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I met with a Vice President of Fisher Investments, a very large and very well-advertised fee-only investment advisory firm, to see if they would be a good fit to manage my portfolio. It turns out they weren’t, and after they asked why, this was my reply:
Frank,
Thanks for taking the time to meet with me to explain how Fisher Investments works.
I respect you for asking for feedback. And since you asked:
1. I’m not a fan of the fee structure:
-Its size: Paying you $70,000 a year to manage my portfolio seems like an awful lot of money. I realize that it is based on incentivizing you to grow my portfolio. While I understand the idea that you will provide such superior returns as to make it appear insignificant, I still can’t wrap my mind around paying you more money than the average US worker is paid ($66,622). I don’t think of myself as a Communist, but there must be some upper bounds.
-Its calculation: The straight percentage of assets under management model seems arbitrary. When I use a CPA to file my taxes, he doesn’t base his fees on my wealth, and neither does my maid or my Realtor®. Well, maybe not the latter, but I’m not sure you want to be placed in the same category as my Realtor®.
I do understand the 1%+ fee is industry standard, though it reminds me of my Realtor®, as she gets paid a percentage that has somehow become the norm and gets paid it irrespective of performance.
2. I’d rather not own (more) individual stocks:
-The tax headache: You mentioned that you will invest my money in individual stocks. After almost 30 years of owning individual stocks, I don’t want more stocks, I want less. Transposing my 1099-B data into TurboTax is as complicated as it is insufferable. For example:
I have just finished filing my 2024 taxes, and they were greatly complicated by sales of a few shares of Solventum (SOLV), which was spun off from MMM on April 1, 2024. I purchased the shares of MMM so long ago that it occurred in another century, but Charles Schwab has classified part of the sale as Short Term (Box B) and part as Long Term (Box D). Why? I have no idea and don’t have the energy to fight it. It’s not the first time they screwed this up and they’re not the only one.
– In 2023, Charles Schwab purchased TD Ameritrade and decided to change my account over on October 1, 2023. I think they chose this date specifically so I would now have two 1099-DIV, INC, and Bs to file. They could have changed over on, say . . . Jan 01, 2024, but I have a feeling they didn’t because they cared more about their fiscal year issues than my carpal tunnel issues. Oh yeah, since I know you like to move your clients’ accounts over to Schwab, can you ask that they start estimating my “Est. Annual Income($)” accurately by including dividends from my mutual funds? I spent most of the first part of 2024 getting them to include income from my CDs (<1 year), CEFs, JWN, and MAR, but I guess they don’t want to make the estimate too accurate.
3. The resulting proxies: I know that I don’t need to vote each and every one received, but if I don’t, I feel like I’m letting someone down – I just can’t help myself.
4. The Performance: I read Ken Fisher’s column in Forbes for many years and know that he always measured himself vs. the MSCI World index. While through Dec 31, 2024, his 10-year return (10.9%) certainly beats the MSCI World (9.9%), it pales in comparison to the S&P 500 (13.14%). Please don’t take it personally, as it’s an issue I faced, and after the chronic underperformance of my portfolio, I decided to measure it against the S&P 500 Value Index (7.4%).
Thanks again,
Mike
As I approached retirement 10 years ago, Wells Fargo was my bank so I figured that I would use their investment arm to manage a portion of my money for a 1% fee. I planned to check their results against mine for a year to see if they performed any better. Well. I handed over $1million. Within hours they showed me the 30 funds into which they distributed my money. How can that be anything but cookie cutter? My 2 advisers were really eager to get me invested into a company called Four Square(?), one that was completely computer-driven and claimed to have never lost money, even during the recession of 2008. Shortly thereafter, the company was found to be fraudulent. So much for their expertise. I was out of there pronto.
Richard Stauffer, your experience and mine confirm that Wells Fargo is the last institution an investor should ask for financial advice.
Amen to that. Sadly, if the past is any indicator, they should just about be due for another episode of shootings themselves in the foot via some form of tomfoolery.
I also met with a Vice President of Fisher Investments, about 10 years ago. Like you I decided it wasn’t a good fit.
My interest was to simplify things for my spouse in the event of my passing. I concluded that an all-stock portfolio could add unnecessary complication. I did balk at their annual fee. My portfolio included ETFs, some older mutual funds and individual stocks. The performance had been very good.
I concluded that to streamline I could simply move everything to a Vanguard Target Date Fund.
Investing has never been easier or cheaper. Yet people still pay ridiculous fees. 60% SCHB, 20% VXUS, 10% T-bills, 10% individual stocks. That is it.
40% SCHD or VYM, 40% VOO, 20% VMFXX… I know someone will say: Where is the international, or… Where are the bonds. Well, I have no answer except – It’s my party and I do what I want to.
If you have a large enough asset base with a large mutual fund family they will likely provide you with a ‘financial plan’ for free.
You can follow it. Or not.
If some people feel uncomfortable managing their own financial assets, a financial advisor is likely a very good idea.
You may get what you PAY for.
Winston Smith, have you asked a large mutual fund family to do this? Any details about the process and product would be appreciated.
Thanks Mike for this post. Certainly, a helpful real world example about active investing and the claims to justify the same at a steep fee.
I have been a fan of JL Collins for years, with his “Simple path to Wealth.” Also watched a recent documentary “Tune out the Noise.” This should leave little doubt about S&P500 passive investing. https://www.youtube.com/watch?v=T98825bzcKw
I went with Fisher in 2002 following my first retirement. After receiving evasive and arguably arrogant answers to questions at their annual meetings, I became disenchanted and moved to DFA. Fortunately for me that was a short time before the Great Recession, which Ken’s touted “sea change” forecasting ability missed. Turned out the all-stock or all-cash portfolio model wasn’t such a good one. The result for his investors was massive losses and subsequent lawsuits for fiduciary failure.
I spent my career in the investment business and our fees were even higher. The promise was always “better performance,” but better than what? As far as I could tell, our performance was average at best. So what exactly is a client paying for? Not, apparently, superior performance. A dedicated a/c exec? That’s nice, but so what? Estate planning? Maybe, but they don’t draft documents which you will have to pay someone else to do, no matter how much advice they give you. In the end, the answer seemed to be that the primary service we provided was to prevent our clients from making poor decisions, especially in times of market turmoil. Not a bad service, but one that can be easily duplicated for a lot less cost if we’re willing to try.
Funny this should pop up just as my wife and I ( early 70s) are hiring an advisor for 0.9% . They dont require all our assets and will also track our independent accounts. We also get tax and estate planning advice. The 0.9% is less than most active MFs, and while obviously a drag over years, at our ages is less than an issue. I think SP500 index funds are headed for a world of hurt and for the value and international stocks that have done well this year there is a better case for active mangement.
while I am in excellent health, my wife is 4 years younger, will probably outlive me and wants nothing to do with our investments.
Concerned, well, 0.9% is better than 1.0+%. Who’s the lucky advisor?
As you are considering a financial planner you may find useful an article that Mike Piper referenced in his 4/14/25 Oblivious Investor newsletter. Mr. Piper has a recommended reading list and he had a link to the writing of Meg Bartelt on the factors to consider to see if you and a financial planner are a good fit.
https://flowfp.com/get-most-out-of-financial-planner/
Adam Grossman also has a weekly newsletter that you can sign up for at his Mayport website and a lot good articles on his blog about planning matters that may concern you –
https://www.mayport.com/blog/
I have never favored financial planners that bill on a AUM model. That position likely comes from my decades of practice in tax as a CPA where the billing is typically based on hours. For most tax matters a CPA’s fees are governed by § 10.27 Fees of IRS circular 230. For CPAs billing on an hourly base is meant to limit potential conflicts of interest. For financial planners I think the key to limiting conflicts of interest is for the planner to work exclusively as a fiduciary which serves the same purpose to put the interests of client first.
https://www.irs.gov/pub/irs-pdf/pcir230.pdf
I hope these sources help.
Best, Bill
Active management has been proved over time to not be any better than passive investing. Just saying. Look it up
Boomerst3, as Samuel Johnson once said, “It was the triumph of hope over experience.”
After spending an afternoon with the man himself (Ken Fisher) on a hike in the woods, I decided that investing with him wasn’t a good idea. I will spare you the details. They say self-interest is good but I felt he takes it to extremes.
haliday11, how about a couple of details? I know that Ken loves trees almost as much as he loves money.
Your statements on fee structure are spot on. I’ve often used the CPA analogy myself. I am surprised the AUM model has remained for so long. Or maybe I am not. It is so lucrative. Even Vanguard has adopted it, though their fees are far less than the 1%. I can’t imagine it takes 20x the hours to manage a $20M portfolio as a $1M portfolio. Great post.
This letter to Fisher had me laughing out loud, especially #4. Like everyone, I have seen their ads and wondered what they offer to people who have managed their own money for years. Now I know.
Fisher essentially pays for all that advertising with client fees. They do lots of TV advertising reaching audiences for which anything on TV provides instant credibility (for example my wife’s cousin who put some money with them). I’ve seen anecdotal reports from Fisher clients touting the performance which comes from Fisher internal reporting, however the performance data has never been independently confirmed to my knowledge. I’d also be wary of thinking of Fisher as much than a wealth manager with limited financial planning-from all reports I’ve seen, they manage wealth first. As noted by another commenter, the AUM model may be cost effective for investable assets <500K-1M, but there are other more reasonable fee models which actually put financial planning first and investment management second, usually using passive index funds. Those models including an annual flat fee, hourly fees and advice only models. We currently 7400/year flat fee for retirement specialist financial planner which is a fee level far less than 1%. The AUM model has an inherent conflict at its core in that the focus is to get as many assets under management and keep up them there. This focus can influence many aspects of advice such as Social Security claiming and buying annuities (unless of course the AUM advisor also sells the products, in which case they make a commission.) I suppose Fisher might actually some folks, but IMO they should not be the first choice in the changing field of financial advice which is trending away from AUM and toward professional independent advisors whose fees are based on professional services delivered
you need to do some editing/proofreading
Mike,
You’re assessment. of the fee structure is spot on.
I would just add the 1% may actually not be bad for a small account. But a 10 million dollar account is just not 10 times the work of a 1 million dollar account. At least as the investment part of the service goes you might buy a 100 shares of particular stock for the $1 M account and 1000 shares for the $10 M account. The work is in the choice and timing of the companies to invest in not so much the quantity of shares.
Basically economies of scale should apply here. Maybe the larger account should have a fee of 5 times the smaller account- but 10 times sure does feel excessive.
As far as realtors go I think the same thing applies. I live in California with houses typically selling for a 1.5 million dollars. This is just an average family home.
Wirh a 3% commission that would generate $45,000. In many other parts of the country the same average home would sell for 500,000 and generate a $15,000 .commission. No wonder they’re more real estate agents here in California than homes for Sale.
Most commissions are 5-6%, not 3%. 3% is low
Mike, do you know what Fisher uses for his 10-year return that gave a 10.9% return? I’m curious what makes up his basket for the comparison. Wonder what kind of turnover he has to do to try to beat an index?
Olin, here’s the link to his “performance.” Reviewing it made me realize that it’s unaudited, which seems a little hinky. Either way, his turnover becomes your tax liability.
Thanks for the funny hinky clip! They are very secretive what goes into their funds, so there isn’t really a way to compare against their benchmark; just the hinky performance and you have to rely on their word.
I have read several of Ken’s books, only because he is widely known. I’d be curious to know how many of their client’s now have a yacht that didn’t have one before becoming a client.
Were there additional questions you asked but didn’t share here?
Ask for the year by year returns. When the market goes down, their returns go down, and you still pay the annual fee. Their portfolio of course goes has to go down when the market does, unless they sell beforehand, which they never have done. You will see that in their annual returns, not the cumulative returns. Which is 1 of the reasons why following index funds/ETFs is better, IMO.
Question, is the AUM fee for Fisher truly 1%+, and do they always use individual stocks? Thank you
Mom & Dad Schneider, In regards to his fee, I was being a little generous, it’s actually a little more than 1% – see this link. When Frank “PowerPointed” me, he showed a slide that mentioned that Fisher uses 90% individual stocks. I couldn’t find anything on the internet that explicitly confirms this, but if you’ve ever read a column by the eponymous founder, you’d realize he really likes individual stocks – I think it’s part of the secret sauce.
When we were younger and focused on family and career, we used Fisher Investments. At the time, we simply didn’t have the confidence to handle the emotional ups and downs of investing, especially coming from a modest background and having experienced heavy losses during the Tech Bubble due to overconfidence.
For us, the fees were worth it. Our financial advisor helped us stay disciplined during the 2008 financial crisis and other market corrections, and our returns (net of fees) slightly outperformed the S&P 500. Our savings discipline coupled with their services helped us quite a bit.
Over the years, Fisher Investments also helped us educate ourselves through books, meetings, newsletters, and other resources. We discovered investors like Paul Merriman, Bill Bernstein, and Larry Swedroe, and gradually developed our own investment framework. More importantly, we matured and shifted our focus toward planning and asset management.
Eventually, we reached a point where we separated from Fisher Investments — and to their credit, they handled it professionally and helpfully, despite losing our AUM fees. Today, we manage our own assets investing primarily in low-cost ETFs and TIPS ladders. We use Pralana for our scenario planning.
I hope we’ve done enough to prepare for our retirement.
Fisher says they only do better when you do better, but they don’t say better than what!
It means you both make more money when the assets go up, so they do better when you do better. But you still pay the fees when the market plunges, but the fee will be less
If you had fractional shares of Solventum from the spin off from MMM and received cash instead of fractional shares of Solventum, that sale would be a short-term or long-term capital gain based on how long you held your 3M shares. You said you bought before 2000 so I would suspect that it is possible that your broker may have incorrectly used the spin off date as the date acquired as the sale should be classified long term as you noted.
If the sale with the wrong holding period is less than the $69.10 FMV of one share of Solventum on the spin off date of 4/1/2024 I would guess the error occurred on just the fractional share. If that was your situation for such a small sale I also would have ignored the de minimis error.
If the holding period date error was a substantial amount for the sale of Solventum then the broker could have made an error recording the date acquired for the additional shares you received from MMM from their 9/29/2003 share 2 for 1 split.
If you have changed stock brokers the error could have been caused by dates and basis not transferring from the old broker to or not being accurately recorded by your new broker.
I have seen occasions when the broker does not have good information that they will sometimes leave the date acquired blank and then when a sale occurs the broker’s default is to drop the transaction into the short term bucket no matter how long it has been held at that broker.
For those holding investments in a taxable account it is a good practice to review your broker statement for accurate date(s) acquired and basis before a sale occurs to avoid the headache Michael had. A spin off basis allocation worksheet or example is often on the parent corporation’s website for you to check to determine if the broker has appropriately allocated the the basis between the original stock and the spin off stock.
Bill this is an excellent explanation of why I only buy only mutual funds/ETFs.
A big advantage of ETFs compared to mutual funds is the tax efficiency of ETFs. With funds, you get lots more taxes
William Perry, thanks for the capital gains primer. I think the issue has to do with Charles Schwab buying out TD Ameritrade, and that my shares of MMM were purchased so long ago, brokerages did not keep track of a stock’s cost basis.
Bill, very good overview and comprehensive explanation. These transactions can be vexatious for investors. The explanations on brokers statements are often poorly worded.
Marjorie, I love the word vexatious. I’ve simply got to use it more because we seem to live in, at least for me, vexatious times.
Thank you, Patrick. I love words—and don’t some sound just like their explanation and the feelings they evoke.
I’m so sick of those Fisher ads in my New York Times morning newsletter. “When to Retire: a Guide for Investors with $1 Million” Like I want to pay them $10K a year for each million.
I get Fisher Investments brochures in my mailbox with aggravating regularity. I have no interest in working with anybody who has to advertise that hard — and pay for it with my fees.
I get Fisher’s big, white, heavy envelopes regularly as well. I grab them from the mailbox and drop them off in my garbage can on the way back to the house. It’s actually quite efficient.
I used to get those envelopes too Mike. One time I sent mine back and replied I wasn’t interested in investing with someone who looked like Anthony Weiner, the former disgraced NYC politician. I’ve never received a mailing since.
Randy Dobkin, There’s little doubt that a fair amount of every client’s fee goes to advertising.
You can find out how many millions they spend on advertising. It’s very similar to Morgan and Morgan. They grew huge because they spend so much money on advertising.
Nice job Mike! I did a little internet search on those guys for a friend of mine. $65k per year is insane.
Michael, can you provide a little more info on what they provide for the fee? Is it comprehensive financial planning (retirement, taxes, estate, insurance, income, …), or just wealth management?
Rick Connor, I think they do it all. This link provides some more detail.
They do not do it all and provide the comprehensive financial planning referred to here. They provide lots of info, and have many client seminars, but as it says in the link, they refer you to other experts in the tax and estate planning fields. Your fee is only for portfolio management and the information they provide. If you feel you need a manager for your portfolio, they will do that for you and you will get results a little better than the MSCI over time
I agree with you, which is why I only use advisors to run the numbers, but did you get a reply?
mytimetotravel, He thanked me for the feedback and mentioned, “Let us know if you ever want to revisit.” Very professional.
I’m sure one could (and am guessing you probably did) uncover several of these reasons with a few minutes of internet research or a few questions via email, rather than spending the time to meet. Did you do the meeting to seriously evaluate them as a potential manager, or were you hoping to learn something else, and did you?
Michael1, I meet with potential money managers every now and again, hoping to be convinced and get a nugget of two. Not sure I learned anything this time around.
Makes sense. I keep suggesting we accept the various steak dinner invitations – of course resolving beforehand not to sign up – but my wife always vetoes.
We did it once for the perk—never again. Time is money, as they say, and this one was expensive.
Smart woman. My wife is the same. We do the same for time share and attorney free meals
They should hook up with the time share peeps for the sake of efficiency.