Anyone know what a financial advisor/investor might be getting for watching over your money ? I guess it might make a difference on how much you have to invest,,, but any averages ?

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95 SL500 Smoke Silver, Parchment 64K
07 E350 4matic Station Wagon White 34K
02 E320 4Matic Silver/grey 80K
05 F150 Silver 44K

You can go with a commission-based or fee only finanical planner.


In my opinion it is a conflict of interest to go with an advisor who earns a commission based on the products they sell you. Commission-based planners are paid by the companies whose products they sell, which to me is a problem of loyalty.

Use a fee only planner, where they charge you a flat fee, regardless of whose company's products they sell. This way, they can look out for your best interests without being swayed by commissions. However, some "fee-only" planners do sell products that pay a commission.

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Paul S.

2001 E430, Bourdeaux Red, Oyster interior.
79,200 miles.

1973 280SE 4.5, 170,000 miles. 568 Signal Red, Black MB Tex. "The Red Baron".

What would be a range for the flat fee people ? I hear anywhere fro 1/4 % to 2 1/2 %.

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95 SL500 Smoke Silver, Parchment 64K
07 E350 4matic Station Wagon White 34K
02 E320 4Matic Silver/grey 80K
05 F150 Silver 44K

I think 1/4% is unrealistically low, but that range seems reasonable.
The advisor who manages my 401-k charges 1%

And I agree completely with Paul about fee vs commission based planners. The temptation to invest client money in products which pay the highest commission although they might not be suitable for the clent is great and very often abused. Can't tell you how many elderly ladies I've seen with limited partnersip holdings in oil & gas ventures over the years.

Never forget this. No one, and I mean no one, cares more about your money than you do. Not your accountant, not your stockbroker, not anyone.
Pay attention to what an advisor or manager is doing and limit his power to trade your holdings.

I had a CFP, Certified Financial Planner, do a financial plan for me, and it was somewhere in the neighborhood of $3,000.00.

They also had an option where they would manage my investments for a fee, based an a percentage, but I don't remember what it was.

I'm a big believer in indexing, so I don't need active management in my investment account. I just determine my asset allocation, and divide my money into the determined percentage of index stock funds, index bond funds, and money market funds. As I get older and closer to retirment, I increase the percentage of my money into bond funds, so that as I reach retirement age, I will have roughly 50% of my money into bond funds.

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Paul S.

2001 E430, Bourdeaux Red, Oyster interior.
79,200 miles.

1973 280SE 4.5, 170,000 miles. 568 Signal Red, Black MB Tex. "The Red Baron".

Good move to have a financial plan complete, but I will disagee with one statement.

You most definitely do need active management. Probably not from a buy/sell activity perspective, but are you protected on the income tax side? How about estate taxes? Capital gains? Life insurance?

I would encourage anyone whom is gainfully employed to seek the services of a CFP.

Just my opinion, do with it what you will...

Fee-based (aka advisory) financial planners typically charge a percentage of assets under management (AUM) for watching the money and making trades/recommendations etc. The rate is nearly always on a descending scale with the more AUM the lower the fee. The scale might be something on the order of 2% on the first 100K, 1.5% on the amount between 100K and 500K, 1.25% from 500K to 1M and 1% from 1M on up. These rates are probably on the low side industry-wide. Suginami suggests not using a planner that deals in commission-generating sales but a comprehensive, holistic planner will always deal in life insurance (including annuities), disability insurance and long-term care insurance, all of which are commission based products. For the larger investment portfolios, fee-based is a better choice in most cases. The adviser can "cherry pick" funds from different fund families and can blend them with stocks in a way that is difficult or impossible to do without the advisory designation. It could also be argued that a fee-based planner has more incentive to grow the AUM since that means more money for him (although an ethical planner should always want to manage his client's money for the client's sake and nothing else). On smaller amounts, say, under 100K, it might not make sense to go with fee-based planning since in most cases, the fees exceed what commissions would be for those amounts.
Hope this helps. The bottom line is, find a planner that you are comfortable with on a personal level since the relationship is of utmost importance. And, I might add, unless the product he is recommending is of the fixed or guaranteed interest variety, avoid any adviser that promises you a rate of return in order to get your business. You are basing your professional relationship on a promise that he doesn't have the ability to keep because it's dealing with a situation over which he has NO control.

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1983 M-B 240D-Gone too.
1976 M-B 300D-Departed.

"Good" is the worst enemy of "Great".

Paul, bonds seem a lot more volatile to me than I used to think they were. You apparently don't agree with this assessment. I have been moving more of my assets into income-producing, equity investments in the last few years. I suppose that these would fall between pure equity plays and bonds in terms af volatility. So far this has worked very well for me.

Are you strictly investing in mutual funds? I don't have any funds in my taxable accounts because I can't control the tax liability or even predict it when somebody else is calling the shots. I only have mutual funds in my tax deferred accounts. Is this true for you, too?

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" We have nothing to fear but the main stream media itself . . . ."- Adapted from Franklin D Roosevelt for the 21st century

OBK #55

1998 Lincoln Continental - Sold
Max 1984 300TD 285,000 miles - Sold
The Dee8gonator 1987 560SEC 196,000 miles - Sold
Orgasmatron - 2006 CLS500 90,000 miles
2002 C320 Wagon 122,000 miles
2016 AMG GTS 12,000 miles

BTW, my sister in a stock broker (AKA financial advisor) and they are rapidly moving in the direction of fee-based, managed accounts. I think they charge between 1 1/2 and 2% on those accounts. She gives me good advice sometimes, but I don't have an account with her. Using a broker in your own family is a bit like lending money to family members or discussing religion and politics at family dinners.

__________________
" We have nothing to fear but the main stream media itself . . . ."- Adapted from Franklin D Roosevelt for the 21st century

OBK #55

1998 Lincoln Continental - Sold
Max 1984 300TD 285,000 miles - Sold
The Dee8gonator 1987 560SEC 196,000 miles - Sold
Orgasmatron - 2006 CLS500 90,000 miles
2002 C320 Wagon 122,000 miles
2016 AMG GTS 12,000 miles

Historically speaking, bonds have less volatility than equities (excluding junk bonds). Bonds and stocks tend to move in opposite directions, so you need bonds in your portfolio to provide a counterweight. The idea is to spread your eggs among several baskets in order to increase your return and reduce your risk.

One good way to invest in bonds is to go with Ginna Mae's (GNMA) bonds. They have very little volatililty and are essentially backed by the federal government (although not technically).

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Paul S.

2001 E430, Bourdeaux Red, Oyster interior.
79,200 miles.

1973 280SE 4.5, 170,000 miles. 568 Signal Red, Black MB Tex. "The Red Baron".

Yes, I invest strictly in mutual funds, in both my taxable and IRA / 401K accounts.

As I mentioned before, I invest (mainly) in index funds, which are incredibly tax efficient. Since an index fund buys a market sector, there is very little trading going on, so little taxable events.

One way to control when a fund buys and sells is to buy spiders.

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Paul S.

2001 E430, Bourdeaux Red, Oyster interior.
79,200 miles.

1973 280SE 4.5, 170,000 miles. 568 Signal Red, Black MB Tex. "The Red Baron".

One thing that I seem to have a problem with,,,, Say I have $500K to invest,,, that is my money that I earned. The advisor wants to charge 1 1/2 % to manage the money. OK,,, the market drops and they get their 1 1/2 %. The market goes up they get their 1 1/2 %. In my mind they should get 1 1/2 % of any profit you might make while in their trust. I just have a hard time paying for failure. Am I wrong ?

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95 SL500 Smoke Silver, Parchment 64K
07 E350 4matic Station Wagon White 34K
02 E320 4Matic Silver/grey 80K
05 F150 Silver 44K

Of course not. No one wants to pay for failure Pete. But don't you agree it is impossible for anyone to control performance results to a degree great enough to be able to be blamed for "failure", which of course means different things to differrent people.
Failure to ...preserve capital?, beat market indices?, predict interest rate adjustments?, etc,.
An investment advisor is required to evauate your risk tolerance and other factors and invest or make recommendations accordingly. Most do this. A few don't.

Pete. There's no really good definitive response to your question but maybe I can shed some light on it for you.
The first point is one of sheer numbers. A $500K account that earned 10% (pretty good) and paying 1.5% would earn the adviser $750 (gross). That's annually. When you figure in overhead for a financial services office you're lucky to net half. So to net minimum wage, the adviser would have to experience $1.4M growth in his AUM every year. At a realistic 8% growth, he would need nearly $18M in AUM to achieve this. And let me tell you, people don't get into the business to struggle, prospect, work long hours and meet compliance, education and testing requirements to make minimum wage. And $18M in AUM is a pretty good number for one adviser and one that generally takes years to amass.
As far as not paying for failure, I agree that better advisers will manage your money better and make more profitable decisions than poorer ones. Their compensation is higher as a result of two things: Higher AUM due to more growth and glowing recommendations from satisfied clients which leads to more clients and higher AUM. However, nobody can control or predict the wonderful world of finance with accuracy and the markets are going to do what they dang well please. To consider a market fluctuation
"failure" on the part of the adviser isn't proper. (That's like getting a haircut and walking outside in a windstorm, then coming back an hour later and demanding the barber fix it for free or give your money back.) And, as mentioned in an earlier post, I am dead-set against an adviser who bases his practice on promises of returns. One thing that hasn't been mentioned is the fact that you are free to negotiate the fees with the adviser and do some comparison shopping in that regard. And, I don't think you'll get a single taker, but there's nothing preventing you from an agreement based on performance of the portfolio. You are always free to cut your own hair, too.
Chuck.

__________________
1983 M-B 240D-Gone too.
1976 M-B 300D-Departed.

"Good" is the worst enemy of "Great".

Well said.