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What People Will Pay For

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  • #31

    I think Jim said it best in another thread: I don’t want to be someone else’s passive income stream.
    Click to expand...

    I love this quote.  I say  Why would I want pay someone >20k/year to virtually hold my hand?


    • #32
      I think Upton Sinclair said it best - "It is difficult to get a man to understand something when his salary depends on his not understanding it."

      I'm sure the vast majority of financial planners are convinced that they are helping their clients become more wealthy and justify their flat fees or AUM fees.  I worry that belief is not true, but I don't think it's worth anyone's time trying to convince the financial planners of that.  The corollary would be one of us trying to convince a patient that we are underpaid.  Pointless.

      I think this site and others like it should continue focusing on educating the potential client base.


      • #33

        I think Upton Sinclair said it best – “It is difficult to get a man to understand something when his salary depends on his not understanding it.”
        Click to expand...

        Well said.  However, although I found the OP article somewhat ridiculous, one does wonder about the average physician rather than our forum participants.  An argument can certainly be made for value by preventing behavioral finance errors.  The pendulum seems to be swinging towards education even among physicians.  However even with the internet one wonders what subset of docs will still need an advisor.  Then the question becomes reasonable compensation.


        • #34

          “The ‘skin in the game’ of AUM is an overstatement on both sides.   For a 1 million portfolio and a 1% AUM and baseline one year 7% increase.  AUM at base case (YE): $10,700; AUM with additional 10% outperformance (over base): $10,770; AUM with additional 10 underperformance (from base): $10,630.  Punchline- AUM difference is $130 over a year, not exactly an incentive.   This also illustrates why only paying for ‘overperformance’ is a problem, insufficient incentive unless significant risk is added.”


          THIS is the huge, huge mathematical reality that AUM advisors will never explicitly lay out for clients.  I have battled with my parents AUM advisor about their fee structure and their (very slickly explained) rationale comes down to “Our incentives are aligned, if you make money, we make money!”  But of course, while that is marginally true, the core truth is “We make money (our AUM fee) whether you make money or not.  The only way we don’t make money is if you move your account elsewhere, so every ounce of effort we put into your account and our work will be to keep you from moving your account!”

          Its a great system for the financial planning company.  Its a rotten system for the client, because it prays on the general innumeracy of Americans.  On the other hand, a fee-only advisor, charging an hourly rate like every other actual professional (or heck, my window washer!) is a much more transparent option.

          Sounds likes leeches !