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    RogueDadMD
    Rogue Dad, MD

  • RogueDadMD
    replied


    Thanks for the reply. Perhaps “someone we trust” was a poor choice of words… Let’s say someone who is extremely knowledgeable and has a long proven track record of strong returns over the last 10 years.   Also, I may not be in the majority with this opinion but if the rate of return is averaging ~3-4% better than our current returns, then a 1% fee is not “eating into my returns”. it’s all relative. People who like to DIY will always harp on the “fees” but if you choose wisely, you will not be “throwing money away”
    Click to expand...


    There is so much to unpack here that I can't even address it all.  I'll let others reference you to the many articles that address some of these fallacies.

    However in brief:

    1) It sounds like you already decided to hire this person, and you are being somewhat snide towards those who correctly point out significant potential problems.

    2) You can't be bothered to learn to do it yourself, which means it's highly likely you won't/don't understand what this advisor is doing.  Saying you don't have the time is a copout, because unless you've been using some odd scheme, investing in a few broad index funds takes about 2 minutes.  On this forum and many other places people could give you free advice for a decent portfolio that will match the market.  Advisors can definitely add value, but for 95% of people it's not by picking investments that beat the market

    3) Is this advisor a fiduciary?  If you don't understand the question or have the answer you should not be blindly signing up with them

    4) It's been proven over time, when investing in the broad market, every the active managed funds are always outperformed by the market.  If you're doing some non traditional investments, then you better take the time to learn what exactly this person is doing and how they are going to beat the market

    5) Learning the basics of index fund investing is really really easy.  If your equities have been outperformed over the recent bull market, then you certainly need some advice, but a 1% advisor guaranteeing returns 3-4% above the market requires skepticism.

    This forum is mostly doctors -- we generally don't go off a sample size of 1 to make life altering decisions unless there is a complete absence of other information.  I suggest you obtain more information about how this advisor will invest your money and "prove" how they manage to consistently beat the market and then apply the appropriate skepticism to that information.

     

    Leave a comment:

  • Hatton
    Moderator

  • Hatton
    replied
    1% of a small portfolio is well small. As you get a larger portfolio 1% becomes a big number.  Don't think in terms of it is only 1% figure out exactly what you are paying.  Personal Capital can do this with fund fees.  You may be shocked

    Leave a comment:


  • Dicast
    replied







    I would avoid both of those options.  The phrase “someone we trust” gives me chills.  Of course you need to trust them…but at what cost?  Any advisor that hasn’t made positive gains for their clients in the last 10 years probably shouldn’t have a job anyway.  I have referenced an old blog post from Vanguard in the past and I hope you take a look.  The cost of those fees will eat at your returns and limit your overall growth by a large amount.  1% may be standard, but you can do better.  A 1% per transaction fee is a crazy load with a minimum of $175.  You’ll have to invest over $17,500 at a time to make it just 1%.
    Click to expand…


    Thanks for the reply.

    Perhaps “someone we trust” was a poor choice of words… Let’s say someone who is extremely knowledgeable and has a long proven track record of strong returns over the last 10 years.

    Also, I may not be in the majority with this opinion but if the rate of return is averaging ~3-4% better than our current returns, then a 1% fee is not “eating into my returns”. it’s all relative.People who like to DIY will always harp on the “fees” but if you choose wisely, you will not be “throwing money away”
    Click to expand...


    My issue with this logic is that you are using past returns to predict the future.  Advisors that outperform the market are very similar to mutual funds that outperform.  Very few carry the same level of performance on an ongoing basis.  If you have no interest in managing your own investments then getting an advisor with a 1% aum fee may not be the worst thing you could do.  I would wager that the extra 3-4% returns aren't developing without any additional risk taken.

    Leave a comment:

  • Hatton
    Moderator

  • Hatton
    replied
    Who has custody of your money? Sounds like Bernie madoff.

    Leave a comment:

  • Lithium
    Physician

  • Lithium
    replied
    To answer your question, it's hard, but not mathematically impossible to see how option 1 beats option 2.  With Option 1, you are paying the same percentage on all your AUM, and with option 2, you're only paying on assets going in.

    Even if your advisor is in the 5% who is getting higher returns out of skill rather than luck (the other 95% inevitably come back to earth), he has to do so well enough to overcome the drag of his fees, the higher fees of the investments themselves, AND the higher tax drag of active management for it to be worth it.  You can probably knock off 2% a year of his average annual return from all of these combined effects.

    Leave a comment:

  • devilfish
    New Member

  • devilfish
    replied




    I would avoid both of those options.  The phrase “someone we trust” gives me chills.  Of course you need to trust them…but at what cost?  Any advisor that hasn’t made positive gains for their clients in the last 10 years probably shouldn’t have a job anyway.  I have referenced an old blog post from Vanguard in the past and I hope you take a look.  The cost of those fees will eat at your returns and limit your overall growth by a large amount.  1% may be standard, but you can do better.  A 1% per transaction fee is a crazy load with a minimum of $175.  You’ll have to invest over $17,500 at a time to make it just 1%.
    Click to expand...


    Thanks for the reply.

    Perhaps "someone we trust" was a poor choice of words... Let's say someone who is extremely knowledgeable and has a long proven track record of strong returns over the last 10 years.

     

    Also, I may not be in the majority with this opinion but if the rate of return is averaging ~3-4% better than our current returns, then a 1% fee is not "eating into my returns". it's all relative.

    People who like to DIY will always harp on the "fees" but if you choose wisely, you will not be "throwing money away"

    Leave a comment:

  • devilfish
    New Member

  • devilfish
    replied




    Unless you have a very small amount to invest, those seem like quite high fees.

    Why can’t you do it yourself?  Barring that, why not see an hourly rate financial advisor for a 2-5 hours per year for a tune-up?  The National Association of Personal Financial Advisors has a pretty good list of potential candidates.  See http://www.napfa.org
    Click to expand...


    I don't have time or interest to do it myself.

    Also, this advisor has been getting consistently much higher rates of return than the portfolio of ETF's we currently have... So to me, the fees justify the expertise and the increased rate of return.

    Leave a comment:


  • Dicast
    replied
    I would avoid both of those options.  The phrase "someone we trust" gives me chills.  Of course you need to trust them...but at what cost?  Any advisor that hasn't made positive gains for their clients in the last 10 years probably shouldn't have a job anyway.  I have referenced an old blog post from Vanguard in the past and I hope you take a look.  The cost of those fees will eat at your returns and limit your overall growth by a large amount.  1% may be standard, but you can do better.  A 1% per transaction fee is a crazy load with a minimum of $175.  You'll have to invest over $17,500 at a time to make it just 1%.

    Leave a comment:


  • Hank
    replied
    Unless you have a very small amount to invest, those seem like quite high fees.

    Why can't you do it yourself?  Barring that, why not see an hourly rate financial advisor for a 2-5 hours per year for a tune-up?  The National Association of Personal Financial Advisors has a pretty good list of potential candidates.  See www.napfa.org

    Leave a comment:

  • devilfish
    New Member

  • devilfish
    started a topic Financial Advisor Fees

    Financial Advisor Fees

    Looking into hiring a new investment advisor...

    We have decided on someone we trust who has been working with a family member with great results for the last 10 years.

     

    I know that WCI prefers flat-fee advisors, but these are our fee options:

    1) 1-1.15 % (to be negotiated) annual fee.

    2) transaction-based (1% per transaction, minimum 175$ per transaction)

     

    Thanks for any input

     
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