A Little Help With Some Math, If You Please

[tylerlevick]

Hi folks,

New to the forum and quite new to investing and the math involved, that is, with choosing a financial advisor. I simply took a look at the recommended advisors on the website, read through the various topics, and have come to the conclusion that my ability to choose my first (hopefully last) financial advisor is going to be related only to the cost of their services. The cheaper the better, and since Jim Dahle has vetted these folks, I'm fairly certain for the time being, that their services and abilities should be sufficient.  So, the list:

1. Timothy Baker, Wealthshape: Super nice guy. Essentially charges based on assets under management, I'm told by him, that the fee schedule is 0.85 of 1% for the first 0-1 million, 0.65 for the second million, and 0.55 for 3 million in assets and above. Jim had mentioned as low as 0.35, but I'm not sure if that still exists.

2. Daniel Wrenne: $750 fee for setting up the financial plan, and $1800/year for maintaining it.

3. Jude Boudreaux: Simply 2k per year, no initial fee for setting up the financial plan.

 

Essentially, I think in the long run, between Dan and Jude, though both great guys and seem to excellent at what they do, cheapest would obviously be Dan.

However, since my assets (as I am brand new Attending out of Emergency medicine residency) are few, and therefore would be very cheap for some time to use Timothy Baker's services, can't quite figure out the math in the long run with Tim's as to whether his services would be cheaper than Dan's or Jude's.

 

I may be trying to be pennywise and pound-foolish. What do y'all think? Again, I've spoken to these folks over the phone, they all seem legit. Pretty sure I just want to save as much money as possible for their services.

Thanks for the input!

 

Tyler

 

 

 

[PhysicianOnFIRE]

Welcome to the forum, Tyler.

I can't give you any information on the individuals you have selected, but I can say that if you've found this blog and forum, you've figured out more than many physicians when it comes to investing.  There is a wealth of information here.

I recently ranked my Top 5 ways to manage money.  An AUM fee with a fiduciary was my #3.  Fee-only with an hourly rate (or flat fee) would be my #2.  DIY is #1.  Spend a little time on Bogleheads.com, read Dr. Dahle's book or the Bogleheads guide, and you could probably save yourself $2000 per year.  If you can't find the time or don't have the interest, keep your costs (fees) transparent and low.

Best

-PoF

[tylerlevick]

PoF,

I do appreciate the reply! Like I said, these gentlemen are transparent in what they offer. AUM with no commissions, no sales of any kind is what Timothy Baker offers, with the numbers I provided.

Daniel Wrenne and Jude are fee only (not fee based). They do not work off commissions. And their numbers for fee only were what I provided.

I quite literally was wondering if anyone knew whether Tim's AUM plan would be cheaper in the long run compared Dan and Jude's fee only structure?

Thanks again!

[Kennyt7]

just read bogle, malkiel, and swdroe as starters and do it on your own, its that easy

[lakelife]

I would go with one of the fee only people. My 2 cents. Over the long run the AUM would add up to be much higher.

[PhysicianOnFIRE]

tylerlevick wrote:

PoF,

I do appreciate the reply! Like I said, these gentlemen are transparent in what they offer. AUM with no commissions, no sales of any kind is what Timothy Baker offers, with the numbers I provided.

Daniel Wrenne and Jude are fee only (not fee based). They do not work off commissions. And their numbers for fee only were what I provided.

I quite literally was wondering if anyone knew whether Tim’s AUM plan would be cheaper in the long run compared Dan and Jude’s fee only structure?

Thanks again!

Click to expand...

The math is pretty simple.  AUM would be cheaper early on.  As your portfolio grows, the fees grow.  Once your portfolio exceeds about $250,000, the flat fee advisors will give you a lower price.  I don't know your specialty, spending habits, or what the markets will do in the next 10 to 15 years, but you could easily be looking at a portfolio in the $1 million to $3 million range in 10 to 15 years if you play your cards right.  Paying the above AUM fees with a portfolio like that will cost you $8500 to $20,500 per year.

A simple 3-fund or 4-fund portfolio is a simple way to get started without incurring any fees (other than the expense ratio of < 0.10%).  If you can figure out clinical medicine, personal finance should be pretty simple for you.  If you have no desire to learn, I'd go with an hourly or flat fee advisor.

[Rando]

I look at it about the same as POF above - once you hit a portfolio of 212k you will be paying about 1800 yearly to Wealthshape.  Until that time you will be paying less to Wealthshape than the fixed-fee advisors.  After that you will be paying more, probably a lot more.

 

Since you are an ER doc motivated to save you will probably hit 212K pretty quick.  Using these assumptions you are probably better off with the fixed-fee for the long haul.

[tylerlevick]

PoF, Rando, Kenneth, lakelife,

Thanks a bunch for y'alls' input. I already read Jim's book.  Trying to grasp Bogleheads'.  At some point, I would like to be doing this stuff on my own, save myself some money that way. But for now, I'd like to start investing ASAP, maybe learn a bit over the next 1-2 years, then take care of all of it myself.  The comments have helped me make a decision.

Thanks!

 

Tyler

[Dr_JB]

To keep it simple, cheap, and start now, I recommend buying a total market index fund such as ITOT, VTI, VTSMX, or FSTMX (only need to pick one).  Invest for a couple of years, read up on the topic, and you may or may not even want to modify your plan at that point.

[tylerlevick]

Thanks for all the advice, folks. Given that most of you think it is relatively easy and safe to manage your own investments, I plan on using a financial advisor for a time that it takes me to learn how to do those things. I mean, I'm starting at the very bottom of the totem pole, having learn the vocabulary of investing, etc. I don't plan on using the services of a financial advisor for more than 1-2 years, so it sounds like I might be better off using Tim's AUM type of doing things, since it will be relatively cheaper early on than using a fee only structure.

[Zaphod]

tylerlevick wrote:

Thanks for all the advice, folks. Given that most of you think it is relatively easy and safe to manage your own investments, I plan on using a financial advisor for a time that it takes me to learn how to do those things. I mean, I’m starting at the very bottom of the totem pole, having learn the vocabulary of investing, etc. I don’t plan on using the services of a financial advisor for more than 1-2 years, so it sounds like I might be better off using Tim’s AUM type of doing things, since it will be relatively cheaper early on than using a fee only structure.

Click to expand...

Anything you start will be more difficult to get out of in the future. I'd go with the above advice of getting into a total market fund, or wiki the boglehead lazy portfolio and do that if you truly intend to learn yourself. If you'd rather not, choose the option that will be cheaper in the long term as inertia and human nature mean you are unlikely to change out of your first choice, especially if it goes well to start.

[jaakko.kasko]

Investing is technically pretty simple. Emotionally it can be much more difficult. The vast majority of the value an advisor provides, in my opinion, is not in the technical proficiency aspect of portfolio construction, but in making sure that emotions don't derail an otherwise sound plan. It's hard to watch a large portion of one's wealth evaporate and not do anything about it, even if the right thing is to do nothing.

[childay]

Since you are a brand new attending, why not just max out your 401k or whatever plan you have available, then focus on loans for a few years?  That will give you plenty of time to figure this stuff out.  Certainly the above fee schedule is fine as far as advisors go but if you are posting on here you probably have enough interest to do it yourself.  Keep it simple to start and it won't matter much at first anyway whether you are in 30% international, small caps or whatever.  Of course there are a LOT of MDs that need an advisor to keep them from doing stupid things like cashing out their accounts because they watch too much television.  If you think you might be one of those then certainly go for the advisor.

[moneyhappens.net]

Tyler:

Since commenting on other advisers in a public forum is a sensitive topic - I shot you a PM on the topic.  Let me know if you want to discuss further.