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https://www.fa-mag.com/news/nearly-half-of-u-s--adults-see-a...

45% of those who don’t have a paid financial advisor—and 50% of all consumers—think they typically cost much more than they do. Fee-only advisors typically charge between 0.5% and 1.25% of the assets they manage, but these respondents believe the typical cost is between 5% and 15% or more of assets.

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The respondents are right. Saving for retirement and spending money in retirement is hopefully a 50 or 60 year project. An advisor skimming 1% per annum from you over a 60-year time frame will take almost half of your net worth -- that's the miracle of compounding working against you.

Vanguard's new "low-cost" financial advice service.
https://retireearlyhomepage.com/vg_advice.html

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intercst
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"Saving for retirement and spending money in retirement is hopefully a 50 or 60 year project. "

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If one retires at 55 to 65, they must really start investing their paper delivery route
payments seriously.

Howie52
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No. of Recommendations: 6
I think any advisor who charges for AUM (assets under management) charges too much. Have a well off friend who interviewed an advisor who charged 1%. Doesn’t sound bad. She has 5M. Does anyone actually give advice worth $50,000 a year? Every year??

My brilliant nephew found a true fee-only guy who charges $300/month. No contract. Hired for a few months to get set up, answer tax questions, balance investments. Does not sell annuities or insurance. Does not have any assets under management, just tells you what to do with your account. I’m retiring soon and will probably hire him myself. Far cheaper than a AUM salesman for anyone with over $500K.
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No. of Recommendations: 3
Howie52 analyzes,

If one retires at 55 to 65, they must really start investing their paper delivery route
payments seriously.

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Not at all. Actuarially, the average 55-yr-old in the top 20% of the income pyramid is going to live another 30 years or more. Assuming you started making contributions to your 401k as soon as you graduated from college, you'll have 60 years or more between saving for retirement and spending down your portfolio in retirement. That's why a fraction of a percent in fees & costs makes such a huge difference.

intercst
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No. of Recommendations: 1
I watch the difference between my ROI and my advisor's ROI. The last time I managed my own portfolio (before index funds were mainstream) my portfolio fell 2% while the market went up 22%. At the time I was newly married, raising a kid, employed full-time, running a small business, and managing our portfolio.

The most appropriate to offload and the one I was doing the worst on was managing our portfolio. So I did and he's earned his pay.
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No. of Recommendations: 2
If one retires at 55 to 65, they must really start investing their paper delivery route
payments seriously.


I started planning at 19, but really couldn't put much by til my late 20's, and still retired at 53, which was 3 years later than needed. Our kids on the other hand have had the benefit of every penny they earned up through college resulting in a Roth Contribution by us up to the max amount. Oldest graduated college with over $40K in his brokerage. We preferred to give them their inheritance up front where it could do some good.

IP,
finished college payments and kid's Roth contributions in 2020
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No. of Recommendations: 1
I watch the difference between my ROI and my advisor's ROI.

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I'd benchmark the advisor against a portfolio of 2 or 3 index funds. Even if you have other major responsibilities, it shouldn't take more than 2 or 3 hours of your time each year to manage that. There's a good chance they'll be your most highly compensated hours of the year vs. paying the advisor.

intercst
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Have a well off friend who interviewed an advisor who charged 1%. Doesn’t sound bad. She has 5M. Does anyone actually give advice worth $50,000 a year? Every year??


I think not.
But if the advisor just says to put all the money (minus his/her fee) under a mattress the next year they'll only get $49500...and then $49005...

Mike
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I'd benchmark the advisor against a portfolio of 2 or 3 index funds.

You missed this comment in my OP: (before index funds were mainstream)
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JonathanRoth writes,

You missed this comment in my OP: (before index funds were mainstream)

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No. I saw that.

When you look at the Dalbar study, the average investor earned 2.1% over the twenty year period ended Dec. 31, 2011.

The S&P 500 returned 7.8%, while the Barclays Capital US Aggregate Bond Index returned 6.5% over the same time period. A 50/50 blend of these two asset classes would have yielded a nominal annualized return of 7.2%.

After including inflation, the average investor got a negative real return. Inflation (CPI) grew at an annualized rate of 2.5% during the period. So the average investors' net real return was -0.4%. The average investor is not very good at capturing the market return of a simple balanced portfolio, never mind outperforming it.

https://www.thestreet.com/personal-finance/average-investor-...

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Just wanted to emphasize, that it's not your return (i.e., the average investor), it's what you can get by basically doing nothing by owning an index fund that should be benchmarked against the advisor's performance.

intercst
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Not at all. Actuarially, the average 55-yr-old in the top 20% of the income pyramid is going to live another 30 years or more. Assuming you started making contributions to your 401k as soon as you graduated from college, you'll have 60 years or more between saving for retirement and spending down your portfolio in retirement. That's why a fraction of a percent in fees & costs makes such a huge difference.

Along those lines, general investment advice is to move towards bonds as you get closer to retirement and there is some merit to that thinking. However, even retiring at 65 means you are likely to have a good 20 or even 30 year investment horizon, which by most measures is long term investing.
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No. of Recommendations: 7
Fee-only advisors typically charge between 0.5% and 1.25% of the assets they manage, but these respondents believe the typical cost is between 5% and 15% or more of assets.

If you believe that the safe long term withdrawal rate is 4% (or even 4.5% if you do certain things like adjust withdrawals during down markets), then that 0.5% to 1.25% fee is 12.5% to 31% of your annual stream. Go ahead and ask your advisor if his advice/management is assured to increase the safe withdrawal rate...*at all*, much less by enough to exceed the fees. It may be that they can project a benefit of lower volatility or something, but it still would be worth hearing the answer.

My advisor did something like that, with projected returns for his managed portfolio vs. my current one. When I pointed out that:
a. Most of the improved return he projected for his proposed managed account was due to asset allocation and I purposely held more cash in anticipation of the seven years between my age 60 retirement and age 67 Social Security claiming, and
b. I still had assets in my (fairly high fee) 401k, and I could buy ETFs at <0.2% fee when I transferred that to an IRA
...well, he didn't have a good answer.

If an advisor wants to charge you even a few thousand dollars to create a plan, that doesn't seem out of line. But a percent--year in, year out--to adjust to a preset asset allocation?
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I watch the difference between my ROI and my advisor's ROI. The last time I managed my own portfolio (before index funds were mainstream) my portfolio fell 2% while the market went up 22%. At the time I was newly married, raising a kid, employed full-time, running a small business, and managing our portfolio.

So, an asset allocation of 80% SP500 Index, 10% International Index, and 10% Corporate Bonds would have been WAY better than whatever you were doing. Ha! I didn't even charge you an entire percent for that.
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The 1% annually probably does total up to more than 10% over a working career. While figures don't lie, sales people figure a way to make their cut appear smaller than it actually is.
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So, an asset allocation of 80% SP500 Index, 10% International Index, and 10% Corporate Bonds would have been WAY better than whatever you were doing. Ha! I didn't even charge you an entire percent for that.

The returns you bost of may well be under my actual returns. Very impressive by the conclusions based on the lack of relevant data.
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So, an asset allocation of 80% SP500 Index, 10% International Index, and 10% Corporate Bonds would have been WAY better than whatever you were doing. Ha! I didn't even charge you an entire percent for that.

The returns you bost of may well be under my actual returns. Very impressive by the conclusions based on the lack of relevant data.



Well, since you wrote:
The last time I managed my own portfolio (before index funds were mainstream) my portfolio fell 2% while the market went up 22%.

That sure SOUNDS like the relevant data shows how a mainstream index would have made a lot of money even if the two 10% positions didn't. If you didn't have exactly an S&P500 Index fund available, lots of large cap funds were closet indexers, and it didn't justify their 1% annual fee although that would still be way ahead of losing money when the market was up 22%.
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I invested some money in Edward Jones when my kids were younger basically because they were helping me do back door Roth’s and tax advantaged 529 accounts. My advisor was a ex engineer and spoke my language (numbers) but...she retired and I don’t think her replacement speaks math as well. Kinda disappointed. Lovely girl but I miss my old engineer.

They only hold < 10% of my assets. Never did convince me to move the lions share. I self manage most in index funds.

Yes the traditional advice of half in bonds is way too conservative. Keep 3 years worth in conservative investments and keep the rest in equities.
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No. of Recommendations: 3
I found a Fee Only (hourly) advisor a few years ago. She's a member of NAPFA.
Basic financial analysis and recommendations were presented, which we had to either transact on our own or not, as it was our decision.
The fees were not based on account balances.

It was well worth the cost of 2 meetings; the first one costing 600.
I was able to consolidate many accounts which was sorely needed for sanity per recommendations.
Her recommendations included some investments at VG.
The follow up, a few years later cost 400 for review and tweaking.

nag
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