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My husband and I are considering working with a firm that will develop a strategic financial masterplan that will include tax strategies, Roth IRA conversions, estate planning, charitable giving and gifting among other things . We are also talking with an advisor who invests in Dimensional Funds. This is a big change for us currently investing in individual stocks, bonds and mutual/ETF funds. We have worked with individual CFPs who claim they offer these services but rarely do they provide comprehensive financial strategies and the main focus is on the portfolio performance. We have a Trust and our taxes are pretty straightforward. What is your experience working with an all inclusive team of advisors and using mostly funds for the investment piece of the plan?
Couple of sources of interest.
https://www.etf.com/search?gq=dimensional+funds
The other is https://www.ifa.com/search?q=dfa%20funds
With IFA, you need to agree to the questions at the bottom to proceed on the site. Mark Hebner, the CEO, likes DFA funds a lot.
I am a longtime index investor and totally happy to get what the market gives me, without adviser fees. I use treasuries, TIPS, and CDs for fixed income and have accounts at Fidelity (without advisory services).
I seriously considered using a local advisory company that I trust, which is the first and most important criteria for an adviser. However AUM fee was .8%. When I multiplied that by our assets, I quickly changed my mind.
Friend told me recently he is paying .8% on all assets. The AUM fee model should be dead and buried
I have been with Dimensional Funds since 2006. I used an advisor in Dallas in person and after retirement in 2008 and moving I switched to an on line advisor who was cheaper. Best decision I ever made. The Funds are invested using a very solid approach and they screen advisors to try to avoid lots of switching. I don’t have them do anything other than rebalance yearly between my existing funds. My Dallas advisor did initial planning. I brother in law started using a Dimensional Fund advisor when he was unhappy with his Fidelity group. All have been conservative and never push any other product.
Do you pay an AUM fee? If so, how much? Thanks
I have used a Dimensional focused advisor for about 15 years. I approached them because I liked the Dimensional concept (Merton, French and the group are pretty smart). I negotiated a hybrid fee arrangement with the firm. I pay them an AUM fee on the initial Dimensional funds I purchased and the growth of those specific funds. He helped me manage the other non Dimensional assets within this fee. Over the years this has worked well. With the advent of Dimensional ETF’s, you don’t need to go with a specific advisor to gain their advantages.
No experience working with advisors, very curious what they’re charging for the “all-inclusive” approach. My experience with all-inclusive is that it tends to mean getting charged for everything whether or not there’s real value in the service.
Does this firm have an assortment of professionals that handle all of these different tasks? A CFP doing estate planning and tax planning isn’t as valuable as a CPA and a lawyer doing the things they specialize in.
Agree a CFP has some knowledge and insight into tax and estate planning but an attorney and CPA is required to draft documents and prepare taxes. The firm I’m considering is an advisory partnership between a Client, Fiduciary, Attorney and CPA. The fees range between .5-1% of the value of the portfolio. I don’t have an issue paying for professional services. I’m knowledgeable about investing, estate planning etc. but I’m not an expert on these services. Others are very comfortable managing their own business affairs but I find value and peace of mind working with an experienced professional.
Multiply your portfolio by .75% and then by 30 (years), and then see how you feel about the fee. Add the lost compounding for extra credit.
That would be the minimum expenses. As the portfolio should be growing, the expenses/fees would be also growing.
True. And 30 years is also a minimum. I took early retirement 25 years ago, and could easily last another 10 or 15.
I am always wary when an advisor ‘recommends’ a particular brand of funds vs type of index. These funds as already mentioned have somewhat higher fees and I’m not sure the performance justifies the added costs. Sometimes keeping things simple is the best strategy. I have a few advisory firms itching to ‘manage my assets’ , but I’m always wondering why didn’t you call me when I had a 10th of the assets I have now, that’s when I would have really needed the guidance.
I’d just rethink investing in those funds vs a broader market index aligned with your goals.
Hi Jane,
It sounds like you and and your husband have lived below your means and saved well. Those are great financial habits.
I am currently reading Ben Carlson’s 2015 book, A Wealth of Common Sense: Why Simplicity Trumps Complexity in Any Investment Plan. This book reinforces the 20+ other financial books I have read since retiring from a full time accounting/tax career in a local CPA firm a few years ago. A early key takeaway of Carlson that applies to me in aces is –
There are many lessons you can learn from the some of the greatest investors of all-time—patience, simplicity, discipline—but that doesn’t mean you can expect to invest just like your favorite billionaire. Understand your own limitations and never try to complicate the investment process.
I am striving to understand my own financial limitations, decision weaknesses and flaws and to weed out my bad financial behaviors and simplify my financial matters and decisions for those who have to clean up any financial mess I may leave behind. That is the criteria I am using in deciding when or if to hire additional professional legal and investment advisors.
Best, Bill
Thanks for the insightful post and reference to Ben Carlson’s book.
Aside from a few remaining shares of my former employer’s stock, all my investments are in mutual funds, mostly index funds. I am my own advisor, except that every few years I have a fee-only planner run the numbers for me. I consider AUM fees daylight robbery.
The funds themselves have somewhat higher cost than typical index funds. I would be wary of switchilng to those funds, expecially with any after tax monies to avoid a large capital gains tax. Unfortunately the long term planning always needs to be re-analyzsed with seemingly yearly tax and law changes. Good luck