There are statistics I’ve seen that say people using a financial planner have more money than those who don’t. IMO it’s for the same reason some use a tax preparer even when their taxes are simple; it’s because they are terrified of things they don’t understand. Many won’t save without someone pushing them to do the right thing. So for those folks I think 1% is fair up to a point, but fees should shrink as assets increase. An hourly advisor is great but someone with little or no money to manage isn’t going to put out several hundred dollars or more for the advice. You have to be mindful of the fact that most people aren’t money nerds like we HD’ers.
Tax planning is the part of retirement that can get complex. I would think a good CPA paid hourly could be worthwhile for many. Percentage of assets to a “financial advisor”? No way. Never.
I felt a need to provide a resource to my wife if I should pass or become incapacitated. She has no desire or training in investments. The time to make this decision is before the event so I began my process. I explored several brokers and went to a course at a local community college sponsored by one. Our theories were aligned and a meeting was set up with me and my wife.
I then began the negotiation with the advisor. Why does it have to be 1%? So we arrived at a different solution. I pay 0.6% of “specific” assets that ends up being less than 0.1% annually. I continue to manage the portfolio but I discuss major moves periodically. He reaches out to me when he sees an opportunity or potential issue. Our understanding is the fee will increase as my capacity decreases.
Let’s do some high-level math – 1% of AUM is an absurd expense with no tie to value created and no rational explanation. Think about it, if my Assets increase by 5% in any given year, taxes eat up roughly 1% those gains, inflation another 2% of those gains, providing me with a 2% return. Guess what, for the grueling labor involved in managing my money, my friendly financial planner takes 50% (or the 1% of 2% return) of my return with no risk, only profit. This single expense may be the single largest impediment to a secure retirement!
There are statistics I’ve seen that say people using a financial planner have more money than those who don’t. IMO it’s for the same reason some use a tax preparer even when their taxes are simple; it’s because they are terrified of things they don’t understand. Many won’t save without someone pushing them to do the right thing. So for those folks I think 1% is fair up to a point, but fees should shrink as assets increase. An hourly advisor is great but someone with little or no money to manage isn’t going to put out several hundred dollars or more for the advice. You have to be mindful of the fact that most people aren’t money nerds like we HD’ers.
Tax planning is the part of retirement that can get complex. I would think a good CPA paid hourly could be worthwhile for many. Percentage of assets to a “financial advisor”? No way. Never.
I felt a need to provide a resource to my wife if I should pass or become incapacitated. She has no desire or training in investments. The time to make this decision is before the event so I began my process. I explored several brokers and went to a course at a local community college sponsored by one. Our theories were aligned and a meeting was set up with me and my wife.
I then began the negotiation with the advisor. Why does it have to be 1%? So we arrived at a different solution. I pay 0.6% of “specific” assets that ends up being less than 0.1% annually. I continue to manage the portfolio but I discuss major moves periodically. He reaches out to me when he sees an opportunity or potential issue. Our understanding is the fee will increase as my capacity decreases.
No.
Let’s do some high-level math – 1% of AUM is an absurd expense with no tie to value created and no rational explanation. Think about it, if my Assets increase by 5% in any given year, taxes eat up roughly 1% those gains, inflation another 2% of those gains, providing me with a 2% return. Guess what, for the grueling labor involved in managing my money, my friendly financial planner takes 50% (or the 1% of 2% return) of my return with no risk, only profit. This single expense may be the single largest impediment to a secure retirement!