I don't understand how taking a percentage of a portfolio is ever ethical, especially when not much needs to change after the first year unless the advisor wants to look busy. Trades make them look busy too. One time large fees for planning, however, worth it.
It's bcuz you have a brain, understand compound interest, and likely don't make a living like a leech. If all three are true, fin advisors are pretty gross
Not here to argue. I agree except in certain circumstances. For example if the AUM is tied with tax/retirement planning. Then the value is there. The reason is because taxes on social security depends on your taxable income and depending on how your retirement is setup (roth/tradition) this can have implications on the amount of taxes you must pay. Which you must calculate yourself. No one withholds it for you each year (unless you have an adviser) Then you add in RMD (required minimum distributions) which could push you into higher tax brackets etc. With tax laws changing every year it COULD be a nightmare not having an adviser. If you already have the background knowledge, and you stay up to date on changes then yea, its never worth it. Other than that re-balancing your portfolio helps reduce risk but if you do a simple index fund then it does it for you. I would add that maybe your fund needs to become a dividend fund because SS doesn't provide enough income, at which point an Advisor would be helpful because Some stocks offer larger dividends because they have higher risk (not all) at which point it could become a terrible situation to lose your retirement because you have high dividend stocks that flopped. Just food for thought.
The best advice is to learn as much as you can how to manage your money and plan for your financial future. Learning and researching online is mostly free. Be disciplined with your money once you set your goals and devised plans to achieve them. Once done, there is little need to hire a financial advisor. You may still need professional to file your taxes or estate attorney to set up a living trust, but those are different problems.
I do wish you offered the option of a single question, hourly based fee or project based option. We do not need to have our funds managed or pay 1% on an on-going basis, but would love to hire an advisor to run the numbers on when to take social security and if we can afford to retire in the next few years. I'll look elsewhere. I do appreciate all of the free advice you have given.
Maybe a retainer option might work for you? I once interviewed a financial advisor and he ended up saying I knew way too much to pay him the 1% fee. However, if I wished, he could devise a plan for me to execute myself for $2500 a year, and be available for ‘occasional’ questions. You might be able to find similar services available if you interview a few of them in your area. Good luck!
I can understand why they like fee-only, especially AUM. It's way more profitable for thr advisor, especially high net worth. The advisor's cut of a managed account fees can be 100+ bps (1.00%); mutual fund A-shares' 12b-1 fees are just 10s of bps. The right A-shares can be substantially cheaper than managed account fees.
Taking a % of a portfolio is exploitative trash. If a situation is complex, assess what services are actually required and charge a flat fee for those activities. If you have a lot of money, it doesn’t automatically mean your situation will be complex or that the advice you receive was any more work for the person giving. Anyone in the comments simping and saying “so you want them to starve?!?” Is just arguing in bad faith. You can make money fairly and commensurate to your skills, effort, and experience without using a predatory pricing structure. I’m grateful that they put out some content for free, but that’s not an unlimited hall pass for doing other stuff that sucks.
I feel like most people in the comments think that a financial planner only makes a couple trades and calls it a day. Someone who does comprehensive financial planning is going to spend a lot hours every single year perfecting their clients plan. I don’t think AUM is 100% the best fee but it is a great way for clients to compare different firms cause it’s so standard. I think my preference for the firm I work at would be a cap after $5-8 million. At that point I feel like the attention needed doesn’t change much
they never got to explaining a tiered AUM fee. some have decreasing percentage at levels of assets. like 1% up to 1M .75% up to 2M then 0.5% above 2m( i am making the numbers up). so is that a regressive fee structure computed the same way marginal tax rates work? what is their fee structure? i didn't see it in their website.
Go to IAPD (government site) and look up their firm name (abound wealth management) and click on their ADV. it is mentioned in the longer version of this video though too
(Brian’s Troll here) Brian, I do appreciate the free information. I’ve watched the whole video But I can’t get my head around the potential opportunity loss. Abound Wealth chargers 1.25% of assets under management up to 1 million. That’s $10,000 a year for an $800,000 portfolio $10,000 is 125% greater than the allowable $8000 contribution limit to a personal IRA/Roth $10,000 is 12% of an $85,000 gross income If im saving 25% of a $85,000 gross income, that $10,000 is 47% of the $21,250 annual retirement savings you recommend. For comparison, If $10,000 a year was invested in an S&P 500 indexed mutual fund, averaging a historical averaged return of 7%, the potential compounded return… @10 years, $10,000 = $157,836 I guess I fall under the low income category.
(Brian’s Troll here) Brian, I do appreciate the free information. I’ve watched the whole video But I can’t get my head around the potential opportunity loss. Abound Wealth chargers 1.25% of assets under management up to 1 million. That’s $10,000 a year for an $800,000 portfolio $10,000 is 125% greater than the allowable $8000 contribution limit to a personal IRA/Roth $10,000 is 12% of an $85,000 gross income If im saving 25% of a $85,000 gross income, that $10,000 is 47% of the $21,250 annual retirement savings you recommend. For comparison, If $10,000 a year was invested in an S&P 500 indexed mutual fund, averaging a historical averaged return of 7%, the potential compounded return… @10 years, $10,000 = $157,836 Sorry Brian and Bo, I’ve watched the video… I guess I don’t see the value of the holistic relationship you offer. I guess I fall under the low income category.
This is a GREAT point. Using AUM means you lose an entire Roth max per year and you must save well over 25% just to reach 25% after fees. Bogle was right, fees will destroy wealth accumulation.
I've been told that fee-only has the disadvantage of the advisor not being able to directly deal with insurance products being part of the financial plan.
IMHO, unless they actually are the ones insuring you, it just adds a layer (and commission) between you and the actual insurance provider. Certainly, the advisor can tell you to get more insurance, but the actual insurance company needs to know your specifics.
Regarding AUM, it’s a fallacy that you have “aligned incentives.” Say you have $2M. Then his annual intake is $20,000. After a good year of 10% return his intake is now $22,000. What’s more important to him? The $20,000 or the $2,000? His ‘incentive’ is to keep you as a customer and to get as many Fat Cat customers as possible. Sure, the extra $2,000 is nice, but that’s not the big money.
How much more work does an % fee-based advisor have to do, and how much more value they can deliver, when one client has a net worth of $1 mil (1% fee = $10,000) and the other client has $2 mil (fee = $20,000)??? The math doesn’t compute for me 😂
AUM make no sense to me... Why do you make more money on client A's 5 million dollar portfolio ($50,000) and then Client B's 1 million dollar portfolio = $10,000? You're trying to tell us that Client A and B are so much different and complex that you need to charge an extra 40K??? And yes I understand the break points for more money but seriously. People with lots of money would be foolish to do an AUM model. No thanks.
This is absolutely cringe and embarrassing for the money guys. There's no way to get around the fact that fees are compound interest working in the opposite for you. Very disappointed in the money guys.
I would recommend watching the last video they put out, it sounds like you don’t need a financial advisor and can keep enjoying the free content. This video will be for those people who need a financial advisor and are willing to pay a fee for their help. If you don’t need their help you don’t have to use their service, it’s an option
@@CalebInvests that's not the argument I'm making. The argument in making is atleast 90% of their clients don't need their services, and thus, their services in general are leech like and predatory. Fee based anything based on asset price is a gigantic con. Their "advisors are worth it!" Video killed so much of their credibility it's not even funny.
I don't understand how taking a percentage of a portfolio is ever ethical, especially when not much needs to change after the first year unless the advisor wants to look busy. Trades make them look busy too. One time large fees for planning, however, worth it.
It's bcuz you have a brain, understand compound interest, and likely don't make a living like a leech. If all three are true, fin advisors are pretty gross
Not here to argue. I agree except in certain circumstances. For example if the AUM is tied with tax/retirement planning. Then the value is there. The reason is because taxes on social security depends on your taxable income and depending on how your retirement is setup (roth/tradition) this can have implications on the amount of taxes you must pay. Which you must calculate yourself. No one withholds it for you each year (unless you have an adviser) Then you add in RMD (required minimum distributions) which could push you into higher tax brackets etc. With tax laws changing every year it COULD be a nightmare not having an adviser. If you already have the background knowledge, and you stay up to date on changes then yea, its never worth it. Other than that re-balancing your portfolio helps reduce risk but if you do a simple index fund then it does it for you. I would add that maybe your fund needs to become a dividend fund because SS doesn't provide enough income, at which point an Advisor would be helpful because Some stocks offer larger dividends because they have higher risk (not all) at which point it could become a terrible situation to lose your retirement because you have high dividend stocks that flopped. Just food for thought.
The best advice is to learn as much as you can how to manage your money and plan for your financial future. Learning and researching online is mostly free. Be disciplined with your money once you set your goals and devised plans to achieve them. Once done, there is little need to hire a financial advisor. You may still need professional to file your taxes or estate attorney to set up a living trust, but those are different problems.
I do wish you offered the option of a single question, hourly based fee or project based option. We do not need to have our funds managed or pay 1% on an on-going basis, but would love to hire an advisor to run the numbers on when to take social security and if we can afford to retire in the next few years. I'll look elsewhere. I do appreciate all of the free advice you have given.
Maybe a retainer option might work for you? I once interviewed a financial advisor and he ended up saying I knew way too much to pay him the 1% fee. However, if I wished, he could devise a plan for me to execute myself for $2500 a year, and be available for ‘occasional’ questions. You might be able to find similar services available if you interview a few of them in your area. Good luck!
I would *LOVE* a retainer option from a reputable advisor.
I can understand why they like fee-only, especially AUM. It's way more profitable for thr advisor, especially high net worth. The advisor's cut of a managed account fees can be 100+ bps (1.00%); mutual fund A-shares' 12b-1 fees are just 10s of bps. The right A-shares can be substantially cheaper than managed account fees.
Taking a % of a portfolio is exploitative trash. If a situation is complex, assess what services are actually required and charge a flat fee for those activities. If you have a lot of money, it doesn’t automatically mean your situation will be complex or that the advice you receive was any more work for the person giving. Anyone in the comments simping and saying “so you want them to starve?!?” Is just arguing in bad faith. You can make money fairly and commensurate to your skills, effort, and experience without using a predatory pricing structure. I’m grateful that they put out some content for free, but that’s not an unlimited hall pass for doing other stuff that sucks.
I feel like most people in the comments think that a financial planner only makes a couple trades and calls it a day. Someone who does comprehensive financial planning is going to spend a lot hours every single year perfecting their clients plan. I don’t think AUM is 100% the best fee but it is a great way for clients to compare different firms cause it’s so standard. I think my preference for the firm I work at would be a cap after $5-8 million. At that point I feel like the attention needed doesn’t change much
Brian, I'm so excited
they never got to explaining a tiered AUM fee. some have decreasing percentage at levels of assets. like 1% up to 1M .75% up to 2M then 0.5% above 2m( i am making the numbers up). so is that a regressive fee structure computed the same way marginal tax rates work?
what is their fee structure? i didn't see it in their website.
Go to IAPD (government site) and look up their firm name (abound wealth management) and click on their ADV. it is mentioned in the longer version of this video though too
Abound wealth is 1.25% up to a million, and 1% for everything million and up.
@@BiggMonot 100% accurate but closer. It’s in one of their most recent videos they just posted or check out IAPD gov database.
(Brian’s Troll here) Brian, I do appreciate the free information. I’ve watched the whole video But I can’t get my head around the potential opportunity loss.
Abound Wealth chargers 1.25% of assets under management up to 1 million.
That’s $10,000 a year for an $800,000 portfolio
$10,000 is 125% greater than the allowable $8000 contribution limit to a personal IRA/Roth
$10,000 is 12% of an $85,000 gross income
If im saving 25% of a $85,000 gross income, that $10,000 is 47% of the $21,250 annual retirement savings you recommend.
For comparison, If $10,000 a year was invested in an S&P 500 indexed mutual fund, averaging a historical averaged return of 7%, the potential compounded return…
@10 years, $10,000 = $157,836
I guess I fall under the low income category.
(Brian’s Troll here) Brian, I do appreciate the free information. I’ve watched the whole video But I can’t get my head around the potential opportunity loss.
Abound Wealth chargers 1.25% of assets under management up to 1 million.
That’s $10,000 a year for an $800,000 portfolio
$10,000 is 125% greater than the allowable $8000 contribution limit to a personal IRA/Roth
$10,000 is 12% of an $85,000 gross income
If im saving 25% of a $85,000 gross income, that $10,000 is 47% of the $21,250 annual retirement savings you recommend.
For comparison, If $10,000 a year was invested in an S&P 500 indexed mutual fund, averaging a historical averaged return of 7%, the potential compounded return…
@10 years, $10,000 = $157,836
Sorry Brian and Bo, I’ve watched the video… I guess I don’t see the value of the holistic relationship you offer.
I guess I fall under the low income category.
This is a GREAT point. Using AUM means you lose an entire Roth max per year and you must save well over 25% just to reach 25% after fees. Bogle was right, fees will destroy wealth accumulation.
I've been told that fee-only has the disadvantage of the advisor not being able to directly deal with insurance products being part of the financial plan.
IMHO, unless they actually are the ones insuring you, it just adds a layer (and commission) between you and the actual insurance provider. Certainly, the advisor can tell you to get more insurance, but the actual insurance company needs to know your specifics.
Regarding AUM, it’s a fallacy that you have “aligned incentives.” Say you have $2M. Then his annual intake is $20,000. After a good year of 10% return his intake is now $22,000. What’s more important to him? The $20,000 or the $2,000? His ‘incentive’ is to keep you as a customer and to get as many Fat Cat customers as possible. Sure, the extra $2,000 is nice, but that’s not the big money.
Can an advisor combine fee-based and hourly? I have an idea for a compensation model, but I'm concerned that it would be illegal "rebating."
Depends on if the firm is state or SEC registered. Every state has different regulations. Consult a local attorney or XYPN.
How much more work does an % fee-based advisor have to do, and how much more value they can deliver, when one client has a net worth of $1 mil (1% fee = $10,000) and the other client has $2 mil (fee = $20,000)??? The math doesn’t compute for me 😂
It computes for them and that computation = a big paycheck for them.
AUM make no sense to me... Why do you make more money on client A's 5 million dollar portfolio ($50,000) and then Client B's 1 million dollar portfolio = $10,000? You're trying to tell us that Client A and B are so much different and complex that you need to charge an extra 40K??? And yes I understand the break points for more money but seriously. People with lots of money would be foolish to do an AUM model. No thanks.
: )
This is absolutely cringe and embarrassing for the money guys. There's no way to get around the fact that fees are compound interest working in the opposite for you. Very disappointed in the money guys.
Tell me you have no idea what you’re talking about without telling me you have no idea what you’re talking about
@@Jericho9696 you just did.
They have to make money somehow?
I would recommend watching the last video they put out, it sounds like you don’t need a financial advisor and can keep enjoying the free content. This video will be for those people who need a financial advisor and are willing to pay a fee for their help. If you don’t need their help you don’t have to use their service, it’s an option
@@CalebInvests that's not the argument I'm making. The argument in making is atleast 90% of their clients don't need their services, and thus, their services in general are leech like and predatory. Fee based anything based on asset price is a gigantic con. Their "advisors are worth it!" Video killed so much of their credibility it's not even funny.