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  • Financial advisor fees!

    Hello,

    New member to the forums, have known about WCI for a while, however just started to read more on investing.

    Just wondering, what are the typical rates for financial advisor fees that everyone is paying.

    I am currently working with someone and I pay 1% + 50/mo ($600/yr) for fees. He has about $60K of wife's IRA contributions he is managing. He also sold us a term life insurance as well.

    I do see a difference if the account's returns as prior to signing with him, her account was sitting in a fidelity retirement fund and there was minimal growth. Am I paying too much with that monthly fee in addition to the 1%? I brought this up to him in the past, he stated once I have more funds invested then he can waive the fee.

    What are your thoughts? Am i getting ripped off?

     

    thanks

  • #2
    That is probably close to market rate, but if all he is doing is investing a $60k IRA, you can do that yourself. If you are getting comprehensive financial planning, it sounds like a bargain.

    Comment


    • #3
      Comparing recent performance (with him) compared to past performance (in an unknown Fidelity fund) doesn't do any good.

      Comparing your current portfolio with a portfolio of similar construction that you could DIY would be useful.

      The latter will perform about 1% better (plus $600) per year if you stay the course. Educate yourself with a book or two. Keep reading and posting, and if you are interested enough, you can learn to invest simply and successfully. If you're prone to making emotional choices with money and not interested in learning, you're probably better off with a fiduciary, fee-only advisor.

      1% on $60,000 is $600 per year, so you're currently paying 2% per year. With Bogle predicting 4% returns over the next 10 years, if he turns out to be right, you'll be giving half of your investment returns to the adviser. 1% or 2% doesn't sound like much, but over decades, investment fees will cost you millions. Read the linked post for a detailed illustration.

      And welcome to the forum!

      -PoF

       

      Comment


      • #4


        If you are getting comprehensive financial planning, it sounds like a bargain.
        Click to expand...


        I would go so far as to call it a steal!
        Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

        Comment


        • #5
          Agree with Vagabond.  If you are getting comprehensive financial planning for $1,200+ annually it may be a deal, but the devil is in the details.  How much of a commission did he make off the term insurance sales?  Is he advising on your 401k accounts?  529 plans? Student loans? Work benefits? Estate planning? Taxes?

          Comment


          • #6
            Great...

            Thanks for your replies all & the reading links PoF. This does put my mind to ease.

            I think he is doing more of a comprehensive approach. He was referred to me by a friend and has been guiding me through residency in terms of what to do once I start making attending salary. During residency he never charged anything as he wanted to "build a life long relationship".

            He has helped me diversify my contributions to my 401K, EDP & HSA plans. He told me how to allocate the funds and what % I should use. He advised me to set up 529 plans which I did on my own and he really had no objections when I opened them myself. I used savingsforcollege.com website to educate myself on the college plans. Thankfully, I don't have much student loans (should be paid off 3-6 months) so he has just advised me to stay the course. Taxes are done by my accountant and we haven't discussed any estate planning as of yet.

            He didn't charge me anything for the term life insurance, I am sure he made his commission thru the policy he sold me, however not sure how much that would be.

             

             

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            • #7
              um. you are being ripped off.

              Comment


              • #8




                Great…

                Thanks for your replies all & the reading links PoF. This does put my mind to ease.

                I think he is doing more of a comprehensive approach. He was referred to me by a friend and has been guiding me through residency in terms of what to do once I start making attending salary. During residency he never charged anything as he wanted to “build a life long relationship”.

                He has helped me diversify my contributions to my 401K, EDP & HSA plans. He told me how to allocate the funds and what % I should use. He advised me to set up 529 plans which I did on my own and he really had no objections when I opened them myself. I used savingsforcollege.com website to educate myself on the college plans. Thankfully, I don’t have much student loans (should be paid off 3-6 months) so he has just advised me to stay the course. Taxes are done by my accountant and we haven’t discussed any estate planning as of yet.

                He didn’t charge me anything for the term life insurance, I am sure he made his commission thru the policy he sold me, however not sure how much that would be.
                Click to expand...


                Not comprehensive planning, just so you know. Just an investment advisor. Ask him when he’s going to dig in to the cash flow and budgeting and how much time he expects that to take.
                Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

                Comment


                • #9




                  Hello,

                  New member to the forums, have known about WCI for a while, however just started to read more on investing.

                  Just wondering, what are the typical rates for financial advisor fees that everyone is paying.

                  I am currently working with someone and I pay 1% + 50/mo ($600/yr) for fees. He has about $60K of wife’s IRA contributions he is managing. He also sold us a term life insurance as well.

                  I do see a difference if the account’s returns as prior to signing with him, her account was sitting in a fidelity retirement fund and there was minimal growth. Am I paying too much with that monthly fee in addition to the 1%? I brought this up to him in the past, he stated once I have more funds invested then he can waive the fee.

                  What are your thoughts? Am i getting ripped off?

                   

                  thanks
                  Click to expand...


                  The total price is probably okay. $1200 + the term life commission actually is great. But you need to not only get advice at a good price, you need to make sure it's good advice. I worry a little bit that your advice may not be good given your advisor is also an insurance agent. But can't tell just from what you wrote. Have you read the ADV2?
                  Helping those who wear the white coat get a fair shake on Wall Street since 2011

                  Comment


                  • #10


                    With Bogle predicting 4% returns over the next 10 years, if he turns out to be right,
                    Click to expand...


                    That's a nominal projection, by the way, and looks about right to me (but allowing plus or minus 4%, for 95% confidence intervals).
                    Erstwhile Dance Theatre of Dayton performer cum bellhop. Carried (many) bags for a lovely and gracious 59 yo Cyd Charisse. (RIP) Hosted epic company parties after Friday night rehearsals.

                    Comment


                    • #11




                      um. you are being ripped off.
                      Click to expand...


                      Not so much. The advice given is likely worth $1200 to a client who doesn't know anything about investing.

                      The OP could educate himself and DIY, but he wasn't there when he met his advisor, and some clients prefer not to spend their spare time on that particular project.

                      Now if the advisor puts him in a 3-fund boglehead portfolio and charges 1% AUM indefinitely going forward, then the OP would be wise to spend some time learning the ropes. Otherwise, he'll be receiving poor value over time.
                      Erstwhile Dance Theatre of Dayton performer cum bellhop. Carried (many) bags for a lovely and gracious 59 yo Cyd Charisse. (RIP) Hosted epic company parties after Friday night rehearsals.

                      Comment


                      • #12
                        ERMD, you are seeing responses that range from "you are getting a steal" to "you are getting ripped off" because it really depends on what you are getting for your $1,200.  To figure out where you stand, look at the documents your advisor has supplied to you.  Is there something that describes how your life insurance policy fits into an overall plan?  Is there something that talks about the asset allocation he recommended and how he chose the investments for your wife's IRA and your 401(k) and how they fit into your overall retirement plan?  Do you have a document that shows how your wealth might grow over time under different scenarios and when you might reach financial independence?  If you have a document that covers these topics, then I'd agree you are getting a good deal.  If you don't have a document like that -- and more importantly, if you don't feel like you know the answers to these kinds of questions -- then you'd want to think about this some more.

                        Comment


                        • #13
                          Thanks all

                          Looks like a variety of responses and ranges.

                          I will continue to do some reading and educating myself on the topic. I am likely better off keeping him at this point as I am a newb to investing. Adam, I do believe I have some documents, however I will have to review them again. I remember reading them initially when I signed on, however honestly, don't remember at this time what they contained.

                           

                          Thanks for the responses everyone.

                           

                          Comment


                          • #14




                            . During residency he never charged anything as he wanted to “build a life long relationship”.

                             

                             

                             
                            Click to expand...


                            ERMD, this guy may or may not be doing a good job (my initial take is that you probably could do as well yourself if you've found this website) but the thing to remember is your financial advisor is not there to be your friend.  He's a guy you hire to do a job.  And over time that 1% is going to get large enough that he will be ridiculously overpriced.

                            Also do not put much importance into your wife's 401k doing better since he took control of it.  That may well just reflect the recent stock market surge and I suspect the amount of time we're talking about is too short to make a judgment.

                            Comment


                            • #15




                              Thanks all

                              Looks like a variety of responses and ranges.

                              I will continue to do some reading and educating myself on the topic. I am likely better off keeping him at this point as I am a newb to investing. Adam, I do believe I have some documents, however I will have to review them again. I remember reading them initially when I signed on, however honestly, don’t remember at this time what they contained.

                               

                              Thanks for the responses everyone.

                               
                              Click to expand...


                              Every year it's worth looking at to decide if you're now capable of doing it yourself. So every year calculate the cost of your advice and consider the value of it. When the price exceeds the value, it's time to become a DIY investor. No shame in doing it either way, but just make a conscious decision and revisit it periodically.
                              Helping those who wear the white coat get a fair shake on Wall Street since 2011

                              Comment

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