fixed fee investment advisor

[LOL!]

saluki9: That's a great list of questions. Looks somewhat like family office stuff. Thanks!

 

[FinanceDude]

Whats the percentage of people that you know that have over $2M vs those that have under $1M?

Whats the percentage of people that have over $2M and therefore dont give a hoot how much they're paying someone to do some work for them vs those under $1M?

We might not have the cause and effect straight here

I've got your low fixed fee investment advice right here. Buy a target retirement fund in a date compatible with your risk tolerance and/or date of actual retirement. Now send me five bucks.

My average client has a net worth of about $1.5 million. My largest client has $25 million, of which I manage $10 million. I am fairly sure your net worth is over $3m, and you do it yourself, but that's not a good sample either...........

I SAID it was MY sample, NOT a scientific one...........

Most people hire advisors because either:

1)They don't WANT to learn how themselves
2)They don't want to take the TIME to learn how
3)They want someone else to be ACCOUNTABLE or BLAME
4)Their finances are VERY COMPLEX (maybe 1% of all folks)
4)Some combination of the above

Investing in products is easy, the whole industry is commoditized by the Internet, it's GOOD ADVICE that's hard to come by..........

Bogle said almost ALL fund managers NEVER beat the index, and that's true.........however, I don't recall him saying people should NEVER seek advice either, and I've read everything he's ever written............

If a target fund is your cup of tea, that's fine, but I watch all of them and I think most folks could outperform them picking individual funds themselves...................

 

[LOL!]

If a target fund is your cup of tea, that's fine, but I watch all of them and I think most folks could outperform them picking individual funds themselves...................

If you have taxable, tax-deferred and tax-free accounts, then a target retirement fund in all 3 places would not be the most tax efficient.

 

[REWahoo]

Most people hire advisors because either:

1)They don't WANT to learn how themselves
2)They don't want to take the TIME to learn how
3)They want someone else to be ACCOUNTABLE or BLAME
4)Their finances are VERY COMPLEX (maybe 1% of all folks)
4)Some combination of the above

I think there is a third number 4: They are scared $h!tle$$ of screwing up.

Or maybe that's a second number 3...

 

[FinanceDude]

I think there is a third number 4: They are scared $h!tle$$ of screwing up.

Or maybe that's a second number 3...

Hmmmmmm.....hadn't thought about that............it is VERY DIFFICULT to sue yourself if the you know what hits the fan..........

 

[megacorp-firee]

Most people hire advisors because either:

1)They don't WANT to learn how themselves
2)They don't want to take the TIME to learn how
3)They want someone else to be ACCOUNTABLE or BLAME
4)Their finances are VERY COMPLEX (maybe 1% of all folks)
4)Some combination of the above

Did you ever think that some people know that there may be some things that they don't know and could use a 2nd opinion? I used the FA to verify that I was ok. Also got some different points of view. Prudent I think.

 

[FinanceDude]

Did you ever think that some people know that there may be some things that they don't know and could use a 2nd opinion? I used the FA to verify that I was ok. Also got some different points of view. Prudent I think.

Smart. I think it fits in the factors I listed above...........

 

[2B]

I still think that the only reason financial advisors exist is that people don't have a clue about managing their own money and don't really want to learn. They are overwhelmed with the thought of doing it, they think its far more difficult than it is and they need someone to be their "nanny" to take care of them.

I've run across many people that have financial advisors. I am always amazed that they really don't understand how much the advisor is costing them. None of the people I've talked with have ever had a fee only advisors. They have always had the 1 to 1.5% off the top plus high fee investments. Investments range from standard asset allocations not much different than you can find in reasonable books and articles to wild and crazy that makes me wonder what the advisor is doing besides maximizing his fees. The best move I've seen was the variable annuity that was bought inside an IRA. I can't think of any way to justify that.

If I felt lost in the financial wilderness, I'd be happy to spend a few hundred or even a thousand dollars for a real personalized plan. I've consulted lawyers and a CPA for wills and estate planning. I think they were worth the money but after I wrote them their check they no longer had their hands in my cookie jar.

 

[saluki9]

If I felt lost in the financial wilderness, I'd be happy to spend a few hundred or even a thousand dollars for a real personalized plan. I've consulted lawyers and a CPA for wills and estate planning. I think they were worth the money but after I wrote them their check they no longer had their hands in my cookie jar.

I don't know what the cost of living is where you live, but stop and think what kind of person you would be hiring to get a personalized plan for $1K?

Most of the decent planners start at $4-5K as a base fee with update fees each year after that.

 

[mathjak107]

depends on ones own depth of knowledge and complexity of the plan. i consider myself investment savy but for varoius reasons i choose to follow 2 newsletters for the last 20 years which serve me well. im also considering seeing a proffessional to get a handle on incorporating the various annuty products avail into my eventual income stream affording me a larger monthly draw.

im weak on knowledge in those areas . my plan is to structure the income buckets with cd's bonds and for extra kickers utilizing index linked annuties with guaranteed floors not as a stock proxy but to enhance the fixed income buckets.

i wouldnt pay an advisor to manage my money though, only to help me sort through products and get ideas.

 

[2B]

I don't know what the cost of living is where you live, but stop and think what kind of person you would be hiring to get a personalized plan for $1K?

Most of the decent planners start at $4-5K as a base fee with update fees each year after that.

I guess I'm going to have to put "fee only planners" in the group of overpriced and not possibly worth their fee.

For a "typical" wage slave with the requisite 401k, Roths and possibly a little after tax money, I can't imagine a personalized plan requiring more than 8 hours of work. An 8 hour plan would also be significantly more complicated than I would need since I have a pretty simple life. That works out to $500 or more an hour. You can get a pretty high dollar lawyer in Houston for that. CPAs are much less expensive.

I guess the cost comes down to how many people walk through the front door in a given day. If I had 1 a day, I could make a great living doing the simple plan 99% of us need. If I had 1 every other week, I'd have trouble getting by on $4000 per plan with reasonable office expenses. Of course, I don't change diapers or wipe noses. I would expect to be dealing with adults which I realize is not always going to happen. I'd want at least $10,000 for a plan for someone that wanted a "nanny."

When I talk to people about their planner situation, they are always worried about the time it would take to do the "work." I tell them I spend about an hour every year rebalancing. Once you pick your asset allocation, you are effectively done. Again from what I've seen, the typical planner is not very active in moving assets around unless there is a commission involved. Depite the fees paid, most people I've talked with that have a planner still do not have a clue about where their money is or what is happening with it.

 

[saluki9]

For a "typical" wage slave with the requisite 401k, Roths and possibly a little after tax money, I can't imagine a personalized plan requiring more than 8 hours of work. An 8 hour plan would also be significantly more complicated than I would need since I have a pretty simple life. That works out to $500 or more an hour. You can get a pretty high dollar lawyer in Houston for that. CPAs are much less expensive.

You've hit on one of the reasons that there aren't many hourly fee only planners. Getting clients in any business is tough. Your attorney, accountant, RE broker etc all have to market their services. Once they have the client they then have to earn some revenue off of them. Once somebody has mastered the skill of obtaining clients they have to either be wealthy already, or a true humanitarian soul to survive on doing $1K financial plans. I suppose if you have a factory assembly line shop it's possible to do them for that price, but I would doubt the quality of advice you would get.

 

[2B]

You've hit on one of the reasons that there aren't many hourly fee only planners. Getting clients in any business is tough. Your attorney, accountant, RE broker etc all have to market their services. Once they have the client they then have to earn some revenue off of them. Once somebody has mastered the skill of obtaining clients they have to either be wealthy already, or a true humanitarian soul to survive on doing $1K financial plans. I suppose if you have a factory assembly line shop it's possible to do them for that price, but I would doubt the quality of advice you would get.

There's a segment in "The Godfather" where Vito says "I don't care how a man makes his living as long as it doesn't affect my family" or something similar. I'm saying the same to you and the other planners that frequent this forum. Personally, I don't have any interest in the service for either a fee or percent of assets. I feel comfortable with where I'm at and where I'm going.

Unfortunately, there is a market for the service because people won't take the time to learn the basics or lack the confidence to take charge of their own money. In the end they turn their money over to someone that has a vested interest in getting it from them. I could never be in the business because I wouldn't be able to take people's money when they should be able to do as well on their own.

I have been a well know "financial prophet" for years and have religiously preached to people to fire their financial advisor, take charge and meet their goals sooner. In all of those years I have seen unbelieveable stunts done by supposed "advisors" and shown many people how their horrific fees are bleeding their returns. In all those years I have only converted one person to do just that.

I suppose I can't object to them being prey.

 

[kcowan]

...In all those years I have only converted one person to do just that.

I suppose I can't object to them being prey.

I'll bet you have finally stopped? Prey are what drive the market economy.

 

[2B]

I'll bet you have finally stopped? Prey are what drive the market economy.

No. I keep trying.

Financial planners and annuities -- they will go on despite me. The most I can hope for is that I make a difference sometimes.

 

[FinanceDude]

I think you are missing the point that slauki is trying to make, but that's ok.

Advice is sometimes about when to do nothing, or to do something. It is not a function of performance, which I have discussed at length but very few understand.

Let's just say the folks on this forum are lightyears ahead of most folks I run into................

Let me ask this. Is is better for a person to do NOTHING, or to work with an advisor who gets them to start investing, and get on the path to FIRE Just curious................

 

[73ss454]

Well it would be a lot cheaper for them to do nothing.

 

[unclemick]

Ya know one of the bar and grill's I've been known to 'do' lunch at has the oft quoted: 'You can get more done with a kind word and gun than just a kind word'. - Al Capone.

A mentor/financial advisor circa 1966 (in contrast to my Dean Witter broker) with 'the gun of knowledge' making me an offer I couldn't refuse - would have saved me the price of an fairly expensive financial education.

Instead - had to wait until 1977 - 500 Index fund/401k/DCA and get there by accident/ or at least not noticing success until it practically bit me in the butt.

I'm getting that grumpy/curmudgeon feeling again.

heh heh heh - when I hit 10mil - maybe I'll get an advisor - maybe

 

[cute fuzzy bunny]

So basically you financial planner guys are just a really expensive version of Dear Abby?

 

[chinaco]

There is pending regulatory rules. Financial planning will soon be regulated much more closely.


On that note. Not all financial planners are the same. There a quite a number of people that just regurgitate fundamental rules that could be read out of any basic book about retirement investing.

Where I think there is more value is:

1) Understanding taxes and prepositioning for those issues. It is a bit more murky and a moving target.
2) Understanding other legal issues around estate planning and other life bumps in the road.


It is expensive... but find a good attorney that is also a CPA. I believe they can help people with much more than the basics of investing and the fundamental on balancing market risk (volatility).


Let's face it... Just like there are small number of very good baseball players, there are very few really good financial planners. Since there is no culling process like major league baseball (and the time horizon is different)... you will never know if you hooked up with a bad or mediocre planner until after the fact.


All of that said. If you are unwilling to learn yourself... a mediocre planner is better than just riding the waves and winging it.

 

[saluki9]

It is expensive... but find a good attorney that is also a CPA. I believe they can help people with much more than the basics of investing and the fundamental on balancing market risk (volatility).

One comment on that, as a CPA, and seeing the personal investment portfolio of dozens of CPAs, do yourself a favor and NEVER take investment advice from an accountant. I can speak from experience that accountants learn NOTHING about investing as part of their education and taught only risk avoidance. In general the ones I have seen make very pad investments.

There is pending regulatory rules. Financial planning will soon be regulated much more closely.

More closely? Is that possible? I can't think of any other business that is regulated as tightly as ours. The regulators from the SEC, NASD, or our state securities dept can march into our offices at any time, no appt, and demand to see our trading logs, cash receipt logs, disbursements, client files, our company books, checking statements etc. In addition we are required to save every e-mail, letter, note, brochure both to and from clients or prospects. If what you're referring to is the Merrill Lynch rule, thankfully that has been put on hold. That would have allowed brokers to hold themselves out as RIAs without doings all the crap that RIA firms do.

 

[REWahoo]

One comment on that, as a CPA, and seeing the personal investment portfolio of dozens of CPAs, do yourself a favor and NEVER take investment advice from an accountant. I can speak from experience that accountants learn NOTHING about investing as part of their education and taught only risk avoidance. In general the ones I have seen make very pad investments.

Very true, and a common misconception along with the belief that all CPA's are tax experts.

I know one CPA who seeks both investment and tax advice from a liberal arts graduate (AKA "dad").

 

[2B]

Let me ask this. Is is better for a person to do NOTHING, or to work with an advisor who gets them to start investing, and get on the path to FIRE Just curious................

Your question is which wrong choice would I recommend? I would always recommend that someone learn to manage their own assets. If that delays them a month, that's ok.

 

[FinanceDude]

Your question is which wrong choice would I recommend? I would always recommend that someone learn to manage their own assets. If that delays them a month, that's ok.

I think you assume ALL folks are like you and others on this board, and that's not true...........

Heck, about a third of all working Americans who have access to a 401K don't even put money in........... However, the govt now thinks that by giving the employer the power to enroll those folks, that it will magically fix the problem............

 

[chinaco]

One comment on that, as a CPA, and seeing the personal investment portfolio of dozens of CPAs, do yourself a favor and NEVER take investment advice from an accountant. ...

I should have said explicitly CPA specializing in taxes (it was implied in the context). I agree Accounting classes tend to only give the basics.

More closely? Is that possible? I can't think of any other business that is regulated as tightly as ours. The regulators from the SEC, NASD....

Yup it is coming. And it should! There are many BSers out there. There are several certifications available that are bandied around and presented as if the fin adviser is an expert. Most are watered down basics. Some are experts but many are not. Of course from the perspective of the person seeking guidance, they often know very little so a few buzz words impress them.