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Basic question about how FA work

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  • #16
    There’s a weird paradox in investing: it’s incredibly easy to capture the market rate of return year after year. It’s incredibly hard to exceed the market average return year after year.

    The odds of this Merrill Lynch guy earning more than his 1% AUM fee on a risk-adjusted, after-tax basis year after year are pretty slim. The odds that he screws up your ability to do a backdoor Roth and tries to collect AUM fees from your old 403(b) are pretty high. Run, don’t walk away.

    P.S. White Coat Investor’s new course might be worth trying. It costs one year’s worth of 1% AUM fees on a $40K account. You can get your money back within 7 days if you truly don’t like the course.


    • #17
      A couple of other items to mention.  Not only is this advisor going to charge you based on an AUM scenario, he is going to use "active management" funds.  Odds are these will be higher cost funds, probably over another 1% in annual fees.  You could quickly be paying 2% a year in fees to be in a managed model (that is what is frequently used for smaller accounts, which is what your $200,000 portfolio would be considered).  Google Jack Bogle and 2% fees to see what paying an extra 2% a year will do to your returns over the years.  Short answer is it can eat up 2/3 of your returns.


      Also, if this guy is telling you the backdoor roth will be going away, which it isn't at this point, take everything he is saying with caution.  This especially applies to any fees he is disclosing, such as how much you would be paying to Merrill and him.  Make sure you get the total number and not what the advisor will make after it goes through their grid, which is roughly 40% of the total fee you would pay to the firm.


      I echo going through the list of approved advisors here on the WCI site, and not just because I am there;-)  You will see there are quite a few who do not charge on an AUM basis and even a few of us who charge a flat annual fee.




      • #18

        Honestly @adrian, if you aren’t ready to be your own financial advisor, I’d recommend going with @jfoxcpacfp. I’ve been on here long enough to know she really knows her stuff, and she’s a fee-only advisor to boot. In this day and age, you don’t need to have face to face conversations with your financial advisor: phone and email are plenty. Dump your current FA and find someone who isn’t interested in leeching off your portfolio.
        Click to expand...

        Well  ops: , thank you. Appreciate that very, very much. And we actually do have f2f conversations with every client, they're just on a computer or smart device screen.
        Our passion is protecting clients and others from predatory and ignorant advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087