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Old 02-04-2024, 06:47 PM   #21
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Old 02-04-2024, 06:49 PM   #22
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And which FAs take a 2% fee?
Even Edward Jones is less than that, right?
Or am I hopelessly outdated
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Old 02-04-2024, 07:42 PM   #23
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If some FA told me they could consistently beat the S&P I would never meet with them again.
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Old 02-04-2024, 08:45 PM   #24
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And which FAs take a 2% fee?
Even Edward Jones is less than that, right?
Or am I hopelessly outdated

Many list their max as 2.5% in their ADV Form Part 2. From Hightower Advisors, LLC in Chicago which manages $105B for 145,000 clients:


" Hightower will generally seek to structure such fees so that, when aggregated with Hightower’s advisory fees, its total annual compensation
does not exceed 2.5% (250 basis points), as further explained in Item 12 below."


If you're considering a FA and are not familiar with the ADV Forms, you need to do some serious research before biting the bullet.
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Old 02-04-2024, 08:50 PM   #25
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From the Motley Fool:

Quote:
"Bulls make money, bears make money, pigs get slaughtered" is an old investment industry saying that warns against being excessively greedy.
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Old 02-04-2024, 10:00 PM   #26
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My ex-ML Wealth Management FA charged 0.8% on our portfolio. After 12 years with them and we were going to bail, he offered to go down to 0.6%. They did a decent job while we were busy working. But we finally went on our own 3 years ago, 5 years after we retired. Our time is now free and we might as well pay attention to our portfolio, not that we do much with it. We take a look at our positions a couple of times a year and decide to sell the losers or swap positions.
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Old 02-05-2024, 07:55 AM   #27
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Benchmark.png
To answer your question frankly, I never paid an FA and I am never NOT beating the S&P. Okay that's an exageration, but look at the blue almost always outperforming the red on the graph. MOST of the time I am beating the S&P500.


I went into an FA (EJ) office in Hawaii back in 2014 arrmed with all my data, accounts, goals etc. We had a fun 15min conversation that ended with...you don't need me.

This is what I've managed to do SINCE that sit-down with the FA on my own.

My current expense ratio is .06% and that is my peak expense ratio as the cost of Vanguard ETFs slowly crept up the past few yrs.

That means for every $1mm I have invested I only pay $600 to manage it myself...vs what maybe a 1 to 1.5% management fee, ($10k -15k a year) if you pay an FA.

I had this same thought probably back in 2014... "Can they beat the S/P500, are they beating S/P500?" That introspection led me to invest in AAPL...a high flying tech company at the time.

Today I have 37% of our assets in AAPL. Probably close to 50% in the Magnificent 7...I'll have to do the math sometime on that.

All I know, is that I am invested in companies that beat the S&P500 and you can be too!

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Old 02-05-2024, 06:00 PM   #28
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Having had an advisor at one of the big companies for years, my general feeling is that they setup a call every quarter or half year, say "everything is balanced properly" and ask you if anything changed.

My gut tells me they have an internal robo-advisor that they "adjust" your balances by..nothing more unless you really demand something different.

For this., they take their 0.5%-2% fee .

If I'm correct-they will never beat S+P even with a 100% allocation because after you get it, they have to take their 0.5-2.0% away from the gain .

PWF
Good point. They need to beat the index by 1% since it's what they charge.

Wishful thinking again. Dang..
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Old 02-06-2024, 08:25 AM   #29
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Good point. They need to beat the index by 1% since it's what they charge. ...
Not much new under the sun. Dr. William Sharpe told us this over 30 years ago: https://web.stanford.edu/~wfsharpe/a...ive/active.htm
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Old 02-06-2024, 08:51 AM   #30
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OP, you can definitely do it yourself. You can buy anything similar to what your FA has you in at Vanguard without paying a AUM fee of 1-2% annually, plus the funds won't have near the internal expense that the funds sold by FA's typically have, that can often be around 1% on top of the AUM. When he set me up I told him I'd be happy to match the performance of the SP 500 long term. He told me that they consistently beat it by 2% after fees. They haven't.

I worked with a FA for years before I started putting my "new money" in a Vanguard account. My Vanguard funds have handily beaten the FA's. I use Total Stock Market Index for my IRS's and their Tax Managed Fund for non qualified funds. Both are very close to matching the SP after fees. I also have some in their SP 500 index for the fun of comparison.

I've seen FA's over complicate portfolios with many, many different funds and asset allocations divided to the tenth of a percentage. I think this is to make investing look complicated on purpose.

I'd recommend that you try going on your own. If you had enough interest to ask the question it tells me you saw the problem on your own and can fix it. You're instinct is correct.
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Old 02-06-2024, 09:19 AM   #31
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... I've seen FA's over complicate portfolios with many, many different funds and asset allocations divided to the tenth of a percentage. I think this is to make investing look complicated on purpose. ...
Exactly. I put $100K into Schwab's original robo a few years ago and it burped out a bunch of tiny positions in too many funds. I shut it down after a couple of years mostly because I didn't want to track tiny positions.

I am on the investment committee of a nonprofit where it is necessary for us to have an FA. I had a private lunch with their lead investment guy and he quietly admitted that they needed to show complexity and activity to their clients, otherwise what is the client paying for? Certainly not buy and hold a couple of funds for yars.
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Old 02-06-2024, 09:40 AM   #32
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And which FAs take a 2% fee?
Even Edward Jones is less than that, right?
Or am I hopelessly outdated
A few years ago, I show my DFIL in the middle of the 30 pages year end statement of his Chase investments (full of legalise) was the fee they charged $2,000 on a $100K account.

It didn't include the fund charges for each of the many investments in the account.

So yeah, 2% fee + expenses is not out of the question at all.. And they take it even if the investment goes down.

A 2% fee on investments is half of the safe withdrawal rate !! So I'd need double my retirement savings.. to compensate.
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Old 02-06-2024, 10:06 AM   #33
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Just set an asset allocation (AA) and DIY the investments using widely diversified funds with low expense fees. You can do it, it's easy once you teach yourself to not follow the short term ups and downs of the market.

If your FA is taking just 1% AUM, that is 1% less going into your pocket of the total amount each year. On $1M portfolio, your FA is taking $10K fee each year, regardless if your investments make money or not! Let's be generous and say the FA is spending 10 hours/year on your investments and meetings with you; although probably less than that 10 hours in reality. That's $1000/hour, not a bad income for the FA.

Now add in the fact that only a small percentage of FAs can actually beat the indexes in a given year, so for many years you will get less than index income from the FA after the FA fees. DIY using low fee index funds you are going to get nearly the same income as market returns.
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Old 02-06-2024, 12:31 PM   #34
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Good point. They need to beat the index by 1% since it's what they charge.

Wishful thinking again. Dang..
Nailed it. In order to outperform the index the FA needs to match the index plus their fee and then some. Unlikely.
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I despise Merrill Lynch
Old 02-06-2024, 02:00 PM   #35
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I despise Merrill Lynch

When I took over managing my girlfriend's investments, she had two accounts with Merrill - a taxable account and a traditional IRA. In the taxable account ML took something like 1.5% of assets and had her invested in reasonable stuff - a couple of broad ETF index funds. In the Traditional IRA, where ML did NOT get an annual management fee they had her in more than 100 mutual funds where they got a kickback and churned the positions every month. We could not escape ML fast enough.
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Old 02-06-2024, 02:43 PM   #36
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It's mild compare to some of these horror stories but when I took over my monther's account management I found a ticket to buy a Dreyfus Muni bond fund with the ticket marked "unsolicited." She didn't have enough income to file taxes and the rep knew it. Munis were clearly an unsuitable investment but obviously Dreyfus was running some kind of sales contest so he was stuffing their crap into every available nook an cranny. The "unsolicited trade" was a CYA in case his own compliance people came calling.
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Old 02-09-2024, 03:30 PM   #37
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I would not expect anyone to consistently beat the S&P. I also would not pay a FA. I just invest in index funds myself.
This
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Old 02-09-2024, 03:52 PM   #38
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I honestly don’t know. It’s the same thing I tell my friends who are into derivatives, day trading, and crypto: I’m not smart enough or rich enough. I’m sure if I had oodles of money, there might be some rock star FA who could get me a higher rate of return than the S&P, but such paragons don’t handle accounts like mine. So I just leave my money in my brain-dead Vanguard fund of funds. It’s worked thus far.

That’s the same reply
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Old 02-09-2024, 04:27 PM   #39
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Exactly. I put $100K into Schwab's original robo a few years ago and it burped out a bunch of tiny positions in too many funds. I shut it down after a couple of years mostly because I didn't want to track tiny positions.
+1

Same experience. Plus I had no feel for what the overall sum of all the investments was supposed to be doing. I compared it to the S&P 500 because it was very aggressive into stocks. But I never had a sense of the strategy of there was one.

I would love to find a good unbiased academic study of robo advisors compared to things like the 60/40 AA, Wellesley fund, Wellington fund, 80/20, etc. And a comparison of the various robo advisors - given the same customer needs - against each other.
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Old 02-09-2024, 07:07 PM   #40
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I'm on the finance committee of an organization that wants a safe place ro park extra money for future projects and decided not to do self investing to eliminate finger pointing in the organization if we lost money. We hired them in the down market a couple of years ago and have been trying to be patient but they have barely broke even this past year. We were not asking for SP500 rates but if they can't do well in a down or up market why pay them 1%. We asked for conservative, but a passbook account would have done as well or better this year.

I have been trying not to bring up self investing for them because of the potential finger pointing but have been doing my own for year. I have my accounts in 3 buckets IRA conservative and runs below SP500 but still does a bit better than current CD rates. My ROTH is a bit more aggressive and is consistently doing around 10% on 10 year average and my brokerage account which is kind of between and doing less than CD rates because of a large cash clump right now but still not bad and should be better because I have moved to high interest MM and CDs for most of the cash the last 6 months or so.

Long way around to say you can probably do better buying broad market index funds. Decide how risky you are and pick the percentage you want in equities verses bonds, CDs and high interest MM and save the advisor fees. But if you expect to be close to the SP500, be prepared for losses close to the SP500 in bad years.
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