong business.
__________________
"All animals are equal, but some animals are more equal than others."
- George Orwell
Ezekiel 23:20
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02-24-2012, 07:52 AM
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#8
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jan 2008
Location: NC
Posts: 21,304
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The good news is, 1% of assets per year is not that uncommon.
The bad news, 0.58% is still way to much IMHO, especially for passive investing. That would motivate me to learn to DIY, the mechanics are pretty easy, it's the discipline to stick to a plan that most people struggle with. There are some good suggestions in the posts above.
Has your long term performance with the advisor beaten benchmarks, or most of the published lazy portfolios after advisor management fees & expenses?
I suspect most people here pay little if any advisor fees, self included. I'd rather know my porfolio inside and out, I sleep better that way...
__________________
No one agrees with other people's opinions; they merely agree with their own opinions -- expressed by somebody else. Sydney Tremayne
Retired Jun 2011 at age 57
Target AA: 50% equity funds / 45% bonds / 5% cash
Target WR: Approx 1.5% Approx 20% SI (secure income, SS only)
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02-24-2012, 07:59 AM
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#9
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Full time employment: Posting here.
Join Date: Feb 2011
Posts: 852
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the reason I am not a do it myselfer are two fold-
but primarily so I can have access to DFA funds which have been shown to be better than Vanguard by enough to justify SOME advisor fees but once they rise the advantage of course is cancelled out.
The other reason I do not do myself is I don't have the time to acquire the knowledge to leverage things from the tax advantage standpoint...I am in the top bracket and taxes can take a considerable toll if I dont put my money into the right things in the right mix...
I keep almost all of my cash separate- not managed.
The low cost guys do not advertise (hence they keep their costs low) so the only way I found about the ones I know was thru this forum and links found here...none have mentioned any low cost passive managers in my town - but I agree that in this technological age the need to have an in town manager is dubious....(there is a side story: I moved to this advisor a few years ago after being with a BROKER for years who was out of town but happened to be my little brother...I finally realized that I did not need or want a broker - just a brother- but he did not take too kindly to my pulling such a big portfolio out of his place --but it was a little easier for him to accept in that I moved to an in town advisor)
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02-24-2012, 09:10 AM
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#10
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Mar 2007
Posts: 14,328
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Quote:
Originally Posted by urn2bfree
the reason I am not a do it myselfer are two fold-
but primarily so I can have access to DFA funds which have been shown to be better than Vanguard by enough to justify SOME advisor fees but once they rise the advantage of course is cancelled out.
The other reason I do not do myself is I don't have the time to acquire the knowledge to leverage things from the tax advantage standpoint...I am in the top bracket and taxes can take a considerable toll if I dont put my money into the right things in the right mix...
I keep almost all of my cash separate- not managed.
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If the DFA investments are that much better and you don't have any time, keep doing what you are doing.
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02-24-2012, 09:37 AM
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#11
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Thinks s/he gets paid by the post
Join Date: Oct 2004
Location: LaLa Land
Posts: 4,698
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Like any other salesperson, they will take as much as you let them. Buyer Beware!
__________________
Work is something you do to get enough $ so you don't have to....Me.
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02-24-2012, 09:58 AM
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#12
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Aug 2006
Posts: 12,483
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There are DFA advisors who charge .50 but do not require a $2000 or whatever "financial planning fee" every year. They may not be in your town but so what? is the $2000 fee a requirement? I would ask them for an contract that says you are waiving the annual planning fee.
Charging someone $2000 a year just to do AA and meet with you is ludicrous. If they hem and haw, tell them you're going to move the account unless they drop the fee. That line about "more money causes more liability" is pure BS. It doesn't cost them any more to manage $250,000 than it does to manage 10 times that much. They are already getting $12,500 a year from you in management fees, that should include ANY financial planning help you would possibly need........
__________________
Consult with your own advisor or representative. My thoughts should not be construed as investment advice. Past performance is no guarantee of future results (love that one).......:)
This Thread is USELESS without pics.........:)
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02-24-2012, 09:58 AM
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#13
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Thinks s/he gets paid by the post
Join Date: Feb 2006
Posts: 4,872
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Quote:
Originally Posted by travelover
If the DFA investments are that much better and you don't have any time, keep doing what you are doing.
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Yes he's paying for access to DFA. It gets me that DFA push low costs and passive investing and then make you pay an advisor to get access to them. They say it's to limit turnover, but you could limit that like Vanguard does by having trading rules. I think the advisor thing is more of a marketing gimmick to keep DFA a bit exclusive and maybe to limit the number of clients and only have to deal with the advisors rather than the pesky public.
If the advisor fee and the usually higher fees of DFA over Vanguard are covered by better performance stick with it. I'm assuming you are with Vanguard for bonds because their net return (after accounting for fees) is better than DFA....which then leads to the question "why pay the advisor to passively manage you bonds". Sounds like for the bond you're just paying for asset allocation and rebalancing.
I don't think much of advisors at all. But passive advisors are just ridiculous. You're paying then them to be passive, what a fantastic job! Active advisors may not perform better than passive ones, but at least the do some work moving stuff around, reading Barrons and looking of opportunities. You probably won't end up any better off, but the active advisor will have earned that no better performance.
__________________
“So we beat on, boats against the current, borne back ceaselessly into the past.”
Current AA: 75% Equity Funds / 15% Bonds / 5% Stable Value /2% Cash / 3% TIAA Traditional
Retired Mar 2014 at age 52, target WR: 0.0%,
Income from pension and rent
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02-24-2012, 10:02 AM
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#14
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Aug 2006
Posts: 12,483
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__________________
Consult with your own advisor or representative. My thoughts should not be construed as investment advice. Past performance is no guarantee of future results (love that one).......:)
This Thread is USELESS without pics.........:)
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02-24-2012, 10:04 AM
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#15
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Thinks s/he gets paid by the post
Join Date: Feb 2006
Posts: 4,872
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Quote:
Yep, I hate a con job, but I did say if you are doing better with them stick there
__________________
“So we beat on, boats against the current, borne back ceaselessly into the past.”
Current AA: 75% Equity Funds / 15% Bonds / 5% Stable Value /2% Cash / 3% TIAA Traditional
Retired Mar 2014 at age 52, target WR: 0.0%,
Income from pension and rent
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02-24-2012, 10:11 AM
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#16
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: May 2005
Posts: 17,241
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Is there someplace that shows DFA funds are better than Vanguard
I just do not see that in a passive investment.... if they are supposed to follow an index, then you follow the index... anything outside that index is not passive...
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02-24-2012, 10:13 AM
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#17
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Aug 2006
Posts: 12,483
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Quote:
Originally Posted by nun
Yep, I hate a con job, but I did say if you are doing better with them stick there
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It is a not a con job. A private company can set up any business model they want. Just because they decided to offer their investments only throught the advisor channel, how are they cons?
American Funds has over a trillion in AUM, and they don't sell direct, you have to have an advisor. Are they a con job too? Sounds like everyone except direct companies are con artists? Interesting......
__________________
Consult with your own advisor or representative. My thoughts should not be construed as investment advice. Past performance is no guarantee of future results (love that one).......:)
This Thread is USELESS without pics.........:)
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02-24-2012, 10:17 AM
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#18
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Thinks s/he gets paid by the post
Join Date: Feb 2006
Posts: 4,872
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Pretty much nailed it in my opinion.
__________________
“So we beat on, boats against the current, borne back ceaselessly into the past.”
Current AA: 75% Equity Funds / 15% Bonds / 5% Stable Value /2% Cash / 3% TIAA Traditional
Retired Mar 2014 at age 52, target WR: 0.0%,
Income from pension and rent
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02-24-2012, 10:19 AM
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#19
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Aug 2006
Posts: 12,483
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DFA Vs. Vanguard: Another Take - CBS News
Here is a link I found about DFA and Vangaurd...........
__________________
Consult with your own advisor or representative. My thoughts should not be construed as investment advice. Past performance is no guarantee of future results (love that one).......:)
This Thread is USELESS without pics.........:)
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02-24-2012, 10:23 AM
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#20
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Aug 2006
Posts: 12,483
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Quote:
Originally Posted by nun
Pretty much nailed it in my opinion.
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Well, it is your opinion. However, I doubt DFA is going to change their business model anytime soon........
I think Fidelity are a bunch of con artists. They tell you they are a direct company on TV, but inundate my mail with propaganda telling me to use their "advisor funds" which underperform and have double the expense ratio of the direct funds, now THAT is a con!
If DFA is a con, I can think of about 1000 others........
__________________
Consult with your own advisor or representative. My thoughts should not be construed as investment advice. Past performance is no guarantee of future results (love that one).......:)
This Thread is USELESS without pics.........:)
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