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Author: intercst Big funky green star, 20000 posts Top Favorite Fools Top Recommended Fools Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 74759  
Subject: The Millionaire Twins Next Door Date: 11/24/2013 3:37 AM
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http://www.courant.com/news/breaking/hc-simsbury-millionaire...

SIMSBURY — When an elderly woman showed up at a small law firm several years ago and asked for help managing her estate, an attorney asked her what she thought it was worth.

Kathleen Magowan said she didn't really know. She thought maybe about $40,000.

The real answer? $6 million.

Magowan lived in a comfortable but unspectacular home on busy Route 10 in Simsbury that sold for less than $250,000 — not because it was small but because it had not been renovated in decades. She shared that home in her later years with her twin brother, Robert, who also never married and helped her manage her money. He died one year before her, leaving a gross taxable estate of $3.75 million, according to Simsbury probate records.

Robert, who worked as an agent for Prudential Insurance, was the family's financial wizard and the key to his sister's wealth accumulation — he oversaw the stocks and bonds that she largely ignored during her life. Those stocks exploded in value from the 1960s and 1970s to reach spectacular heights by 2013.

</snip>


With that kind of wealth accumulation from an insurance agent, Robert must have handled her account without commission.

intercst
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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: 73811 of 74759
Subject: Re: The Millionaire Twins Next Door Date: 11/24/2013 11:41 AM
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With that kind of wealth accumulation from an insurance agent, Robert must have handled her account without commission.

I see no reason to be snarky here. What difference does it make if he made a commission or not as she still ended up with $6 million, so didn't seem to suffer from possibly paying a commission. I also note that she ended up with more money than he did, as he had just under $4 million when he died.

And it doesn't say if he managed her money as part of his job as an insurance agent. He could have just as easily had Power of Attorney on her account, similar to what I have on DH's accounts and my kids' accounts, and just managed it well for his twin. Perhaps he even had the stocks and bonds held at a brokerage, in which case the broker was the one making commissions.

I think their story is wonderful, and I'm disappointed that you have let your bias against those who make commissions in the financial world get in the way of noting that.

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Author: JAFO31 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73812 of 74759
Subject: Re: The Millionaire Twins Next Door Date: 11/24/2013 3:32 PM
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2gifts:

<<<With that kind of wealth accumulation from an insurance agent, Robert must have handled her account without commission.>>>

"I see no reason to be snarky here. What difference does it make if he made a commission or not as she still ended up with $6 million, so didn't seem to suffer from possibly paying a commission. I also note that she ended up with more money than he did, as he had just under $4 million when he died."

Why not?

The article did not say to whom the borther left his estate. Possibly the never married sister with whom he lresided at the end of his life?

I also note that there is no indication that here brother - "agent for Prudential Insurance" - ever used insurance products as part of that wealth accumulation. Best as I can tell it was stocks and bonds (at least that is what is described).

Regards, JAFO

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Author: CCinOC Big gold star, 5000 posts Top Recommended Fools Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73817 of 74759
Subject: Re: The Millionaire Twins Next Door Date: 11/25/2013 3:46 PM
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I think their story is wonderful, and I'm disappointed that you have let your bias against those who make commissions in the financial world get in the way of noting that.

You must be referring to intercst pontificating again. Or maybe Rayvt.

What’s interesting is that the more attention and accolades these know-it-alls receive, the more dogmatic they become. My suspicion is that financial dogma arises out of a sense of pride, something we can all admittedly struggle with as we chase after the same dwindling dollar floating around out there. We start out confident in our ability to help others with their money (a good and noble motive indeed), but over time, instead of realizing that there are many ways to skin a cat (various worthwhile strategies that fit different situations and financial personalities), we find ourselves launching into an all-out assault on anyone who does not agree with our way of doing things.

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Author: ItsGoingUp Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73818 of 74759
Subject: Re: The Millionaire Twins Next Door Date: 11/25/2013 8:35 PM
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CCinOC wrote:
What’s interesting is that the more attention and accolades these know-it-alls receive, the more dogmatic they become.

So do you have a theory as why some people like to jump into conversations where they have no contribution to make and insult people? Please enlighten us.

We start out confident in our ability to help others with their money (a good and noble motive indeed), but over time, instead of realizing that there are many ways to skin a cat (various worthwhile strategies that fit different situations and financial personalities), we find ourselves launching into an all-out assault on anyone who does not agree with our way of doing things.

And some of us are forced to realize that instead of helping people we've been collecting commissions and giving them bad advice. Imagine, through our ignorance we've been screwing the very people who we sought to help. It's hard to imagine how bitter that would make somebody feel. Likely she'd respond by lashing out at others, especially people much smarter and less reprehensible and who can use spreadsheets. What do you think?

-IGU-

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Author: intercst Big funky green star, 20000 posts Top Favorite Fools Top Recommended Fools Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73819 of 74759
Subject: Re: The Millionaire Twins Next Door Date: 11/25/2013 9:11 PM
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2gifts complains,

<<intercst: With that kind of wealth accumulation from an insurance agent, Robert must have handled her account without commission.>>

I see no reason to be snarky here. What difference does it make if he made a commission or not as she still ended up with $6 million, so didn't seem to suffer from possibly paying a commission. I also note that she ended up with more money than he did, as he had just under $4 million when he died.

</snip>


I certainly apologize if you found my comments or the arithmetic of this woman's situation offensive. I didn't know you worked in the financial services industry. <LOL>

Many people don't realize that the financial services industry operates on a business model that assumes they'll extract 2% per year in fees, expenses and costs from their customers. (Prudential is actually among that elite cadre of firms that manages to take a bit more than 2% from their clients.) Losing 2% per year, every year to an insurance agent and the company he represents has a profound affect on your ability to amass any wealth.

Over a 60-year investment horizon (30 years saving for retirement, 30 years in retirement) an advisor taking 2.00% per year will capture 2/3 of your wealth vs. a low-cost index fund portfolio with 0.10% in annual fees and expenses.

http://retireearlyhomepage.com/vg_tsp.html

Compound interest is a wonderful thing. Make it work for you, and not some blood-sucking advisor or insurance agent.

intercst

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Author: CCinOC Big gold star, 5000 posts Top Recommended Fools Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73820 of 74759
Subject: Re: The Millionaire Twins Next Door Date: 11/26/2013 12:44 AM
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So do you have a theory as why some people like to jump into conversations where they have no contribution to make and insult people? Please enlighten us.

I don't know. Why do you do this?

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Author: ItsGoingUp Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73821 of 74759
Subject: Re: The Millionaire Twins Next Door Date: 11/26/2013 2:03 AM
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CCinOC asks:
I don't know. Why do you do this?

I believe you that you don't know -- it's all part of that lack of self-awareness thing that seems to be your signature. As to why I occasionally post in direct response to your droppings, I can't really say. I know it's totally pointless so far as you're concerned, as no change is possible, but perhaps it may amuse the onlookers.

No, wait, that's it! I'm trying to brighten your day. I'm giving you a chance to be useful, to bring a smile to a normally quiet and serious board. If you feel useful, maybe the bitterness will recede, if only for a moment. Think on it. Feel the love, and reciprocate.

-IGU-
(retired, with no IUL to keep me warm in my dotage)

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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: 73825 of 74759
Subject: Re: The Millionaire Twins Next Door Date: 11/26/2013 10:11 AM
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Many people don't realize that the financial services industry operates on a business model that assumes they'll extract 2% per year in fees, expenses and costs from their customers. (Prudential is actually among that elite cadre of firms that manages to take a bit more than 2% from their clients.) Losing 2% per year, every year to an insurance agent and the company he represents has a profound affect on your ability to amass any wealth.

The article doesn't say if her brother was doing this for her and taking a commission, so you are making an assumption there. However, even if that were true, it does seem to me that she had more than enough money to fund her lifestyle and was happy with that. It also seems to me that she either wasn't interested or didn't have the knowledge or whatever such that she preferred to let someone else manage her investments, with or without a fee.

Over a 60-year investment horizon (30 years saving for retirement, 30 years in retirement) an advisor taking 2.00% per year will capture 2/3 of your wealth vs. a low-cost index fund portfolio with 0.10% in annual fees and expenses.

I do have a financial planner, and he does take a percentage, but he takes 1%, which is half of the rate you are quoting. I am perfectly willing and able to pay that fee and still end up with enough money to do what I want. I really only need enough, as anything beyond that will be excess. Yes, I realize I could do something with that excess in terms of leaving it to my heirs or charity or whatever, but that's not on my priority list.

And the other side of that coin is that I might also not get at least the net results of my financial planner by doing it all myself, so if I am doing as well or better with my planner than I could do by myself, it is OK for me to be paying for that service.

Not everyone has the interest or knowledge to manage their own finances, and so they hire someone to do that. Similarly, I know people who hire plumbers and electricians and roofers to do things around their house when they could probably do a lot of that themselves and save the money.

But it is not always about the money, and in the case of these twins, it seemed to have worked well for them. Sometimes, people are actually happy with having enough, and prefer to do something else with their time than just manage their money. And if that means that someone else also gets to earn a living along the way helping them to manage their money, that is OK as well.

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Author: buzman Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73826 of 74759
Subject: Re: The Millionaire Twins Next Door Date: 11/26/2013 10:17 AM
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I fail to understand the snarkiness over this feel good story.

Sometimes, people are actually happy with having enough, and prefer to do something else with their time than just manage their money.

Just maybe his job had little to do with their investments.

There were some WW 2 bonds stuffed in drawer for Christ's sake.

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Author: AmericanIdle Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73827 of 74759
Subject: Re: The Millionaire Twins Next Door Date: 11/26/2013 10:21 AM
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Sometimes, people are actually happy with having enough, and prefer to do something else with their time than just manage their money.

Personally, I don't find it all that onerous. And I do seem to find time to do other things with my time as well.

YMMV,

AI

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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: 73828 of 74759
Subject: Re: The Millionaire Twins Next Door Date: 11/26/2013 10:26 AM
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Personally, I don't find it all that onerous. And I do seem to find time to do other things with my time as well.

Sure, and I'm in that same bucket. But DH is not, and never will be, so a financial planner works better for him should I predecease him.

We are not all interested in the same things or talented in the same ways. For those things in which we are not interested or not skilled, it is not unreasonable to pay someone who is skilled to get the job done. I do not understand why that concept is so abhorrent to some when it comes to managing money. That skill/interest seems no different to me than cleaning (many people have housekeepers), mowing (many people hire landscapers), plumbing (many people hire plumbers), auto repair including general maintenance (many people use mechanics), etc.

Outsourcing anything will have a cost to it, and that includes outsourcing money management.

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Author: BruceCM Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73830 of 74759
Subject: Re: The Millionaire Twins Next Door Date: 11/26/2013 12:05 PM
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I'm disappointed that you have let your bias against those who make commissions in the financial world get in the way of noting that.

That's certainly one way to read it. But I read it to say that the wealth accumulated for the sister occurred due to adept portfolio management. Would the same level of wealth have been accumulated had the brother put his sister's money into cash value life insurance or equity indexed annuities?

And any "Top Producer" (an industry term for an insurance agent who sells more product than any other agent in his office), of which it sounds like Robert was one, gets that way by convincing more people to buy insurance products. These products are usually sold, not bought. So, is he providing a much needed service to those in financial need, or selling the equivalent of expensive lemon flavored water as an financial cure?

From my sketch (based only on the information provided), it seems the brother might have a double standard...that approach offered to his 'clients' and that offered to his family.

For those things in which we are not interested or not skilled, it is not unreasonable to pay someone who is skilled to get the job done.

Well said.

I think many self-managing sorts on these kinds of forums (like me) tend to grow an almost cynical view of those who won't see it my way. But the simple reality is that many, many, many (most?) fully capable adults, as you say, have no interest. This doesn't mean they don't have the need. So for these, it really becomes more a situation of being a good consumer than being a good wealth manager.

BruceM

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Author: reallyalldone Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73832 of 74759
Subject: Re: The Millionaire Twins Next Door Date: 11/26/2013 1:11 PM
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Personally, I don't find it all that onerous.

For a long time, I enjoyed it. Then my mother's money(which I managed from when my father died & I was 25) became very important because I wasn't sure it would last and I was running spreadsheet numbers every month. When that was over, there was the estate and dealing with the household goods. Then the end of college was in sight and a few months after that, my husband became ill and I was dealing with appts and medical bills and looming disability and death.

I still manage some of my own and I manage my kids' retirement accounts. Mine, because of a variety of investments and some self-employment, sometimes feels like one more job. I do have some of mine managed for a couple of reasons and I am okay paying for it.

And I do seem to find time to do other things with my time as well.

Grandparenting and outdoor sports trump money management these days. A couple of other activities do as well. Then again, I seem to recall at some point figuring out that I am old enough to be your mother so we can check in again in 20ish years ;)

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Author: CCinOC Big gold star, 5000 posts Top Recommended Fools Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73833 of 74759
Subject: Re: The Millionaire Twins Next Door Date: 11/26/2013 3:25 PM
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Your doppels came out in force, UGM. Congratulations.

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Author: CCinOC Big gold star, 5000 posts Top Recommended Fools Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73834 of 74759
Subject: Re: The Millionaire Twins Next Door Date: 11/26/2013 3:26 PM
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UGM = IGU. Can't keep the doppels straight. Sorry.

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Author: sykesix Big gold star, 5000 posts Top Recommended Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73835 of 74759
Subject: Re: The Millionaire Twins Next Door Date: 11/26/2013 3:58 PM
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Sure, and I'm in that same bucket. But DH is not, and never will be, so a financial planner works better for him should I predecease him.

We are not all interested in the same things or talented in the same ways. For those things in which we are not interested or not skilled, it is not unreasonable to pay someone who is skilled to get the job done. I do not understand why that concept is so abhorrent to some when it comes to managing money. That skill/interest seems no different to me than cleaning (many people have housekeepers), mowing (many people hire landscapers), plumbing (many people hire plumbers), auto repair including general maintenance (many people use mechanics), etc.

Outsourcing anything will have a cost to it, and that includes outsourcing money management.


I don't see how anyone can disagree with that premise. This issue is the high costs. Let's say you have a reasonably large portfolio, say $500,000, and your financial planner is charging you a 1% fee, or $5,000/year. Compare the per hour costs of the financial planner with the plumber, the mechanic, or even a doctor or a lawyer. The FA charges fees wildly beyond what any other reasonably well trained professional makes. And we know the power of compounding. That $5K/year adds up quick over a few years.

As a solution, you could hire and retain a good CPA and the best tax and estate lawyers in town for a fraction of the cost of the FA.

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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: 73836 of 74759
Subject: Re: The Millionaire Twins Next Door Date: 11/26/2013 4:10 PM
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I don't see how anyone can disagree with that premise. This issue is the high costs. Let's say you have a reasonably large portfolio, say $500,000, and your financial planner is charging you a 1% fee, or $5,000/year. Compare the per hour costs of the financial planner with the plumber, the mechanic, or even a doctor or a lawyer. The FA charges fees wildly beyond what any other reasonably well trained professional makes. And we know the power of compounding. That $5K/year adds up quick over a few years.

If I use your example and assume the FA makes $200/hour, then that's 25 hours of work over the course of a year, or about 6 hours per quarter. Doesn't seem unreasonable to me.

As a solution, you could hire and retain a good CPA and the best tax and estate lawyers in town for a fraction of the cost of the FA.

I don't know about your area, but in my area, a good estate attorney charges $200-250/hour, so I'd say that's in the same ballpark as the FA. And then I'd still have to pay the CPA, who I'm sure doesn't work for free. But I don't consider either of them people I'd want investing advice from, so I still have that problem about actually managing the money, so this doesn't solve that problem. It's not a direct skillset replacement at all.

I get it. Most folks on this board think that the only way to go is to manage your own money to avoid the fee. I don't share that opinion, and am perfectly fine with paying someone to manage my money, particularly as that person is currently doing better than I am AFTER their fees. I figure I'm ending up with more money in my pocket because I used his services including paying his fee than if I'd just done it all myself, and I still got to use my time to do other things that I wanted.

I don't subscribe to the notion that there is only one solution for the money management problem, and I happen to use a different approach than others on this board. I'm fine with that.

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Author: ItsGoingUp Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73837 of 74759
Subject: Re: The Millionaire Twins Next Door Date: 11/26/2013 4:31 PM
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2gifts wrote:
I don't share that opinion, and am perfectly fine with paying someone to manage my money, particularly as that person is currently doing better than I am AFTER their fees.

It's a rare financial advisor that will do better for you than just putting you money in an S&P index fund. Comparing the FA to how you do may not be the best comparison -- maybe you should stop doing what you're doing and instead do something that works better. I'm not saying this is how it is in your case, but nothing you have written precludes it.

It's not just the magnitude of the fee that bothers people; it's that rarely is anything of real value delivered for that fee.

-IGU-

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Author: Hawkwin Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73838 of 74759
Subject: Re: The Millionaire Twins Next Door Date: 11/26/2013 4:45 PM
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It's a rare financial advisor that will do better for you than just putting you money in an S&P index fund.

Why do those that argue against advice always make this comparison?

Do you have all your money in a S&P Index Fund? Would you recommend everyone, regardless of risk tolerance and need for income invest 100% in the S&P?

it's that rarely is anything of real value delivered for that fee.

It always seems that you folks think one-dimensional - beating an index. Advice is rarely, in my experience, about trying to beat an index. It is far more about education, risk and loss avoidance, financial planning (working on POAs, wills and trusts), maximizing social security, etc. The vast majority of people I meet don't even understand the differences between a Roth and a traditional IRA. They don't know the tax benefits they may receive from a 529 plan. They don't understand how they can file and suspend their social security allowing their spouse to claim spousal benefits now.

If you don't like paying a fee, don't - but there is no reason to look down on those that don't have the time, interest, knowledge, or desire to do all of their planning on their own.

Some people love math and hate to read, some people are just the opposite. I see no reason to heap scorn on those that simply have a different preference.

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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: 73839 of 74759
Subject: Re: The Millionaire Twins Next Door Date: 11/26/2013 6:36 PM
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It's a rare financial advisor that will do better for you than just putting you money in an S&P index fund. Comparing the FA to how you do may not be the best comparison -- maybe you should stop doing what you're doing and instead do something that works better. I'm not saying this is how it is in your case, but nothing you have written precludes it.

First, I think I actually get to decide on my own yardstick, whatever that may be. It may or may not be the same as your yardstick, but it takes into account all the criteria that I have for measuring success. That can include many factors, and is not just based on ROI because I also value my time as well as DH's comfort factor, all of which have value to me. These things may or may not have value to you, and we probably would have our criteria ranked differently. But that doesn't matter. It only matters that my ranked criteria is being met to my satisfaction. It does not need to also meet your criteria, some of which may be lower on my list or not even on it at all.

You don't get to decide how much work I should do or should want to do, regardless of if you think that I could do "better" by your yardstick because I'm not using your yardstick.


It's not just the magnitude of the fee that bothers people; it's that rarely is anything of real value delivered for that fee.


And here we disagree again. No one, other than DH and me, gets to decide what "real value" is in this instance. I have already stated, repeatedly, that we feel we are getting fair value for what we are paying, and other people don't get a vote on that.

DH is a general contractor, and has clients that pay him for things that both of us consider absurd, like paying a 4-hour minimum to diagnose and fix a garage door opener that needed a new battery, but those people are getting what they perceive as value from that. It is not up to us to decide what the value is to them, and it is not up to others to decide what has value to me.

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Author: synchronicityII Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73840 of 74759
Subject: Re: The Millionaire Twins Next Door Date: 11/26/2013 7:10 PM
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It's a rare financial advisor that will do better for you than just putting you money in an S&P index fund

As others have noted, for most people it's not just about beating the S&P 500 index. Heck, even if one uses exclusively index funds, there's always the question of WHAT asset classes one should put their assets in.

I totally get that some sort of allocation of "cash", "bonds" and "equities", with the former in online savings with decent interest and latter two in, say, VBMFX and VTSAX is a decent low cost base, but beyond that there's still a world of stuff to think about. Not to mention things like setting goals for retirement and how much will be needed and then acting as one's own "pension manager" in handling drawdowns and the like.

Yes, one can use the "4% rule of thumb", but even then, it helps to have some base knowledge of a bunch of different financial issues.

We won't even begin to get into income tax and estate planning on top of that. Good financial advisors usually have connections with knowledgeable CPAs and attorneys (some of them may even BE knowledgeable CPAs and/or attorneys even if they don't practice in those fields) and have at least some idea how all that ties in with basic asset allocation and financial issues.

Can I do all of that myself? Well, sure *I* can, as can some others on this board. But, as I think others can vouch, I may be a wee bit better than the average bear at that sort of thing, and even most of us posting here look for assistance in some areas.

Yes, I totally get that the financial industry takes commissions and fees, and that a whole bunch of people are not well-served by the industry, and in general the more complex a product is and the more it promises the more costs and fees there are wrapped up in it. I get that, and I get that some people in the industry one shouldn't touch with a ten foot pole. But there are reasons things cost money as opposed to going the DIY route, and not ALL of those costs are "the financial industry trying to take all your money", just like a plumber or electrician or mechanic charging you for a service you could do yourself for less means does not mean all or most tradesmen are out to rip you off.

As The Joker said in Dark Knight - "If you're good at something, never do it for free".

-synchronicity

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Author: intercst Big funky green star, 20000 posts Top Favorite Fools Top Recommended Fools Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73841 of 74759
Subject: Re: The Millionaire Twins Next Door Date: 11/26/2013 7:30 PM
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ItsGoingUp writes,

It's not just the magnitude of the fee that bothers people; it's that rarely is anything of real value delivered for that fee.

Daniel Kahneman (2002 Nobel Prize in Economics) said this about Wall Street "wealth managers".

It's a "puzzle: a major industry appears to be largely built on an illusion of skill". (Page 212, Thinking, Fast and Slow (2011)

I'd modify that to "illusion of financial skill". A wealth manager has to be a very skillful salesman to get someone to buy high-ticket financial advice that's no better than participating in a dice game.

intercst

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Author: AmericanIdle Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73843 of 74759
Subject: Re: The Millionaire Twins Next Door Date: 11/26/2013 8:42 PM
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Grandparenting and outdoor sports trump money management these days. A couple of other activities do as well. Then again, I seem to recall at some point figuring out that I am old enough to be your mother so we can check in again in 20ish years ;)

Yes, pretty close on the age concern.

Anyway, I have taken steps in recent years to put things more on autopilot and dramatically reduce "hands-on" time since time has grown scarcer and more precious, both from the family side and the career side lately.

That being aide, 1% of assets per annum still strikes me as quite a high price, but, as always, YMMV.

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Author: Goofyhoofy Big funky green star, 20000 posts Top Favorite Fools Top Recommended Fools Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73845 of 74759
Subject: Re: The Millionaire Twins Next Door Date: 11/27/2013 7:44 AM
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And here we disagree again. No one, other than DH and me, gets to decide what "real value" is in this instance. I have already stated, repeatedly, that we feel we are getting fair value for what we are paying, and other people don't get a vote on that.
DH is a general contractor, and has clients that pay him for things that both of us consider absurd, like paying a 4-hour minimum to diagnose and fix a garage door opener that needed a new battery, but those people are getting what they perceive as value from that. It is not up to us to decide what the value is to them


Your point is well made. All intercst is saying is that from a financial perspective, you are paying your advisor a minimum of 1/3 of your investment income to change your battery.

But that is your choice, of course.

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Author: reallyalldone Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73846 of 74759
Subject: Re: The Millionaire Twins Next Door Date: 11/27/2013 9:07 AM
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But that is your choice, of course.

As is the choice to decide when the money one has is enough. Maybe it's a gender difference - do men use accumulated money as a proxy for virility ?

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Author: Goofyhoofy Big funky green star, 20000 posts Top Favorite Fools Top Recommended Fools Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73847 of 74759
Subject: Re: The Millionaire Twins Next Door Date: 11/27/2013 11:09 AM
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As is the choice to decide when the money one has is enough. Maybe it's a gender difference - do men use accumulated money as a proxy for virility ?

I'm quite sure some do, just as some women will spend thousands to stave off the effect of time on their youthful beauty. I daresay most men do not fall into the category of having "enough" to ignore the effects of financial fees (heck, more than half don't have enough to live reasonably without a Social Security check.)

If you are in the category of truly wealthy, I'm sure the 2% rake doesn't affect you or your lifestyle appreciably. For the great mass of investors, particularly the ones of modest means who do their best to save for retirement and have a comfortable life, losing 1/3 to 2/3 of your gains DOES make a significant difference.

But I am not opposed to people hiring other people to do this for them, it's just important that they understand the ramifications of doing so, including the data which demonstrates that most advisors perform no better than the average market, and that the compounding effects of fees take a significant toll over a person's lifetime.

Still, I go to a diner to have someone fry an egg for me at triple the cost of doing it myself, so I am not hyper critical of those who choose to spend their money in such manner. I just don't do it every day, and unlike financial advisors, the waitress presents me with a bill with actual figures as to the cost, rather than having the monies subtracted from my bank account without notice to me of what those costs actually are.

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Author: sykesix Big gold star, 5000 posts Top Recommended Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73848 of 74759
Subject: Re: The Millionaire Twins Next Door Date: 11/27/2013 11:47 AM
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It always seems that you folks think one-dimensional - beating an index. Advice is rarely, in my experience, about trying to beat an index. It is far more about education, risk and loss avoidance, financial planning (working on POAs, wills and trusts), maximizing social security, etc. The vast majority of people I meet don't even understand the differences between a Roth and a traditional IRA. They don't know the tax benefits they may receive from a 529 plan. They don't understand how they can file and suspend their social security allowing their spouse to claim spousal benefits now.

If you don't like paying a fee, don't - but there is no reason to look down on those that don't have the time, interest, knowledge, or desire to do all of their planning on their own.


I heartily agree. The answers to many of those questions are often not obvious and and sometimes you don't even know what you don't know. For that reason, I hired a CPA when I started my business. Worth every penny. The previous poster suggested her FA charges the equivalent of 25 hours a year. My CPA hasn't billed me 25 hours in nine years. I haven't even talked to him in a few years. In another few years, I'll probably see him again for an hour, just for a check up. Just to make sure I'm not missing something.

Similarly, if you want to set up will or trust, plenty of competent attornies will be willing to do that for less than $1000 in most cases. That's a one time fee, although you might want to revisit it every few years. Yet dramatically less than the $5,000 per year our hypothetical FA charges.

I totally get that the previous poster is plenty happy paying her FA. Bully for her. But for most people it is a bad financial decision and you can get the same advice elsewhere for a tiny fraction of the cost.

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Author: Hawkwin Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73849 of 74759
Subject: Re: The Millionaire Twins Next Door Date: 11/27/2013 11:47 AM
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and unlike financial advisors, the waitress presents me with a bill with actual figures as to the cost, rather than having the monies subtracted from my bank account without notice to me of what those costs actually are.

Not really.

The waitress actually itemizes your bill a little less than a mutual fund itemizes their expenses. You are not informed as to the cost of the egg, how much is labor, and how much is profit, for example.

The sale of mutual funds, for example, requires the delivery of a prospectus (summary or otherwise) and usually a 1-2 page fact sheet. If someone sells you stock, your confirm will detail the commission. If you are paying a wrap or AUM fee, that is typically very clear on quarterly or annual statements.

Hawkwin
Strong advocate for full and upfront disclosure.

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Author: Hawkwin Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73852 of 74759
Subject: Re: The Millionaire Twins Next Door Date: 11/27/2013 12:05 PM
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you don't even know what you don't know.

That is the absolute most common issue in my experience.

But for most people it is a bad financial decision and you can get the same advice elsewhere for a tiny fraction of the cost.

And this brings me back to my comment above, if you don't know about it, you are not going to get advice elsewhere, regardless of any savings.

Don't make the faulty assumption that people will do this on their own.

I can count on my two hands the number of people (minus those that already had a trust) that already had a POA, will, and medical POA when I met them. The overwhelming vast majority had never thought about it - or if they thought about it, never did anything about it.

Now, I don't create those documents for clients. I tell them to go to legalzoom.com, use Quicken Willmaker, or if they must, visit their family atty (assuming they have one). I receive no compensation by giving them that advice - it is a "comes with" service for any compensated advice I might give.

Same goes for those I assist with social security maximization. I don't charge for that service. People can certainly do such on their own but I've yet met a SINGLE PERSON that fully understood their options with regard to SS (minus the small number of people that were not qualified for SS).

Our education system has completely failed us as it pertains to financial education. I would rather there be no need for anyone to seek advice. I would rather everyone have all the knowledge and desire to manage their own financial affairs and that it was easy for people to do so - we would be a much better country and world if that were the case but we are no where close to that.

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Author: reallyalldone Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73853 of 74759
Subject: Re: The Millionaire Twins Next Door Date: 11/27/2013 12:36 PM
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If you are in the category of truly wealthy,

Still looking for that measurement ? and it's not 2%, btw. It's 1% up to a million and then drops after that.

Aren't you the guy who didn't understand a post I titled "Philanthropy" years ago ?

But I am not opposed to people hiring other people to do this for them, it's just important that they understand the ramifications of doing so, including the data which demonstrates that most advisors perform no better than the average market, and that the compounding effects of fees take a significant toll over a person's lifetime.

Have you read 2gifts' posts over the years ?


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Author: intercst Big funky green star, 20000 posts Top Favorite Fools Top Recommended Fools Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73854 of 74759
Subject: Re: The Millionaire Twins Next Door Date: 11/27/2013 2:45 PM
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2gifts writes,

I do have a financial planner, and he does take a percentage, but he takes 1%, which is half of the rate you are quoting.

<snip>


The 2% financial services industry average I quoted is total annual fees, expenses & costs -- not just your advisor's 1% skim.

What kind of investment products is your advisor recommending you buy? A portfolio of low-cost Vanguard index funds with a 0.10% expense ratio and another 0.01% in trading costs (total of 0.11%) or something closer to the average mutual fund with an expense ratio of 1.07% plus another 0.5% to 1.00% in brokerage commissions and trading costs if it's actively managed, (total of 1.57% to 2.07%)

You're likely paying more than 2% when you add it all up.

At 3% in annual fees expenses and costs, your financial advisor and the companies he recommends will capture 80% of your wealth over 60 years -- $1 for you, $4 to Wall Street.

intercst

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Author: jgc123 Big gold star, 5000 posts Top Recommended Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73855 of 74759
Subject: Re: The Millionaire Twins Next Door Date: 11/28/2013 7:47 AM
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The truly rich don't pay 2%. Dad has a full service broker but they have a sliding scale where they charge 1% up to a certain amount, .9% above another threshold, etc. Dad pays 55 basis points total.

The wealthier you are, the better the deal that you can cut.

The people with the fewest assets pay the highest fees by percentage.

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