Financial planner fees

HardDrive · 12-13-2005, 07:11 PM

Wife and I met with a financial adviser from Ameriprise Financial this evening. I have been averse to getting a Financial adviser, since I am reasonably knowledgeable on the subject. But I don't have time, and I have come to see some advantages in having someone else mind the flock. The guy comes with recommendations from 2 separate friends who are physicians.

His fees are $600 yearly retainer, plus 1.5% of your portfolio. So if I give this guy 100k to work with, he is charging me basically 2.1% in the first year. So my investments are going to have to beat the markets by 2 points just to make this worth it. I'm pretty skeptical.

Comments appreciated.

pwd72s · 07:54 PM

You have a right to be skeptical...BTW, anybody who has read "The millionaire next door" will assure you that, as a group, MD's are notoriously poor at being able to manage their high salaries. They are among the last of the list of "professionals" I would ask for financial advice. Seriously, I know a retired log truck driver in this town who is a brilliant investor, a multi millionaire, while I know MD's who will be in debt, scrambling to maintain "image", throughout their lives. I live in what most MD's would consider a "poor" neighborhood, but I live comfortably, despite being "deprived" by having only one P-car. I could afford another, but I don't want one. I also could write a 6 figure check tomorrow. It wouldn't bounce. I know MD's who, despite making much more annually, salary wise, than I ever did, can't say the same. Bottom line? NO "financial manager" will care more about your money than you do. You are better off spending more time doing your own financial homework and managing your investment portfolio yourself. 8-10 hours a week or so spent at this should do it. I applaud you for figuring out one important thing...fees DO matter!

(edit) What I don't applaud is your "don't have the time" comment. Think about it...passing up a golf game a week? Or? Really, what's more important to you than your financial security? Your choices, your time, your money, your responsibility...

cantdrv55 · 12-13-2005, 07:56 PM

Couldn't have said it better myself. Great advice.

Hugh R · 12-13-2005, 08:03 PM

I was in one of those financial planning things with a major broker and they charge me about 1.5% to manage my account. From 1999 to 2003 they managed to loose me about 25% of my portfolio. And collected about 20K for the priviledge of doing so! Bottom line, they have no guaranteed return for you and a guaranteed fee for them. I switched to Schwab and do my own investing. The S&P 500 did 9.9% annual return over the last 15 years, they gave me 6.6% AND charged me about the same 1.5%. Look at Schwab or some other online broker before you sign on. Its easy to research, and fees are a lot smaller.

Cdnone1 · 12-13-2005, 08:22 PM

Fee's and percentages should be negotiable. My wife and I have an Ameriprise (use to be American Express) financial planner and we negotiate fee's every time we make a major move or at our yearly meeting.
Depending on the size of your portfolio and how aggressively you are going to move things around your planner is going to receive a percentage back from the funds he puts you into. This should be discussed up front
Tough call but I'm like you, I don't really have the time to do all the research I would want before making a decision. Like many things in business it's easier to get professional options from the experts and decide from there
If your investing and keeping a balance over I think $750,000.00 they give you a free Amex Platinum and a whole bunch of services that I never use.
Good Luck
Steve

HardDrive · 12-13-2005, 09:26 PM

Quote:

Originally posted by pwd72s
What I don't applaud is your "don't have the time" comment. Think about it...passing up a golf game a week? Or? Really, what's more important to you than your financial security? Your choices, your time, your money, your responsibility...

Golf? I'm speachless. If I could only express how.....

Its 10:30pm, and I am sitting in front of my computer. I was at work at 7:30am. Meeting at 5:00pm, ram some thai food in my face, then working from home until now. I have a solid 2 hours of work left, thens it up at 6:30am to get back at it. This weekend, 12-16 hours a day of work and study so I can present a new product on Monday.

Golf!?!?! I don't know whether to laugh, cry or be mad....

I appreciate the advice though.

HardDrive · 12-13-2005, 09:27 PM

Steve, have you been happy with your results?

cantdrv55 · 12-13-2005, 09:35 PM

Quote:

Originally posted by HardDrive
Golf? I'm speachless. If I could only express how.....

Its 10:30pm, and I am sitting in front of my computer. I was at work at 7:30am. Meeting at 5:00pm, ram some thai food in my face, then working from home until now. I have a solid 2 hours of work left, thens it up at 6:30am to get back at it. This weekend, 12-16 hours a day of work and study so I can present a new product on Monday.

Golf!?!?! I don't know whether to laugh, cry or be mad....

I appreciate the advice though.

OK, not golf. Give up bowling. Just kidding. I'm sure pwd72s was too.

Truthfully, unless you have a rather sizable account or accounts, no one's going to look after your money better than yourself. If you cannot find any time at all to review your positions at least monthly (and that's even too long), better farm it out but be ready to pay fees for often times meager performance.

Markus33 · 12-13-2005, 09:52 PM

What kind of financial services are you looking for? Estate planning, income tax, portfolio securities selection? What are your goals for the amount you're willing to invest? Level of risk tolerance? If you're just looking for someone to help you allocate assets among mutual funds I would venture to say that you could do about as well yourself with very little time commitment. Comparison shop and watch the expenses including 12b-1 fees. Don't fall into the trap of chasing last year's winners.

I've worked in the investment business for ten years at a big mutual fund company and as a licensed broker. Mutual funds have their place for the individual investor but most of them don't beat the S&P 500 over the long term. There are a lot of reasons for this including the high expenses you mention. Doing individual stock research is certainly doable yourself, too. But as you say it does take time to do it right.

Feel free to send a PM and I'll answer any questions about the funds and securities industries honestly, and at no charge for a fellow pelicanite.

Regards,

Markus
'80 SC Targa

Cdnone1 · 12-14-2005, 06:32 AM

Hard Drive
Overall I would say yes. We are not very aggressive (risky) with our investments and tend not to move stuff around alot. We got stung when the tech market dissolved years back but we where not heavily into that either.
Our planner makes suggestions, but I have really found that he is on board with our comfort of risk and never tries to hard sell us into stuff he knows we would not go for. He wants to sit down once a quarter but we review everything monthly and usually only talk if there is a yellow flag somewhere. We do meet at lest once a year
Steve

turbo6bar · 12-14-2005, 06:47 AM

Given the choice, I'd rather reduce expenses than increase income. You may not have that option, but you can still manage your own account and meet or beat the market. Subscribe to forums like Morningstar and Value Line. That will give you research to find great stocks and mutual funds.

If 10-15 hours per month is too much time, you can step less. You can buy 4 mutual funds that will essentially give you market returns.

Vanguard Total Stock Market, VTSMX
Vanguard Total Bond Market, VBMFX
Vanguard Total International, VGTSX
Vanguard Developed or Emerging Markets Index

I prefer the former route. I have a mix of stocks and mutual funds. I think I can beat the market.

{edit:} Ameriprise was recently fined by the SEC for market-timing activities. That basically helps the select few and hurts the little guys like you.

Cdnone1 · 12-14-2005, 07:07 AM

My brother is an investment banker and plays in the world of finance.
All info released to the public is yesterdays news. Anyone reading the perspectives and reports and making decisions on that will never do as well as the people that are writing the reports. There is a reason why investment bankers are subject to random polygraphs.
All investments are really just legalized gambling (esp. commodities)it just depends on how much of a risk you want to take. People use to say just put your money in something safe like GM and Kodak, HA!
Everyone wants to beat the market, but which market? It's a global market now.
I personally (and this is just me) look at my investments in 6 month,1 year,5 year and 10 year plans.
I don't day or minute trade and I'm not greedy or impatient with my money and that has helped my wife and I do well. Maybe we didn't make the extra .7 % one year but we didn't lose the extra 3.6% the next
Just my 2 cents pardon the pun
Steve

turbo6bar · 12-14-2005, 07:21 AM

Beating the market, for me, is not losing in the down years. My ass still hurts from 2000. I was stupid and chasing the big money.

Now, I look for funds and stocks that will do alright through thick and thin. We've had a lot of thick lately. I think we're due for some thin.

VaSteve · 12-14-2005, 08:46 AM

The really rich have people manage their money so they can go out and make more money.

I understand harddrive's position. It's tough enough picking out a ______ (anything the sponsor here sells) and weighing all the options. Now weigh that against your financial future and all the information and misinformation that is out there. Every know nothing or know one thing is pitching a product that may or may not be right. It's a little overwhelming when you have a job, family, etc. Look at that idiot from CNBC with the bald head and the rolled up shirtsleeves screaming and yelling. Would watching that lunatic constitute real research? LOL

turbo6bar · 12-14-2005, 09:05 AM

Quote:

Originally posted by VaSteve
The really rich have people manage their money so they can go out and make more money.

The really rich don't go out and make money. The really rich let money make money.

Nathans_Dad · Nathans_Dad's Garage

I do my own investing. I have had 2 financial planners in the past, neither of which I was very impressed with. Funny how the mutual funds they offer tend to be the ones that give them the best commissions.

I don't have too much in my accounts yet (less than $50k) but that will be changing in the next few years after I get out of the military. I know some people really just don't have an interest in the market or investing and want someone else to take care of it for them. For those people I would say get a planner. For anyone who has an interest, I think you can do pretty darn well on your own.

I have been doing my own investing for about 4 years now and have done better than either of my planners did. Plus I agree with the statement that no one cares about my money more than me.

I use index funds for the core of my portfolio, Vanguard tends to have the lowest fees that I have seen for indexes. It gives me a solid diversification in the portfolio, then I have about 30% in individual stocks. I am young so none of my stuff is in bonds or other more conservative vehicles.

I say do it yourself!!

Cdnone1 · 12-14-2005, 09:22 AM

If your not making money while your sleeping your not making money
I can't remember who said that but it sure is true
Steve

einreb · 12-14-2005, 09:33 AM

Quote:

Originally posted by HardDrive

His fees are $600 yearly retainer, plus 1.5% of your portfolio. So if I give this guy 100k to work with, he is charging me basically 2.1% in the first year. So my investments are going to have to beat the markets by 2 points just to make this worth it. I'm pretty skeptical.

Not just 2.1% but you'll also have to figure in the fees of whatever funds he puts you into.

Not to sound sceptical, and I don't mean to offend anyone in the business... but that entire industry is about separating you from your money.

I think Schwab will charge .5% to actively manage your portfolio. The other option (and what I will suggest). Is to find a flat fee based adviser. you pay him a flat fee of say $750 and go rearrange you portfolio once a year.

There are also one time fee services available. I think Schwab does it for $500, TRowe Price for $250 or something like that.

Why the **** should these folks make a percentage? is managing 200k twice as hard as 100k? N.F.W.

Better yet, figure out a good allocation for yourself. Find high morningstar rated, low fee (NO 12B!) funds and do it yourself.

pwd72s · 12-14-2005, 11:14 AM

Quote:

Originally posted by Nathans_Dad
I do my own investing. I have had 2 financial planners in the past, neither of which I was very impressed with. Funny how the mutual funds they offer tend to be the ones that give them the best commissions.

I use index funds for the core of my portfolio, Vanguard tends to have the lowest fees that I have seen for indexes. It gives me a solid diversification in the portfolio, then I have about 30% in individual stocks. I am young so none of my stuff is in bonds or other more conservative vehicles.

I say do it yourself!!

Good advice. Especially relating to your age, your goals. When young, assume more risk in hopes of more reward. As retirement gets closer, begin adding bonds. Actually though, U.S. Treasury I Bonds, inflation protected bonds, are offering some damned attractive rates right now. You can open your own account with treasury direct, or you can buy them at your bank. No risk to capital, interest earned is not subject to any state income tax, and the yield is currently around 7%. Since Warren Buffett's right hand man was predicting a 6% gain in the total market for '06, well...let's just say we're older than Nathans Dad...

legion · 12-14-2005, 11:25 AM

How's the old saying go?

If you have good financial advise, you take it. If you don't, you sell it.

I get a wide variety of mutual funds and other financial products through work without fees or loads. Right now, the bulk of my assets are in my 401k (I had the good luck of starting it in 2000--essentially the bottom of the market), but I'm slowly adding more. I don't worry about beating the market in the short term, I worry about underperforming the market in the long term. From what I've seen, most investments (be they specific stocks, mutual funds, or even real estate) underperform the indexes (S&P, Dow, etc...) over the long term. It seems to me, matching the market puts you way ahead of most other investors. I don't spend a lot of time researching anything, I just have my money in index funds and let it ride. I figure I save time by not actively trying to manage my portfolio AND still come out ahead of everyone else.