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Investing/Strategies / Retirement Investing
|Subject: Re: Talk me out of a Financial Advisor||Date: 6/2/2013 2:01 AM|
|Author: Watty56||Number: 72355 of 76421|
...He charges 1% on assets under management...
This is greatly oversimplified but 4% of a portfolio is what is often mentioned as being the safe withdrawal rate for what recently retired person can spend each year.
If you pay him 1% which only leaves you 3% to live on and pay taxes out of. That is 25% of your income that is being paid to him even without taking taxes into account which could easily cost another 1%.
Think about that, for him to be worth that he would have such a super investor that he could boost your safe withdraw from 4% to 5% just for you to break even. That is a huge amount, if her was a mutual fund manager and could do that over the long term then he would be on the cover of investing magazines.
The only real way to do that is to put you a lot riskier investments which is what a lot of advisors do. If they bet your money on something risky and win then they are geniuses. If they lose then they still get paid for a few years before you are either broke of leave them.
....Actually, his 10 year average return beat the S&P by a full percent...after fees.....
He might have beaten that if you trust his numbers but that is a faulty comparison since you would not have been invested in all large cap stocks if you had invested with him ten years ago so just having had a three fund portfolio of these index funds Total (US) Stocks, total International stocks, and total bonds might have beaten both him and the S&P 500.
In the best case he might work for you if you monitor him closely but when you eventually retire and get older things could change so now is a good time to simplify your portfolio and to basically get it on automatic pilot as much as possible. Eventually some combinations of these could happen;
1) He retires or dies and your account is assigned to an advisor who is better at getting money from you.
2) Your mental capacity or interest in investing declines when you are older.
3) The financial advisors focus changes and he starts costing your more.
3) You die an your spouse is vulnerable to financial advisors might take advantage of her financially.
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