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Good AUM Financial Advisors

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  • #31
    Why do you want a financial planner ? To pick stocks and funds or for general investing advice.

    Any basic investment book will get you started. You could put all your money in a target date fund and forget it for the next 20 years if so inclined.

    Picking funds is easy, staying the course when everyone else is jumping ship is the hard part. If you think you will need a plan so you dont jump ship in a down turn, hiring a good advisor may well be worth the money.

    Early on savings rate is more important than what funds you chose.

    If you need other advice, insurances, disability, wills. Someone to piece it all together may be helpful as a consult , but probably not as an ongoing service, unless life circumstances change. Like any other professional service out there , choosing the cheapest alternative may not be the best. You probably would not choose the cheapest doctor , why would you want to choose the cheapest financial planner ? I am a total do it yourselfer , but there are several times though out life that I need good professional advice, and I am willing to pay well for it, as long as I feel I get a good value for it.


    • #32
      SIMPLY STATED the goal of many in this financial industry is to keep the retail investor in the dark.I would wonder how many AUM advisors put their clients in a 3-4 Boglehead Fund portfolio. Look at SPIVA to see how active funds have fared versus SP500. Even Buffett is having his wife put 90% of inheritance in to SP500. Unfortunately way too many get duped by advisors, but they are to be blamed for being uninformed. As Dr Dahle says if you know enough to know if your advisor is doing a good job, you can manage your own portfolio.
      And who could think doctors and other educated investors cannot learn this stuff in short order


      • #33
        AUM is popular with advisers for the same reason it is a poor choice for customers. 99.9999% of the time, there is nothing for the adviser to do. Yet they collect steady fees for doing nothing. Set someone up with a 3 fund portfolio and done. That takes almost no work to set up and no work at all to maintain.

        If the customer wants someone to rebalance for them, then with simple software, the adviser can tell at a glance whether the customer is outside of bands. They can spend a handful of minutes, at most, doing the rebalance. Same if there are doing some TLH.

        Let's estimate, generously, that they put in an hour per year doing these things. And that most years they don't do anything else because there is nothing else to do. At WCIs $100,000 portfolio, that $1,000 per year in fees becomes $1,000/hour of service. Very hard to see this as anywhere near worth it. For the customer. It is a great deal for the adviser.

        The deal only gets better for the adviser as the portfolio grows. The work does not increase at all. But the fees keep going up. If you pay 0.5% on a $10M portfolio, that is 50k. For the same 1 hour of work. For the advisor, this is great. For the customer, they have just paid a very large amount of money for--nothing.

        If the customer went to an hourly fee advisor, most years they would seek no advice and pay nothing for it. When they do pay for advice, it is likely to be less than $1,000 per hour. Even if they pay $500/hr, it will take 100 hours to get to the $50,000 in AUM fees we postulated for a $10M portfolio. I have not paid for 100 hours of financial advice in my life. Certainly not every year.

        Even for a small portfolio it is overpriced. For a large portfolio, the cost is obscene.

        Now it could be worth it if the AUM rate was far smaller. At 5 basis points, rather than 100, one could make a case for AUM. On the 100k portfolio, that would be $50, which is about right. For the $10M portfolio, that would be $5,000. Still absurdly high for what you get. But I have not heard of an AUM adviser, who charges anything close to that.


        • #34
          I think it is pretty difficult for us to understand the mindset of the average client. Not only is their knowledge base pretty poor, but so is their level of interest. Have any of you tried to educate your friends and family about things like the three fund portfolio, the Backdoor Roth IRA, short vs. long term capital gains, or the nuances of disability insurance? Most of the time, their eyes just glaze over. People want a “money guy” (investment management) to make sure they reach their number when they turn 65, and that’s what they’re willing to pay for.

          I’ve provided quite a bit of high quality financial advice to friends and family over the years, and usually they disregard it even when they seek it out. Considering how they use this advice when it’s rendered for free, there’s no reason to think they’d pay high sums of money for it.

          People don’t know what they don’t know.


          • #35
            Those are good reasons for people to use advisers. They are not reasons to pay an AUM fee. If you need advice, hire someone to offer it and pay them for the work they do. Like a dentist, doctor, lawyer, etc. When they don't do anything, don't pay anything.