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Old 09-05-2021, 11:00 AM   #121
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Bingo Markola!
I think that having another party who can handle/ explain/ manage the Finanical aspects of your plan is very key in case of the death of one (the more familiar with the plan details) spouse.
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Old 09-05-2021, 02:52 PM   #122
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How do you determine the value of a financial advisor? I'll admit, I do have one, and recently told him that I'm not going to do the % of assets approach with him anymore, but I'm going to move to a flat fee. I do value someone else figuring out where to move my $ and also to calm me down when the market tanks briefly. He does much more than just invest my money - he helps with my overall strategy, estate planning, gifting and a lot of other things. Those things don't take time in my head, which I definitely value. I just don't value them the amount that I'm paying.

He is all on board with a flat fee, and said "let's talk about it next time we meet," which is in a couple weeks. But I'm having trouble coming up with a justification for a number.
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Old 09-05-2021, 03:02 PM   #123
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... But I'm having trouble coming up with a justification for a number.
Well, what would you pay for a good CPA or a good attorney? How do his education and experience compare to those professions? Less I think. How much less? Your call.

Another tactic would be to remain silent until he offers a price but don't respond immediately. Tell him you'll think about it. And do.

Interview a couple of other fixed-fee FA's and see what their rates are.

How much has he been making per hour (your estimate) under your AUM scheme?
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Old 09-05-2021, 03:35 PM   #124
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Also check if FA is getting any $ 'kick back' from any mutual funds or other parts of the financial service chain.
I am not anti advisor and can think of places where they have helped others. I had one years ago and was genuinely helpful for my limited financial knowledge. The statement I like is that when you can determine that a FA is effective you already know what you need to know to not need one. Now if I pass first I told DW to go to Vanguard (either all Wellesley or their PAS) or the one FA I have come to trust
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Old 09-05-2021, 04:55 PM   #125
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Well, a good FA is much more than an investment advisor and our financial lives involve much more than the stock market. So you may not be comparing apples and apples. The person paying the 1.1% really needs to assess what they are getting for that amount.

For example, I wrote an RFP for an advisor for a nonprofit I'm involved with, to run about $5M. Bids ranged from 40bps to almost 100 and we picked the FA that offered 62 because we wanted the package he was offering. Low bid was VG, BTW, but we wanted more hand-holding and support than they offered.

That said, IMO 1.1% is on the high side unless the AUM is well under $1M. Getting into low millions seems to drive the fees down towards 60bps.

I was talking to an FA friend one time who said: "Look, if I keep my client from panicking just once or twice in down markets I will have earned everything he's ever paid me and everything he will pay me in the future."
Well, that's why you pick an AA you can live with in good times and bad.

I'm fortunate to have roughly a decade of spending in fixed income, so I doubt I'd be panicking.
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Old 09-05-2021, 05:38 PM   #126
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Well, that's why you pick an AA you can live with in good times and bad. ...
That works for you, it works for me, and it works for many other people here but the evidence is that it doesn't work for everyone. Many people need the hand-holding.

One thing that I hear occasionally that just amazes me: "We had a meeting with our financial advisor to see if we can afford to buy a car."
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Old 09-06-2021, 05:18 AM   #127
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That works for you, it works for me, and it works for many other people here but the evidence is that it doesn't work for everyone. Many people need the hand-holding.

One thing that I hear occasionally that just amazes me: "We had a meeting with our financial advisor to see if we can afford to buy a car."
As I have said before, I think it also comes down to the concept that many folks can't fathom that they can do just as good a job as a FA professional (if not better).
One can study all day on the internet on how to remove an appendix, but just won't have the expertise/legal standing, etc to perform the surgery.
The same concept is applied to the FA's in that how can one do as good a job without all the "training"?
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Old 09-06-2021, 07:02 AM   #128
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As I have said before, I think it also comes down to the concept that many folks can't fathom that they can do just as good a job as a FA professional (if not better).
One can study all day on the internet on how to remove an appendix, but just won't have the expertise/legal standing, etc to perform the surgery.
The same concept is applied to the FA's in that how can one do as good a job without all the "training"?
This may be true for a select few FAs. Yet study after study says that over the long term, one can do better than most FAs. How does one go about find those few FAs (not companies) who will outperform over the next 20-30 years?
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Old 09-06-2021, 07:23 AM   #129
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This may be true for a select few FAs. Yet study after study says that over the long term, one can do better than most FAs. How does one go about find those few FAs (not companies) who will outperform over the next 20-30 years?


Outperformance should not be the goal of an FA, in my view and experience. Rather, it is protecting income over life expectancy. Second, if you can cite a study, please do, as I havenít seen one.

The studies Iíve seen are that most individual investors underperform the market averages in their consistently failed attempts to outperform, as do the vast majority of actively managed mutual funds. Buying and holding index funds is, therefore, the path with better odds.
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Old 09-06-2021, 08:43 AM   #130
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... How does one go about find those few FAs (not companies) who will outperform over the next 20-30 years?
Well, stock pickers work for companies so I'm not sure how to deal with that distinction. I think it's logical, though that the best stock pickers will work for investment companies whose track records are public. So, with that I think there are three different ways to approach the question:

1) If someone does know how to pick the superior investment advisors, they aren't telling. Here is a pretty good video on the subject: Dr. Kenneth French on picking a manager: https://famafrench.dimensional.com/v...-managers.aspx

2) Coming from human psychology, if someone did have the skills to be a consistent winner, why would they be selling their talent to retail investors or even to an investment company for a relative pittance? IOW, if they exist we won't have access to them anyway.

3) Fifty years of research all points to the fact that the best model of the market is randomness with a slight upward bias. If the market is indeed random, then all investment results come from luck, including streaks of wins once in a while. IOW, while the existence of streaks sometime somewhere is predictable, winners can only be identified in the rear view mirror.
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Old 09-06-2021, 09:02 AM   #131
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I have talked to a couple in the past year, just kinda feeling them out and also getting a free assessment of where I am financially. They both essentially had the same 'approach', 60/40, investing in indexes, and hitting the account for .8-1% annually.

The 2nd guy I talked to I liked, but now I am not sure as his big 'tip' for me when we concluded the call was to look at a Blackrock fund, BIGZ, that they were putting clients in to. Well, I looked at BIGZ....-.65% return for 2021 with a 1.25% management fee...uugghh.

I probably will not use an investment advisor while I am of sound mind, but my wife will definitely need to have someone manage the money when I am gone. Maybe that will be the DS, or maybe I will need to have a financial planner on stand by for DW.
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Old 09-06-2021, 10:24 AM   #132
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Outperformance should not be the goal of an FA, in my view and experience. Rather, it is protecting income over life expectancy. Second, if you can cite a study, please do, as I havenít seen one.

The studies Iíve seen are that most individual investors underperform the market averages in their consistently failed attempts to outperform, as do the vast majority of actively managed mutual funds. Buying and holding index funds is, therefore, the path with better odds.
My measurement of an FA outperforming is relative to an self directed management. This group is heavily in that camp. And it is to those whom I am addressing. Further, I don't know many who, when measuring their investments don't in some manner, use the SP500, DJI or similar index as part of their "ruler". As an simple example, a 60/40 AA portfolio might measure their personal performance/growth/ against 6% if the DJI gains 10% and their cash/bonds earn 0%. In order for an advisor/manager to match that, after his fees, he has to beat that index consistently year after year. I might also add, that his job should be to protect the income over not the generally accepted "life expectancy" but to the end of one's actual life, whatever that might be. Personally, I plan to a 5% chance of living to ~100 for either of DW or me. I'm fairly certain that nobody wants to plan on running out of money the day after they exceed their expected life.

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Well, stock pickers work for companies so I'm not sure how to deal with that distinction. I think it's logical, though that the best stock pickers will work for investment companies whose track records are public. So, with that I think there are three different ways to approach the question:

1) If someone does know how to pick the superior investment advisors, they aren't telling. Here is a pretty good video on the subject: Dr. Kenneth French on picking a manager: https://famafrench.dimensional.com/v...-managers.aspx

2) Coming from human psychology, if someone did have the skills to be a consistent winner, why would they be selling their talent to retail investors or even to an investment company for a relative pittance? IOW, if they exist we won't have access to them anyway.

3) Fifty years of research all points to the fact that the best model of the market is randomness with a slight upward bias. If the market is indeed random, then all investment results come from luck, including streaks of wins once in a while. IOW, while the existence of streaks sometime somewhere is predictable, winners can only be identified in the rear view mirror.
+100 on all 3 points.

One cannot ever know the best, or even an above average advisor/manager over the unforeseen future. That can be only known in the rear view mirror. We, mere mortals, have not the power to do so.
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Old 09-07-2021, 12:03 PM   #133
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That works for you, it works for me, and it works for many other people here but the evidence is that it doesn't work for everyone. Many people need the hand-holding.

One thing that I hear occasionally that just amazes me: "We had a meeting with our financial advisor to see if we can afford to buy a car."
But at what price?

If 1% (or more) fee on assets under management no wonder they're not sure if they can afford a car...
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Old 09-07-2021, 01:17 PM   #134
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My current FA said their job is to ensure that we will never be poor and at the same time they won't make us rich. They have done a pretty good job todate but these two chicks are ready to leave the nest. We have spent about $300K in FA fees so far and decided that it is enough. Wish us well!
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Old 09-07-2021, 01:35 PM   #135
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But at what price? ...
The price at which a willing buyer meets a willing seller.

Really that's all you can say except to hope that the buyer of FA services has done their market research and their competitive evaluation to determine what services they need and what is a fair price for those services.

Interestingly, I do pro bono small business mentoring and I have an FA client just working to get his business off the ground. He feels strongly that AUM pricing is unfair to the clients that pay and it excludes clients who need advice but do not have big enough portfolios to interest AUM-oriented shops. So we together are struggling to design a cost-effective fee-for-services strategy that will put adequate bread on his table.
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Hiring a Financial Advisor
Old 09-07-2021, 01:55 PM   #136
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Hiring a Financial Advisor

^^^^^You might Google the Garrett Financial Group of fee-only advisors, if you havenít yet. You might not need to reinvent the wheel.

https://www.garrettplanningnetwork.com/
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