I’d agree! I would consider this the biggest flaw of The money guys. I would flat out refuse to hire anyone on an AUM basis. They have reiterated several times that investment strategy should not change regardless of a $30,000 portfolio or a $2.5m portfolio. Yes I understand the tax complexity certainly will change which is why I’d expect to see an increase in hours billed to the client. AUM fees are highly profitable I’m sure but I have no interest in paying such fees
@@charlescc1000 very well said. They also say they want to work with you when you hit $500k in investable assets. Hard to imagine that’s not at least in part tied to how much money they can make from you.
@@FunStuffBuddy The other side of that coin is that it's not worth paying for an FA when you have less than $500k. They provide free resources to get you on the path to financial independence. Somewhere between $500k and $1M things tend to get complex. As you get closer to retirement (within 15 years) a lot of questions come up where you might need an FA's opinion.
@@Lucky008aau the only issue with that logic is let the individual decide if they want help and want to spend time watching all these videos for self-learning or if they are ok with the fees That option is taken away from the individual if your net worth is too low (due to my point above). They do not allow you a choice. And not all FA’s have minimums either.
You’re fee- based. You’re selling an investment product and getting a commision. A fee on AUM is a commission there for you’re not fee only. -a CFP here
@@brokecooking8277 How so? Either a person has the education and experience to produce a solid financial plan or they don't. Why can't a CFP work by the hour to product quality results vs a person who sucks 2% from your portfolio for only doing a few hours worth of actual work?
Sooo….if someone is “independent” and “fee only” and “unbiased” but they charge 1.25% AUM fee…is that really a good thing? I know many traditional advisors that make only 0.25% on their fees/kickbacks/incentives. So removing conflict of interests is good but also isn’t necessarily “cheaper” (or in many cases more expensive). It’s all in how you spin it (or sell it).
Fee-only fiduciaries have a legal obligation to act in your best interests, even at their own detriment. Many “advisors” get a kickback on funds that they sell. Fiduciaries don’t (or shouldn’t) do that. I think the value proposition of fee-only advisors is less than it used to be with free/low cost access to index funds and free financial education, but once your net worth hits a certain amount, I think it makes sense to have a professional on your side. When you have $500k-$1m+ in assets, even a small mistake can have potentially devastating consequences.
Also, not sure if you're familiar with loss math, but it works like this if you have a 50% loss, you need more than a 50% gain to get back to even. In fact, you need a 100% gain just to get back to even. So, when a B/D takes 5% commission from that A-share mutual fund, you need that mutual fund to have a 5.26% increase just to get back to even. Meaning to beat whatever benchmark that fund is up against, you would have to get 5.26% on top of the return of the benchmark, which DOES NOT HAPPEN.
Of course these guys love billing right out of the client’s account. I would think the client has a serious second thought on the value provided when they need to write a check from their checking account!
It’s similar to the fitness club membership business method or paying cash vs credit card. Writing a check for their services will be more painful and likely may you think harder if the service is worth the expense.
Well stated. Psychologically the concept applies to everything. If you stroke a check you notice how much you're paying rather than having a small basis taken out each year which will eventually become material as the asset size grows.
@@aaront936 Quite the contrary actually. Vanguard has put out a lot of information detailing the alpha investors with advisors experience over investors without an advisor.
@@aaront936 Yes AUM costs a lot but having a high caliber advisor, which pretty much all of them are AUM, benefits you more than the costs. Vanguard has put out lots of information around the alpha people experience when they have an advisor vs. people without an advisor.
Why so high? A fee based on AUM should be less than $150 to 250 per year for each million or 0.015% to 0.025% of AUM/year. Then charge a one time $1000 for a comprehensive financial plan covering all the extra services. You guys just lost my trust as I can tell you are dancing around the fee only label and it is a lie.
@@marc8919 The Money Guys are just a nicer and more educated version of a used car salesman, but are able to swindle more money out of you, albeit legally.
Imagine having a withdrawal rate of about 4%... the money you've worked your entire life to make... and 1% (a quarter) goes to these guys. Every freaking year. Of course they want to bill your account directly. Nobody in their right mind would be able to handle that, no matter how good they are.
sorry but 1% is actually great that is not a lot at all especially if your advisor is intelligent. It depends on the type of investor you are. If you are an ordinary person you probably dont even have 500k to invest
I tend to think of a fee-only advisor as someone I pay a flat or hourly fee too, not someone paid on assets under management.
I’d agree! I would consider this the biggest flaw of The money guys. I would flat out refuse to hire anyone on an AUM basis.
They have reiterated several times that investment strategy should not change regardless of a $30,000 portfolio or a $2.5m portfolio.
Yes I understand the tax complexity certainly will change which is why I’d expect to see an increase in hours billed to the client.
AUM fees are highly profitable I’m sure but I have no interest in paying such fees
@@charlescc1000 very well said. They also say they want to work with you when you hit $500k in investable assets. Hard to imagine that’s not at least in part tied to how much money they can make from you.
@@rapfreak7797 that’s precisely why. You aren’t worth THEIR time yet. It’s roughly same amount of work for them but they make very little money
@@FunStuffBuddy The other side of that coin is that it's not worth paying for an FA when you have less than $500k. They provide free resources to get you on the path to financial independence. Somewhere between $500k and $1M things tend to get complex. As you get closer to retirement (within 15 years) a lot of questions come up where you might need an FA's opinion.
@@Lucky008aau the only issue with that logic is let the individual decide if they want help and want to spend time watching all these videos for self-learning or if they are ok with the fees That option is taken away from the individual if your net worth is too low (due to my point above). They do not allow you a choice. And not all FA’s have minimums either.
You’re fee- based. You’re selling an investment product and getting a commision. A fee on AUM is a commission there for you’re not fee only. -a CFP here
NEVER EVER pay an CFP a yearly AUM FEE! Only hire an hourly CFP!
disagree. You will get subpar service in hourly advisors
@@brokecooking8277 How so? Either a person has the education and experience to produce a solid financial plan or they don't. Why can't a CFP work by the hour to product quality results vs a person who sucks 2% from your portfolio for only doing a few hours worth of actual work?
Imagine you come to a grocery store and all prices are expressed in percentages of your net worth...
I'm not signing up for a wealth tax.
Sooo….if someone is “independent” and “fee only” and “unbiased” but they charge 1.25% AUM fee…is that really a good thing? I know many traditional advisors that make only 0.25% on their fees/kickbacks/incentives. So removing conflict of interests is good but also isn’t necessarily “cheaper” (or in many cases more expensive). It’s all in how you spin it (or sell it).
In fact, many financial advisors are actually loving this fee only “unbiased” approach since they make way more
Fee-only fiduciaries have a legal obligation to act in your best interests, even at their own detriment. Many “advisors” get a kickback on funds that they sell. Fiduciaries don’t (or shouldn’t) do that.
I think the value proposition of fee-only advisors is less than it used to be with free/low cost access to index funds and free financial education, but once your net worth hits a certain amount, I think it makes sense to have a professional on your side. When you have $500k-$1m+ in assets, even a small mistake can have potentially devastating consequences.
%age-based raises an eyebrow for me. be very careful
Also, not sure if you're familiar with loss math, but it works like this if you have a 50% loss, you need more than a 50% gain to get back to even. In fact, you need a 100% gain just to get back to even. So, when a B/D takes 5% commission from that A-share mutual fund, you need that mutual fund to have a 5.26% increase just to get back to even. Meaning to beat whatever benchmark that fund is up against, you would have to get 5.26% on top of the return of the benchmark, which DOES NOT HAPPEN.
@@FunStuffBuddy why unbiased in quotes? They are held BY LAW to the fiduciary standard since they work at an RIA
AUM is never justifiable, you guys need to rethink this.
Of course these guys love billing right out of the client’s account.
I would think the client has a serious second thought on the value provided when they need to write a check from their checking account!
It’s similar to the fitness club membership business method or paying cash vs credit card. Writing a check for their services will be more painful and likely may you think harder if the service is worth the expense.
Yeah that is actually with everything though.
Well stated. Psychologically the concept applies to everything. If you stroke a check you notice how much you're paying rather than having a small basis taken out each year which will eventually become material as the asset size grows.
Thank you for posting this. Just in time as I was looking for resources for fee-online FA for my parents :)
heads up though. they are not flat-fee financial advisors. they are percentage-based fee financial advisors. be very wary of %age-based advisors.
@@thejohnbeck there is no reason to be wary of AUM advisors
@@aaront936 Quite the contrary actually. Vanguard has put out a lot of information detailing the alpha investors with advisors experience over investors without an advisor.
@@aaront936 the only advisors to be wary of are commission based, as they have the largest conflict of interest.
@@aaront936 Yes AUM costs a lot but having a high caliber advisor, which pretty much all of them are AUM, benefits you more than the costs. Vanguard has put out lots of information around the alpha people experience when they have an advisor vs. people without an advisor.
Excellent videos!
Thank you very much for your hard work.
Fee-only is paid a fee by hourly service.
Why so high? A fee based on AUM should be less than $150 to 250 per year for each million or 0.015% to 0.025% of AUM/year. Then charge a one time $1000 for a comprehensive financial plan covering all the extra services. You guys just lost my trust as I can tell you are dancing around the fee only label and it is a lie.
Complete rip off!! Percentage of AUM. Why not just $250 or $500/HR?
The money guys disgust me. They are charging 1 to 2% EACH YEAR of your total account. That is absurd.
It’s really not…but either way, do it yourself if that upsets you. Good luck….
They're fine for the inept investor. But make no mistake they are like leeches.
@@marc8919 The Money Guys are just a nicer and more educated version of a used car salesman, but are able to swindle more money out of you, albeit legally.
Imagine having a withdrawal rate of about 4%... the money you've worked your entire life to make... and 1% (a quarter) goes to these guys. Every freaking year. Of course they want to bill your account directly. Nobody in their right mind would be able to handle that, no matter how good they are.
sorry but 1% is actually great that is not a lot at all especially if your advisor is intelligent. It depends on the type of investor you are. If you are an ordinary person you probably dont even have 500k to invest