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Investing/Strategies / Retirement Investing
|Subject: Re: Professional management||Date: 7/8/2011 8:32 PM|
|Author: 2gifts||Number: 69240 of 76422|
A 1% assets under management fee on top of any high ER's and/or loads for active funds the advisor places you into can take a massive blow to retirement income safe withdrawl rates. At 56 and all of your goals taken care of then withdrawls are probably not terribly far off. Even if you are not making any withdrawls yet these fees can drastically undercut any returns you earn on your portfolio. If inflation averages 3%, AUM fee of 1%, ER on the active funds at an average of 1-1.5% and you would need a return of over 5% to just break even (God help you if there are loads).
I think you are making a lot of assumptions with this statement. Nowhere did the OP say that she was going to do high ER's and/or loaded funds. All planners, even those that are paid on commission, do not sell loaded funds. The guy I'm using has us in a bunch of ETFs, and I certainly don't mind paying his percentage fee, even as the account value goes up, because he is doing a good job in getting me great returns.
This doesn't mean active managment doesn't have it's place, only that you need to be aware of potential pitfalls so you can avoid them. BruceCM mentioned the Garret network and finding an advisor that charges by the hour. I would say this is probably the best way to go if you have a large portfolio (7 figures) and no longer want to take the time to manage them yourself. I've always scratched my head at the Assets Under Managment fee schedule. If I had two million with an advisor he would charge me $20,000 a year to control my investments (1%). If I had four million that fee would increase to $40,000 and for what? It's the same advisor, same skill and experience level, similar tax considerations, almost the same investments (maybe a few more muni's?), and he'd probably spend almost the same amount of time working on the two portfolios. Good financial advice deserves to be well paid but I can't stomach the idea that the bigger the whale the more blubber that can be squeezed out.
I've talked to lots and lots of folks when choosing our financial planner, and that has included fee-based who are paid by the hour and those who are paid a percentage of the assets. I even talked to one guy who wanted to charge us a percentage of all our assets, even those that we wouldn't be transferring to him, so there are all kinds of models out there. I did run from that last guy, but obviously there are people who pay his prices as he has been in business for a long time.
I have been very happy sharing a percentage of assets managed because his performance even after his fees has been better than mine. That's what I am paying for, and between that, less stress for me, and knowing that DH won't starve if I am gone is well worth the fee for me.
As always, YMMV, but the OP seems to be in a place where some help would be welcome, and so I don't understand all the pushback on why this is a bad idea, especially for someone who I think is known to a lot of us as being fairly advanced in terms of financial savvy.
But that doesn't mean she wants to manage everything forever. And I'm in that same boat.
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