5 Hidden Costs of Fee-Only Advisors
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- Опубликовано: 8 июн 2024
- Fee-only financial advisors are fiduciaries. They must make recommendations that are in your best interest. Yet those fee-only advisors who charge a percentage of the assets they manage for you are not conflict-free. In fact, the fee arrangement creates 5 hidden costs that you should be aware of before hiring an advisor.
We'll also talk about a better alternative to a percentage of AUM arrangements.
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While still working as a trial attorney in the securities field, I started writing about personal finance and investing In 2007. In 2013 I started the Doughroller Money Podcast, which has been downloaded millions of times. Today I'm the Deputy Editor of Forbes Advisor, managing a growing team of editors and writers that produce content to help readers make the most of their money.
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Thank you very much. I think PlanVision is now $299.
Thank you so much!
No kidding, I have a FA soliciting me who keeps saying she is a fiduciary. She sells insurance products for commissions, and gets a kickback from a third party money manager if she can talk you into rolling your 401K into them where they charge a 2 percent AUM to put you into proprietary mutual funds. The insurance industry is almost identical to the vacation club industry, absolutely slimy propped up by high commissions and misleading marketing, and protected by powerful trade groups in Washington
@@stephendove2850 💯
Hello Rob. Thanks very much for all you do. What do you think about New Retirement’s flat fee service of 1500 USD a year?
I was a stay at Home mom with no money in my IRA or any savings of my own, which was scary at 53 years of age. Three years ago I got a part time job and save everything I make. After 3 years, I am 56 yo and have put $9,000 in an IRA and $40,000 in my portfolio with CFA, Abby Joseph Cohen. Since the goal of getting a job was to invest for retirement and NOT up my lifestyle, I was able to scale this quickly to $150,000. If I can do this in a year, anyone can.
How and where can i reach her, if you don't mind me asking?
Been debt free for two years thanks to Abby Joseph Cohen Services. So sad to see my friends in their 40s with car loans, mortgages and credit card debt.
Abby Joseph Cohen hooked me up with a late-stage fund that got me in on private shares of some hot companies before they hit the market or blew up. Those investments totally paid off when the companies went public and their stocks shot up. Now, I'm stoked because I'm heading into retirement with almost a million bucks in my portfolio.
Scam
These are bots responding to bots. All a scam.
Heck, I feel like I owe Rob 1% for all his great content/education.
I'm sure he wouldn't mind getting a check :)
After inflation is now 5%. Lol
Oh, he's making plenty off of people watching his RUclips videos!
I’m skeptical of anyone who has their hand in my pocket, even someone who calls themself a “fiduciary”. Tacking that word onto a business card doesn’t magically erase greed.
I agree. I never used a financial advisor.
It's not the greed that gives me pause, but also competence. Just because someone is legally bound to act in your interest, not theirs, doesn't mean they know the best investment or management strategy for you.
I'm a retired stockbroker who currently coaches friends and family pro bono. I preach some of the ideas in this video with everyone. A flat-fee advisor is the ONLY way to go for anyone with more than $100,000 to invest...period. Rob is SPOT ON with this video.
I was paying my guy 1.5% and a $1200 annual fee, he has me in expensive mutual funds and multiple funds. I believe this was to make it look like it was a very confusing account that most would not want to do themselves.
The straw that broke the camel was when I had to lower my distributions below 4% to pay him every year. I didn’t walk away I ran.
Looking back, would you have outperformed with 100% of your equities in an S&P 500 index fund?
That's criminal. Licensed scammers!!
You mean 1.5% of the invested assets plus a $1200 yearly flat fee on top?
That is worse than a a broad daylight robbery.
@@junkabcjunk yes 🤦🏼♂️
They better have been giving you 5% over the S&P 500 to justify it.
I discontinued my relationship with my financial advisor last year for all of the reasons Rob has mentioned in this video. I started to notice a pattern over the years. Every time I suggested any kind of investment that would not have included AUM, my advisor steered me away from it. Case and point. About a year ago I told him that I found a CD offering a 6% APY, and that I was going to pull about $200,000 and make the investment. It was an obvious no brainer that this was a great opportunity, but he tried to steer me away. I stayed my course and closed my accounts with him altogether. I self-manage now and follow smart guys like Rob. Things are going very well and I'm not paying an advisor over the top fees.
Excellent content! I don’t forward many financial videos to my wife. However this one is a must. She’s not “interested” in the details of our retirement investments but I continue to try to pull her in. I asked her to read your book which she did. And at 60 years old she’s learning the basics. Truly appreciate what you do Rob for all of us. Thank you.
Anyone who's not interested in the details of your retirement should also not be interested in benefiting from it in any way.
We just don't live in the same world we once did. Everyone has to get their shit together. 😅
Rob, 2 things, first your video's are a true gift. Second the reason people don't use flat fee advisors is they are impossible to find. I searched all the sites last year trying to find one and could never come up with one who would work with me. I spoke to several who said they can't do business in Minnesota or they are not taking clients etc. Sometimes the "flat fee" advisor ending up wanting to charge 1% AUM Very frusterating.
Rob has no issue finding flat fee advisors.
Definitely check out Robs list of flat fee advisors. I use PlanVision and it is an excellent ultra-low cost solution to get a solid plan in place. This is for investors that want to keep things low cost, simple and are not looking for complex investment planning.
This is true. I finally found a couple in Minnesota but they had very little track record- and they wanted $5,000 minimum for even a fairly simple plan
Same for me. If they can't get a good return on time invested, they will go looking for a bigger fish. Need a free service (social system) so the self-serving money motive goes away. Guess that is why you need to partner with some sort of investors club. AUM is the golden ticket.
@@jdskycaster3576 his list needs updating.
Your insight about conflict of interest hits home. My wife financial advisor told her to take social security at 62. On top of that he bought her a variable annuity with a 7% sales commission, held it for 7 years and bought a new one for the same commission. I finally convinced my wife to change to fee only. Thanks for your content!
Modeling the 1% AUM impact to your annual withdrawal amounts (over 10% in the example) is a VERY effective eye opener. It's an example I've not seen used before. I've cautioned friends & family against AUM and will be pointing some of them to this video.
My biggest issue with the fees was they take one percent of the portfolio. Instead they should take one percent of the annual gains they made for you. That would be a better judge of what they have done for you rather than taking a percentage of the principal you invested initially, that they did nothing to "create".
A lot of people who sign up for AUM firms think that is what is occurring, 1 percent of the gains which is easy to rationalize.
Exactly. Well said!
@@stephendove2850better would be a percentage of the gain above inflation.
Agree. They are leeches.
@Rob Berger. Spot on. Ive been saying this for years (over 4 decades). Once I read Bogles first book and learned about the importance of investing costs, saw the graphs...I said :why pay any amount that I don't need to pay. Go will low costs. I have not used a Flat Fee FP, but I would recommend that for most. My rules: "Money Doesn't Grow on Fees", "Money in Motion Costs Money", "Trust But Verify". Folks, fees really really matter, remember, the fees have to be taken into account for your safe withdrawal rate (they reduce it).
I have a saying too: where there is confusion, there’s profit. It’s usually for the FA.
We went with an AUM advisor in 2008. At the time, I don't even think flat-fee advisors existed (all the financial media was screaming about fee-only AUM). 10 years later, when he raised his rate to 1.8%, we realized we were paying this guy thousands of dollars an hour to do very little. It still burns me all the money we lost, and then it took another 5 years to get out of all the expensive funds we were in (We only finished last year). But you hit the nail on the head, it is hard to write a check for 5 grand.
My dad pays 2% fee to his financial advisor on a 2MM+ portfolio. I’ve forwarded him some of your videos Rob. I probably won’t send him this one, at the end of the day it’s his money to spend how he sees fit. But I appreciate you fighting the good fight and when i retire in 30 years I’ll be better for it!
why wouldn't you send him this video? One of the toughest talks I had with my parents was over their AUM Fee FA. It took multiple conversations over several months to convince them what was actually going on to the point where they felt comfortable firing that FA. You are right, it's your dad's money to spend as he sees fit, that's precisely the point: it's your dad's money, not the FA's. My parents' fiduciary FA had annuities in AUM, and, the FA had not touched their portfolio since it was basically on auto pilot for 5 years except auto monthly withdrawals for monthly income and quarterly for the FA's AUM commission (Fee). They had under $1m AUM, so my position was look at what you are getting for him doing nothing and what you could spend the money on like things you love. Their feeling was the FA saved them when their finances were a mess, which is a problem. It took some convincing to make them realize the FA worked for them not the other way around. 2% AUM commission is ridiculous. Depending on what the FA has done to the AUM portfolio for your dad and what investments are in the AUM portfolio, $40k+/yr AUM commission is obscene. He could be paying $5k-$10k/yr flat-fee or hourly and spend $30k/yr extra at the jiggy bar.
Way too much!! Should be more under1%!!
What a waste of money
I wish schools taught this in schools when was growing up in the 60's and 70's. I can only imagine the amount of money I would have in my accounts now. 🤔
One thing I can't get around is that AUM is calculated on all assets which I have worked hard to accrue over many years. The advisor had nothing to do with growing those assets, yet they start taking a percentage on day one of their contract. It is outrageous! A fairer system would be a fee based on a percent of gains generated, at least for the first year. An alternative might be a very low yearly one time fee plus percent of growth/gains. As it stands now, AUM happens whether the investor gains or loses. Another point is to look at the fees paid as an expense just like utilities or insurance which are paid in after tax dollars. I make it part of my budget so I can see how it is affecting my lifestyle. I want to stay within my budget without tapping into my investments. That is impossible with the AUM fee structure.
If my portfolio is 60% stocks and 40% fixed, why would I pay 1% on the 40% that just sits there?
Well done Rob. As consumers we need much more content like this-if the AUM model is the elephant, eating it one bite at a time is the way to go. As a client of a flat fee only advisor of seven years and counting, who is a retirement planner first and investment manager second (and optionally), I would suggest that some of the best money we ever spent was getting a comprehensive financial plan (and if someone wants to stop there that's fine). Following that, we hired our FA for ongoing planning advice and eventually investment management in low cost index funds/ETFs and TIPs. The ongoing advice in pre and early retirement has been very helpful and gets my wife and I on the same page-and, it's my belief the planning advice saves money in tax efficiencies (and in other ways) and helps manage risks.
"Where are the customer's yachts?" is a great book. Published almost 100 years ago and still pertinent.
AGREE, I listened to it on audible last year... Human greed is eternal ...
Pub date is 2006.
@i-postm4943 Originally published 1940 & republished many times. The title is from an event that's purportedly from the late 1800's.
@@DrBilly90210 I look forward to reading or listening to the book. Thanks for reminding me it's a thing.
Great topic. Fees, upfront and hidden, are a mystery to most investors. Its nice to have those fees summarized and confirmed in one video.
Keeping in mind, of course, who is assuming 100% of the risk, no matter what: you are. There's no guarantees of performance of any kind, but they'll take their money from whatever you have left. Nice work if you can get it.
Its downright scary that people don’t get this.
Somewhere, some VP at MerrilLynch is sitting at his desk watching this video… sweating profusely.
As they SHOULD BE ! 🤣
Rob, Thanks for the great video. You can also add in that some firms will place your money into their own ETFs, essentially collecting double fees! When I complained they started to refund the fee for their funds, but I opted to manage my own money after a couple of years,
Thank you Rob. Have been learning a ton this year after inheriting some money.. I was very afraid to Fail and mess that up for my family . There was a strong urge to outsource that possible failure to someone else !! Came very close to AUM model but it just didn't make sense to this new investor. You just clarified for me and my family what I kind of sensed about AUM charges just not being customer friendly. Thanks for helping us, and for being evidence based / practical in your teaching. BTW the inherited portfolio has 25 plus mutual funds ... A Boglehad called it a "mutual fund of mutual funds" ! high turnover in the taxable accont etc... nightmare... Loved your reaction to the messages you receive regarding spectacularly overcomplicated portfolios. I STRONGLY believe that complication adds to the average person thinking they need professional help.
I feel your pain. I inherited a portfolio with hundreds of individual stocks. Been working the last 2 years on understanding what I own and slowly simplifying.
A very thought-provoking video and it hits close to home for so many, myself included!
And worth forwarding to anyone who is receptive to change...cheers!
Thank you Rob. This is the video I was hoping for.
THANK YOU!!
I have often looked at using a Vanguard financial advisor or listened to radio ads while traveling and thought about a fiduciary. Now, I believe that doing it on my own for the past 10 years was the right decision. Thanks again! I just hadn’t thought about it in this context, but now it makes sense.
Great discussion, the accumulation of AUM fees over the life of a portfolio is eye watering. I have a friend whose guy (last name James) has him in 18 different investments on a $1.4M portfolio. That’s over 1k a month for the life of the portfolio ! No way I giving away that kind of money for elusive “outperformance”
A person I know has an advisor with a large company that starts with F who said proudly that the advisor has him in 22 funds to diversify him. I agree with another comment that complexity increases perceived value.
Rob, you are a blessing to many of us. Love learning from you!
Thanks for this video. Makes a lot of sense to me. I'm about 3 years away from retiring, and I'm looking around for help. So ,...for me very timely. Enjoy the wisdom, and the common sense.
Great video, just put your money in low cost ETFs, do a 60/40 split if you are not sure what to do. 70/30 if you are under 50 years old. You'll be fine.
Great video and helpful information. Best channel on YT. Cheers.
"Fiduciary" is a synonym for "Bullshite". I received a letter from the advisor stating in the first paragraph they were a fiduciary and the rest of the two-page letter noted all the ways that they would likely act in the own interest when managing my account. Finally after a few more years of this, I left them. No manager ever again, sorry I ever had them and happily moving on alone.
Basically, the financial advisor’s service must outperform the general market by whatever fee they charge plus the additional higher expense ratios of the investments they select, just in order to get an equal result in the end.
60% VOO, 35% BND, 5% cash is pretty easy, and works well for the vast majority of us.
Unwinding a overly complex portfolio can take many years. I used Vanguard advisors to help with this. For me, they took a portfolio with about 30 high cost funds and reduced it to about 15, mostly low cost funds, in 6 years. Should be done completely after one more year. Taxes were higher than I'd have liked the first few years, but they did a good job taking advantage of tax loss harvesting overall. 15 funds is still more complex than I'd like but much better and much less expensive.
Watching your channel gave me the confidence to ditch my big firm AUM adviser at the beginning of this year. The portfolio was not only overly complicated but was not tailored to my financial needs. It was just the cookie cutter portfolio used for everyone in my level of service. But the worst thing was the advisor seemed like he was meeting me for the first time every time we met. There was no long term plan at all, they just plug everyones information (compiled and provided by the Client) into the same monte carlo simulation and that is their “plan”. I remember wondering why every advisor at the firm has a VP title. It’s just a ploy to impress the Clients and has no bearing on the service you receive.
Thank you Rob
Great points. It took a lot of digging around and research to find out exactly what I was paying my advisor. He always make sure that I have a significant amount of cash on the sidelines so he can pull his fees out. he does good work, but I’m really starting to reconsider all of this. Thanks for all the information.
I recently broke away from our investment advisor after 16 years. Rob is right, it is/can be scary. My advice is to continue to educate yourself to push back the fear.
Also, anyone know if the advisor gets his fee before or after the mutual fund fees? And, does the advisor get kickbacks for buying specific funds?
Great Video!
Perfect. Thank you Rob. I wish I could send this to my girlfriend without her biting my head off. Unfortunately, she assess her financial advisors based on how “nice” they are and how quickly they send her own money to her when she requests some.
Great topic! Looking forward to more on the subject. Thanks for sharing!
This is, by far, the best video I have seen concerning the hiring of advisors. I am embarrassed at how many videos I have seen. So far, I have been a DIY investment/retirement guy. At some point I feel it advisable to hire someone to keep up my financial matters, if only to make sure my wife is cared for when I die. This video suggests to me that I hire someone who charges by the hour or per year and not one paid as a percentage of assets.
Excellent common sense financial advice. I wish they would teach this stuff in school.
Great video, the AUM model is indeed insidious, folks are shielded from the true cost to them, they just get statements showing a return and don’t realize their returns have been significantly cut and the dollar amount of these reduced returns over decades of engagement in this model.
9:22 mark, spot on! Great video Rob…
You have illustrated Rob why, if someone feels they want an advisor, Vanguard is an excellent choice because they only charge 0.3% fee for assets under management and they have excellent low cost funds both index and managed. I personally don't like even this amount of fee, but if an investor believes that an advisor is needed on an ongoing basis, then Vanguard has much more reasonable fees than anyone else I've found.
Thank you, Rob. Great points. I will attempt to post a link in the NR group.
I've always been confused about the math of a 4% withdrawal rate combined with 1% AUM. That's like giving up 25% of my income?!?
Out of every four dollars you spent in retirement, one of those dollars would be going to your advisor.
I was thinking the same thing. Crazy amount to pay an advisor. And if the account falls in value they still get the fee.
Fully agree with your views Rob , I can think of 2 exceptions. 1. If you do not have the stomach for the stock market and sells every time the market drops. 2. If you get older and lose your cognitive abilities, especially if your spouse is not close to the details. In these cases, AUM may make sense.
I didn't think about the incentives to keep the assets under management and the possibility that the financial planning advice may be poor compared to a flat fee only advice service. Thanks for sharing.
Another excellent video
Great video Rob. And timely. We have been tryin to figure out who to use after just having an investment firm managing our money for AUM. We don't get any advice on retirement and tax planning which is why we have been trying to figure it out.I like the flat fee advisor idea. Thanks.
Thanks very much for your content.
I recently fired our FA. Their fee was “only” 0.4% AUM but, when looking at a 4% SWR, that would be our biggest expense in retirement. Our portfolio was definitely “over-complicated” - I’m working to untangle this now without blowing up my taxes.
You are right on it Rob. Also, if you are reasonably intelligent, learn, learn to manage your money yourself. Nobody is going to take better care of your money than yourself. Too many greedy hands want to get ahold of it. My 2 cents
Great job discussing the cost of AUM. Many people need tax planning and portfolio, risk management advice and that could also cost several thousand dollars. Additionally, I believe that the AUM can be paid with before tax money. I wonder how these considerations affect the calculation? I’m not an advisor, I am considering which way to go.
Preach Brother @rob_berger!
This issue is the thing that really fires me up...
My mantra is:
Owe Less
Save More
Keep More
Thanks again for a great video, and for all you do for us!
Flat Fee in my opinion is the way to go. I have had both and the service is way better in my case from my flat fee advisor. After two AUM and not getting the service I though I should be getting. I looked at the total picture and all the fees and that didn't sit well with me. Looked at Sara Grillo list and had interviews with 4 different advisors. Very happy with my choice who does it all. You need to educate yourself and yes , I could do it , but I'm retired and rather have someone else keep track of all the changes, the market, the tax laws, etc. .
Its like withholding taxes that come out weekly by biweekly from your paycheck. People dont feel the pain since they never see the $$.
Unfortunately I fell into this trap. I wanted to move my money to save on fees and got talked into AUM by some slick advisor and realized 4 yrs later I was paying even more in fees for worse performance and advice. I even asked if he was a fiduciary and acting in my best interest and was told yes but he knew darn well he was taking advantage of me. These guys prey on the people’s money anxieties and the AUM model should be illegal and the industry better regulated. What other profession does this? I’ve since dropped them and had to unwind everything into a simple low fee ETF portfolio based on some of your other videos. Thanks for getting this out to people. I hope it educates some people how really dumb they are doing this like me.
I was in the same situation for many years but, have since wised up self-manage using Vanguard,TIAA and Firstrade using Empower and E-Money with Mark Zoril.
I’ll tell you what other profession - the vacation club industry.
Realtors fees are another example of a percentage-based fee structure that is good for them and terrible for the clients
HVAC industry is another scam!!
You bet. Realtor commission is outrageous and i used to be a realtor. Such a scam.
All excellent points. I published a book in January about the wealth management industry that advocates transparency and disclosure, among other points. It includes a list of due diligence questions. I suggest adding a sixth reason: 12 (b)1 fees that usually are undisclosed. The book advocates independent investing in index funds and fixed-fee investment planning separate from financial planning, emphasizing risk awareness using Kahneman's Prospect Theory.
Love your videos! This topic drives me NUTS! How can these guys take 1% a year, it's just nuts! Thanks for the advisor list below, I've been meaning to search for it.
I ran a compound interest calculator on a $500k portfolio at 1% versus a low cost index fund portfolio at 0.08 percent for 20 years. $116k lost wealth in the 1% AUM versus $8k in the index fund portfolio 👍
I've been with the very large investment firm for 10 years you may have discussed. I think they started me out at 1.5%. I've not been happy with them for the last couple of years, especially since the markets have been shaky since the pandemic. I think I'm on my 5th "counselor." They always seem to be junior-young types. When I express concerns, I always get the routine placating advice.
At 61 I inherited a large portfolio at Charles Schwab along with a
young financial counselor. Ugh! I always felt like he was patting me on the head and telling me not to worry about it little girl. The fees were ridiculous. I'm doing it on my own now and much happier.
@@zumapuma38 Good for you. That's awesome
so if you hold this perspective, then why are you still with them?
Dear Mr Berger, 1 - Go Buckeyes 2 - if one was too have a lot of money on the sidelines because it doesn't fit in an IRA, how do I estimate taxes on a brokerage account? Specifically dividend growth stocks and etfs
Great video Rob, I have considered a flat-fee financial advisor but I like to manage my own Schwab, Fidelity & a 457 (b) accounts. This last year CD’s were my favorite before I realized my state income taxes went up so now T-bills are my favorite very low risk investments. My 457 has some of the lowest fees for the choices I can make but I still buy stocks that I think are good for paying dividends. I let my spouse manage her own 401k and she just keeps it as a balance blend of stocks & mutual funds.
Good topic. Unfortunately, the people who should hear this truth is not interested enough to learn about it. I see two important points to make about asset managers: If you believe that four percent is what you can take out to make your money last and your asset manager wants one percent, then you just gave away 25% of your spendable money. The other point is that there are target date funds designed to have the same asset allocations that paid asset manager should put you in. With the target date funds, you get the same benefit for free that the asset manager gives you.
People with AUM fee advisors pay the fee to alleviate personal insecurity and to be able to blame someone later when things don’t work out. Personal accountability is tough and requires work.
I think you would the last person I would expect to get a financial advisor!
me too
Great video! Have you done a video addressing the cost of loads and other transaction fees when an AUM advisor constantly buys and sells small amounts of shares in a 15-20 fund portfolio (all of which are funds of the same company, e.g., Columbia)?
If you are paying a % and are in a managed “wrap” account, there should be zero transaction costs
Agree. Flat fee advisor hard to find
What I did was pay 1500 for a plan from a CFP that worked at a company that also offers portfolio management/advice for 1%. I would always recommend getting a plan first as it will open your eyes to a lot things mentioned on this channel. You will then have ammo to ask your prospective portfolio manager before you hand over your hard earned cash.
I never did use their portfolio management service because I still cant understand why you would give someone a % when the work they do is not likely proportional to the amount of assets under management (almost but not quite as bad as real-estate agents). I would also argue it gets easier for them when you have more money. I could almost go along with a nominal flat fee + a percentage of "gains". Also can't say I like hourly rates either until you REALLY know what you want and have good questions.
One more thought. Nothing says you have to give all of your money to one advisor. Give them a little and see how well they do first.
the question I would have where the Firm offers both plans and management: is the plan geared toward AUM or easy DIY management? Considering management usually comes with a high buy in of around $1m, giving them a little seems at odds.
I don’t use a planner, but one reason some pay for a manager is to guide and prevent them selling equities at the bottom of a down market. Unfortunately, I watched my father in law force his highly paid manager to liquidate just at the wrong time in the Great Recession downturn. The manager continued to charge the high fee.
Nice video Rob. I really want an objective unbiased review of my tax planning approach (timing and size of Roth conversions in particular) based on analysis with New Retirement. I use the Roth conversion explorer extensively. However, with limited scope and low potential payoff to a fee only advisor, I don't think I am a very attractive client. I am sure there are some good advisors, and they could help me a lot, but I am very leery of the up-sale potential they would see with our sizeable portfolio. Our investment portfolio is laughably simple (60/40). Going to get killed by IRMA the next 3-4 years, but the payback with SS taxes, RMDs, Income Taxes (fed and state), and estate benefits seem far more important (valuable). Self-study seems to be the most likely outcome for me ... blind spots and all. BTW thanks for your weekly newsletter, it is always interesting.
Im retired now at 60 and wife retired. I have been using a FA specialized in clients from the oil and gas industry in Houston. i was worried they would push back on when i wanted to pay off the mortgage but they agreed and the also prefer us to take our SS at 67 vs i was thinking 65. So overall maybe im using a good FA group! BTW my yearly fee is less than 1% but im also considered high NW. They also i think they have saved me money in the long term!!
If you like your FA and believe they are worth the cost, then that's perfectly fine. I'm not sure how they can tell you that they save you money in the long term unless they provide you with their performance history against say simple 3-5 index fund portfolio or even the S&P500 index. There's are firms say they can't provide you with such. What are you actually getting from them? Is going with an hourly or flat-rate advisor planner more suited to what is actually happening in your client-advisor relationship, or is your advisor doing much more? Don't get lost in overly complex portfolio or seeing a wide variety of investments in your portfolio as any indicator of the advisor being good or earning the fee. Again, how does that performance compare against simple index portfolio?
Is it Oak Harvest?
No its WJA
@@hanwagu9967 We meet quarterly and they provide their performance minus the fee compared to baseline of key indexes. They have not said they save me money i said that based on things they did to my portfolio i was not aware of and also probably prevents me from making high risk investments which ive done a few over time lol.
Great video, although it makes me a little ill given that I'm paying my advisor a % of my assets. A few years ago I went to Clark Howard's website to find references to advisors that you pay up front for advice, rather than a % of assets. In my city I think there was one listed. We met with him to feel each other out. Nice guy but I didn't get the feeling that I was going to get a lot of help navigating my own situation. I didn't feel like I was going to be able to ask a lot of questions through these bumpy years (just before retirement and Medicare). So I opted to go another way. I rationalized this by telling myself I was paying for a "financial trainer" (like a personal trainer) to help me get my financial life in order and help me navigate my 60's. Maybe someday I won't need a coach any longer?
Rob, I pay a 1% flat fee advisor for 1 reason with two arts: I expect my wife to outlive me due to chronic medical conditions by 30 plus years and b) throughout our 40 year marriage my wife has demonstrated no interest in investing or doing any financial planning other than our family checkbook. I found an advisor with Will many our nest egg conservatively after I am dead and gone.
Hi Rob, thanks for all you do. Can you share who you use and trust to advise you?
You are absolutely right about the financial PLANNING part of having a finacial advisor. My advisor for many years seemed fairly good with his investment advising. But when it came to retire, I realized their planning was deficient. I had received zero advice about what I should be contributing to my retirement every year, and bad advice about how much I could afford to withdraw once it was time to retire.
Investing and long term financial planning use different skills, and require different knowledge bases.
Sold! I pay 1.25% and although I do believe I get good support and investment advice, I have recently seen a couple of these conflicts peak through the veil. QUESTION: how do I find a flat fee advisor I can trust? Where do I start? Thanks Rob.
Here's a list I maintain. But do your due diligence before hiring anybody! robberger.com/low-cost-financial-advisors/
@@rob_bergerThanks for the list! Finding fee only folks is not easy.
The flat fee comes out up-front while the assets under management fee comes out at the end of the investment period. Maybe a small difference. But, not inconsequential.
Are you talking about Fisher Investments? … they talked to me today ; I am glad to find your video. Thank you 🙏
Thanks, Rob, great info! Curious to know your thoughts on personalized indexing for taxable accounts. I've seen this option involving a 40 BP fee, but offering the benefit of tax loss harvesting.
I hear that it may be beneficial but may also be difficult and time consuming to unwrap or liquidate all of the positions, which may cancel the benefits that you have achieved.
Rob, I have really enjoyed your channel. I have long pondered the same questions you address in this video. One other hidden fee is what is called "trailing commissions". Trailing commissions are found in the fund's prospectus and are paid from the fund's expenses to the advisor. When i discovered this transaction, it explained why certain high expense funds, which underperform the market, are "pushed" by advisors. Any thoughts?
Hi Rob, Maybe a good topic would be how to interview a financial planner? (assuming you haven't discussed this before)
What I’ll never understand about the AUM model: the time and effort required to manage a $2M account is no greater than that for a $1M account, so how do these advisors justify charging Client A twice as much as Client B? (And don’t tell me they’re providing twice the value to Client A!)
The people I know who hire investment advisors don't want to do any of the work themselves. Since we are transitioning, I consider our personal financial planning to be a part time job with flexibility.
Just look at Wall Street compensation- huge salaries, bonuses, stock options, etc. All those "rewards" come from someone. I use a fee based advisor- pay $8/month. I don't need my hand to be held- there is a huge price to pay for that..
What level of service does your advisor provide for $8 a month? I'm looking to come out of retirement and set up my own flat-fee practice and am studying some combination of hourly fee and/or subscription-based model.
@@jimtorode9330 They are there when I have a question to ask. Investment advisor, and a tax advisor. I don't use them much, I buy a lot of T Bills through Vanguard. But I have contacted them once a year at least. It is $300 for the first year, $8/month afterward.
Your title confused me Rob. When I think of “fee only” advisors I think of hourly or “flat fee” fiduciaries rather than AUM managers. Otherwise, as usual, concise and understandable information I can depend on from you. Thank you!
Right! Fee-only includes those who charge a percentage of AUM. It can be confusing.
The confusion is because the industry has competing lobbying groups. The industry attempts to categorize FA compensation into: commission-based, commission and fee, and fee-only. Fee-only includes AUM Fee, flat-fee/rate, hourly, or retainer. AUM fee is a commission no matter how hard the AUM industry wants to try and convince your otherwise.
Rob, how about NewRetirement Advisors $1500 annual fee? Do they provide the scope of services that a higher fee advisor charges?
1% AUM is a huge ripoff. Frankly, $5,000+ for flat fee is way overpriced compared to other professional services administered by folks with far more impressive credentials (accountants or attorneys, for instance) than taking a few CFP courses.
Most friends I talk to who use an advisor can’t answer the following two questions…….what do they charge you? And where is your money invested?
One of the issues seems to be a lack of good financial planning software available for everyday folks. Most of it’s aimed at CFP firms and is costly and not intuitive. Would welcome recommends if I’m ignorant of the options.
Using New Retirement and find it meets all of my needs, maybe not all of everyones needs, but it does me well. ~$100/yr. give it a try.
@@tjan4367 Thanks! I’ll take a look
Looking at it from a % perspective, aren’t the %AUM advisors saying that I can earn you (at least) 1% better return than you can do yourself? Well 2% actually. You’re paying for professional services. The thing is, how will you ever know if they do better than you or not?
No one can guarantee anything. If you don’t do it yourself then you will not know. Plus the fees and costs exceed even 2% which is the theme of this message.
Create a watchlist simulation of the funds you would use. Rob has examples of Vanguards 3,4,5 and 6 fund portfolios that I set up simulations to see which works best for me and my family.
There was a great video that Rob had on using portfolio analyzer for this. I used it and determined how badly my advisor’s portfolio was doing compared to being in just a simple portfolio. It prompted me to get out from under my advisor ASAP.
@@lonestrtgr55 I met with three advisors prior to retiring at 57…. Figures crossed I can continue to return 12.9% for my 4th year in a row (9.9% after 3% payroll deduction/contribution).
Compare them to the performance of whatever index fund/s you would otherwise use
I’m have a unique question, how do you know when it’s time to sale a stock?
It depends on the value you get for the fee. My advisor invests in individual stocks, bonds, ETF’s. I like the results and his service is phenomenal. My last advisor called me once a year and I had 100% ETFs/MF’s. He literally did nothing.
How much is the fee?
Rob great video would you provide links of flat fee advisor
What is your view on New Retirements flat fee service
You should sign up for one of their introduction Zoom presentations.
I did
Hi Rob, thanks for your videos! Can I ask a question? Did I hear you mentioned that a planner could put you into over complex portfolios and it could have tax consequences? I thought if all the money was in an IRA, then no taxes are due ( unless you take a distribution)
Sorry, I missed you specified “taxable accounts “
The biggest conflict of interest is individual retail “dumb money” investors not deeply educating themselves regarding their investment options, market data, investment strategies, and practicing various strategies over time to build wealth, avoid dumb purchases, ignore societal trends and material possessions. Trust in God, educate yourself first, save, make more, spend less, and invest. Lastly, listen to people like Rob and be cautious.
God?