UnThreaded | Threaded | Whole Thread (59) | Ignore Thread Prev | Next
Author: 2gifts Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76397  
Subject: Re: Professional management Date: 7/8/2011 8:32 PM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 3
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.
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (59) | Ignore Thread Prev | Next

Announcements

The Retire Early Home Page
Discussion on accelerating retirement day.
Foolanthropy 2014!
By working with young, first-time moms, Nurse-Family Partnership is able to truly change lives – for generations to come.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Post of the Day:
Macro Economics

Economic Implications of Cuba
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and "#1 Media Company to Work For" (BusinessInsider 2011)! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement