How much would you have to have to pay an FA

[nun]

Is there a size of portfolio that makes it sensible to employ a Financial Adviser? My response was always "NO"......but as I get older and my portfolio increases I can see asking for advice on estate planning....but not investing.

 

[ponyboy]

Yes...when it becomes so large that it takes teams of people to manage. You think Ted Lerner does and keeps track of all of his investments, lol. The largest property owner in washington dc...I think not.

For the rest of us who have $0 to multi millions...we cant even begin to imagine what it takes to keep track of a billionaires investment portfolio.

 

[Blue Collar Guy]

I applied for a job once, it paid 105k a year (2007)to work 4 days a week to manage the guys art holdings. Needless to say i did not get the job, they wanted to know if i had a full gun carry permit. Would I be interested in driving the family around when they were in town and the regular chauffeur was unavailable. These are the folks that have teams of people managing their stuff.

 

[Clone]

I think that the issue becomes managing the whole financial package, not 'what should I invest in'. Estate planning, tax planning, keeping track of assets, and so forth.

 

[OldShooter]

FAs are not estate planners even if you find one who thinks he/she is. Find an attorney in your state that specializes in estates.

Re portfolio, my impression is that it takes $1m to interest a true Registered Investment Advisor. These guys are legally fiduciaries and that is what you want. I think sticker prices for FAs like this start at 2% for $1M and slide down from there. I just helped select an FA for a nonprofit and at a $4M level, we were quoted prices ranging from 40 to 75bps from the 8 firms we sent RFPs to. Obviously, they knew they were in a competition and came with sharpened pencils.

 

[FlaGator]

FAs are not estate planners even if you find one who thinks he/she is. Find an attorney in your state that specializes in estates.

Re portfolio, my impression is that it takes $1m to interest a true Registered Investment Advisor. These guys are legally fiduciaries and that is what you want. I think sticker prices for FAs like this start at 2% for $1M and slide down from there. I just helped select an FA for a nonprofit and at a $4M level, we were quoted prices ranging from 40 to 75bps from the 8 firms we sent RFPs to. Obviously, they knew they were in a competition and came with sharpened pencils.

With less than that, I'm at the upper end of your quotes - think your getting a fair price.

 

[Scuba]

I think it depends more on your interests and personality than the size of your portfolio, unless you're talking about $10M+. If you get peace of mind from professional help and you like not spending time managing your portfolio, an FA could be helpful. Also if you tend to panic in a market downturn, an FA will help prevent you from selling at a low point. I managed our portfolio myself for years but got an FA 3 years before planned ER to help me transition our portfolio from purely growth to partly income-generating. It made me feel better having an FA confirm our ER readiness also.

Still have our FA post-ER, and will probably keep the FA for the first few years of ER. Having too much fun traveling and doing other things that interest me right now to want to take that over. Also would feel better taking it back on myself after we get through the initial years of ER. YMMV

 

[Koolau]

If I can't visit a FA on a per "issue" basis and pay by the hour, I'm not interested. The kinds of help I need are NOT things like AA or pulling the trigger on an investment. What I would like is someone who can evaluate MY planned major changes for unforeseen issues like taxes and "gotchas" such as MC limits, etc. IOW, I want someone familiar enough with the "Big Picture" to keep me from making a stupid mistake. YMMV

 

[exnavynuke]

Assuming an investment portfolio of stocks/bonds etc only, I don't think there is any point in which a FA would be worth their cost to me. If I had won that $435M jackpot, however, I'd likely utilize a team (including lawyer, CPA, and probably investment personnel) to manage the estate as I'd likely diversify investments into other areas including multiple real estate holdings, possibly some venture capital investments, etc. Then I'd probably want help managing all the various investments instead of doing it on my own.

 

[jazz4cash]

I think that the issue becomes managing the whole financial package, not 'what should I invest in'. Estate planning, tax planning, keeping track of assets, and so forth.

Great point that is seldom mentioned. Most threads go down the active/passive investment rathole and ignore all these other highly significant factors.

 

[Fedup]

I'm thinking of $20 million, that's what I was quoted from Barclays Bank in LA a few year ago.

 

[Sojourner]

If I can't visit a FA on a per "issue" basis and pay by the hour, I'm not interested.

+1

To answer the specific question, I would start thinking about retaining an FA if my net worth were to approach the $10-12 million mark. That's the point at which I'd have so much money to burn, I might as well outsource things like portfolio management to free up the 2-3 hours per month I would otherwise be spending to do it myself.

 

[Texas Proud]

Wow.... some people seem pretty low to me.... I can manage $10 to $20 mill on my own... not a lot more work than I do now (and I am not close)...


BUT, if I won one of those super lotteries and had over $100 mill I would than hire some people... but not pay a % of NAV unless it was really low... like 25 to 50 BPs..... that is still $250 to $500K to them.... I should be able to get a lot of service for that kind of scratch.... but since you should be making anywhere between $5 and $10 mill a year in profits it becomes a minor expense to you...

 

[Sojourner]

Wow.... some people seem pretty low to me.... I can manage $10 to $20 mill on my own... not a lot more work than I do now (and I am not close)...

Well, I could manage $10-$20MM (or more) on my own, too, but when the nest egg gets to be that large, it becomes a simple matter of freeing up more of your time. When your passive income gets to be so high (say, $35,000/month from a $12 million portfolio) that you have, essentially, unlimited discretionary money to spend on whatever you want, wouldn't it make sense to pay someone to manage your money and free up some of the time and "brain space" being devoted to personal financial management? IOW, you use a little bit of something you have an excessive amount of (money) to free up a little bit of something you have a very limited amount of (time).

Using the exact same reasoning, if I had a $12 million net worth, I would hire a maid to come in and clean my house, wash my clothes, do the dishes, etc. several times a week instead of spending time doing those kinds of drudgeries myself.

 

[Danmar]

I would think around $100 million. But not sure. I don't see any problem managing up to $25-50million myself. I'm an unusual case though since I am better qualified and interested than most to self manage (MBA, CPA, CFA). I enjoy managing my portfolio. The thought of paying some guy $500,000-$1,000,000 every year kind of puts me off. But everybody is different.

 

[Fedup]

Well, I could manage $10-$20MM (or more) on my own, too, but when the nest egg gets to be that large, it becomes a simple matter of freeing up more of your time. When your passive income gets to be so high (say, $35,000/month from a $12 million portfolio) that you have, essentially, unlimited discretionary money to spend on whatever you want, wouldn't it make sense to pay someone to manage your money and free up some of the time and "brain space" being devoted to personal financial management? IOW, you use a little bit of something you have an excessive amount of (money) to free up a little bit of something you have a very limited amount of (time).

Using the exact same reasoning, if I had a $12 million net worth, I would hire a maid to come in and clean my house, wash my clothes, do the dishes, etc. several times a week instead of spending time doing those kinds of drudgeries myself.

Exactly the same thinking for me. I guess if we put 50% in stocks and 50% in bonds, we should be ok.

 

[Danmar]

Well, I could manage $10-$20MM (or more) on my own, too, but when the nest egg gets to be that large, it becomes a simple matter of freeing up more of your time. When your passive income gets to be so high (say, $35,000/month from a $12 million portfolio) that you have, essentially, unlimited discretionary money to spend on whatever you want, wouldn't it make sense to pay someone to manage your money and free up some of the time and "brain space" being devoted to personal financial management? IOW, you use a little bit of something you have an excessive amount of (money) to free up a little bit of something you have a very limited amount of (time).

Using the exact same reasoning, if I had a $12 million net worth, I would hire a maid to come in and clean my house, wash my clothes, do the dishes, etc. several times a week instead of spending time doing those kinds of drudgeries myself.

$35,000 per month provides for unlimited discretionary spending? Don't think so.

Hiring a maid, gardener, pool guy, is a little different than hiring an asset manager in my view. Have hired all those services and more but not an asset manager. A lot more expensive for the asset manager too. I enjoy managing my portfolio (not drudgery) and would be constantly second guessing any manager. Agree that my education and experience makes this a little unusual. Doesn't take much time the way I do it (buy & hold, spend divs).

 

[Sojourner]

$35,000 per month provides for unlimited discretionary spending? Don't think so.

Hahaha... I had a feeling someone would quibble with that statement and take it more literally than I intended. Note that I wrote "essentially unlimited", which I was hoping would imply that, clearly, $35K/month is not literally unlimited. But I think for most on this board, that amount would feel pretty close to unlimited. Of course, it's all relative. I imagine $35K/month would feel like abject poverty to someone like LeBron James.

 

[gcgang]

I could say I like to do it myself, which I do, but down and dirty, I guess I'm too cheap.

Even at $5mm, paying 1% is $50,000. Per year. It's hard to imagine receiving $50k of value. Every year. Not going to get it in higher returns or asset allocations.

Estate and other issues are nice to have help with. Paying someone to make sure they're in order is worthwhile. That might cost $5-10k, at most. Once every several years, perhaps. Not every year.

But $50,000 worth? Every year?

 

[exnavynuke]

If anyone is facing such a problem, I'll be happy to invest your money in 3 low cost funds and distribute an annual 3.5% of your money to you at regular intervals of your choosing (broken down to as little as weekly, possibly daily distributions if you'd like) for a low fee of only $500k/year. In fact, I'd even be willing to guarantee that I'd do it for that low fee (adjusted for inflation) until one of us died (for only effectively a few hours of work per year, I'd keep "working" until I died at such an income for the amount of work).

 

[OldShooter]

I could say I like to do it myself, which I do, but down and dirty, I guess I'm too cheap.

Even at $5mm, paying 1% is $50,000. Per year. It's hard to imagine receiving $50k of value. Every year. Not going to get it in higher returns or asset allocations.

Estate and other issues are nice to have help with. Paying someone to make sure they're in order is worthwhile. That might cost $5-10k, at most. Once every several years, perhaps. Not every year.

But $50,000 worth? Every year?

I don't disagree with your argument, but I think it's fair to point out that it's based on IMO a false premise.

Again, IMO, only a chump would pay 1% on $5M. RIA sticker prices I have seen are more like 50bps on $5M and prices can be negotiable depending on what the client wants from the advisor. If you are high maintenance or need extensive support doing planning that's one thing. If you just want general support for an AA and a fairly passive investment strategy I would go for lower than 50bps. To your point, it's still a lot of money and maybe not worthwhile, but it shouldn't ever be 1% on $5M.

An extreme example: I wanted to try some DFA funds, which are only sold through RIAs. Zero maintenance client; just buy and hold $100K worth for a couple of years and see how they do. I managed to negotiate a 50bps fee for this. The RIA is of course hoping that if they do well we will put some serious money with them. Interestingly, the RIA told me that he felt bad charging me just because he is a gatekeeper for DFA and he asked if there was anything else in our planning he could help with to better earn even this fee.

 

[Danmar]

Hahaha... I had a feeling someone would quibble with that statement and take it more literally than I intended. Note that I wrote "essentially unlimited", which I was hoping would imply that, clearly, $35K/month is not literally unlimited. But I think for most on this board, that amount would feel pretty close to unlimited. Of course, it's all relative. I imagine $35K/month would feel like abject poverty to someone like LeBron James.

OK got it. I was being a little literal for sure. But once you have a lot of money you eventually find ways to spend it or give it away. It might feel limitless at one point but then gradually less so as you get used to it.

 

[Texas Proud]

Well, I could manage $10-$20MM (or more) on my own, too, but when the nest egg gets to be that large, it becomes a simple matter of freeing up more of your time. When your passive income gets to be so high (say, $35,000/month from a $12 million portfolio) that you have, essentially, unlimited discretionary money to spend on whatever you want, wouldn't it make sense to pay someone to manage your money and free up some of the time and "brain space" being devoted to personal financial management? IOW, you use a little bit of something you have an excessive amount of (money) to free up a little bit of something you have a very limited amount of (time).

Using the exact same reasoning, if I had a $12 million net worth, I would hire a maid to come in and clean my house, wash my clothes, do the dishes, etc. several times a week instead of spending time doing those kinds of drudgeries myself.

I have a cat laying on my keyboard so I will be brief....

Still not worth it to me... at $100 mill that is over 300K per month and then I am good to go...

OK, cat went away, so I will expand...


I actually enjoy looking at my investments etc.... and except for doing some flipping on some preferred shares to try and juice my return on a small amount of money ($10 to 15K) I do very little with what I have... there are some funds that I have where I have not done anything in 4 to 5 years.... at 10X of what I have I would still be doing the same...

But, at 100X I would probably not be that concerned with the ups and downs of the portfolio as long as I knew where it was invested and that there was not any churning.... IOW, losing 5% of 100 mill is less of a problem than losing 5% of $1 mill to my lifestyle...


We do spend our money on people to free up time... we have cleaners and a yard guy... I pay to get the cars fixed even though I can do some of the work (I do the air filters since they charge way too much for that)... but I also look at it as a value to cost.... I do not see the value at such a low asset level...

BTW, I got WAY too much free time according to my DW

 

[DrRoy]

I had a FA 10 years ago covering half of my assets, I kept the rest. Over 8 years I generally had a higher return (before fees) than he did, so I fired him and now handle it all myself. My minimum desired WR is only 1.5%, so at 1% fee, a FA would be taking 2/3 of what I need. Not a good deal.

 

[UnrealizedPotential]

The part that gets me on a FA is why should I have someone who can't amass the amount in the first place, have control of my money? In other words, if the FA isn't smart enough to have an equal amount or more, why should I hand over the keys to someone who can't afford a car? That's the part that gets me. I know for some people a FA is a necessary thing. But unless someone knows more than me, they are not getting control. You can apply that statement to any amount of money you wish. IOW if they are so smart, what are they doing still working?