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You really can't be the judge on the value someone else perceives in their advisor and the fee they pay them. It's beyond rediculous just to spot off "you're getting robbed" and then tell someone to move all their funds to vanguard and manage their own money.
vanguard's fee for the sp500 index in .05 percent. ML is 1.5?
what are you getting for this 1.50% fee? and is it advice that you should be paying more for just because you have more money invested?
i would have an issue with someone charging me 1.5% of several million dollars and giving me the same advice they give someone for 1.50% of 500k.
i also would have a problem for someone re-charging me for positioning my portfolio year after year and doing nothing or little further on it.
many advisors place the money in buy and hold funds then recharge you each year with that fee.
at least if you are charging me charge me only on the money you made me not what i origonally handed you and you already charged me on.
Well let's see.... Management fee for VOO? 0.05% per year. Management fee for AGG? 0.08% per year. Do the math.
You're paying Merrill Lynch (who are non-fiduciaries) about 15% of your potential nest egg after 10 years. Next time hire a fee-only adviser on a one time or one task basis, or better yet do it yourself. It's easy.
big mistake paying an advisor to baby sit bonds or cash instruments. however now that i said that ,there are exceptions in the real world:
i think most here are really missing the big picture of things.
i am all for using an advisor for advice but there are enough sources out there including newsletters that paying someone to baby sit your money is not wise if you have the desire to learn..
tax planning ,goal setting and finacial coordinating of lots of pieces of the puzzle are all worth paying for advice but forking over a yearly fee based on asset value is nuts in my opinon UNLESS you truely lack the discipline to even follow advice in a newsletter and require a full time manager to keep the money out of your hands, and yes some people do. in fact many people do from the looks of the small investor returns as opposed to the returns the funds got..
i do get it that some would never be able to stay in the markets left to their own devices and are far to much of a nervouse nellie to handle their own money.
giving up that 15% on compounded gains may be the best deal around compared to how poorly they would do on their own. vanguard ,the grand pappy of do it yourself investing said their own study shows the typical small investor loses 3% a year just trying to do things on their own . that 1.50% fee is a bargain amd may leave them with 50% more..
holy cow, if the youngins in our company 401k had paid for a professional money manager to handle their 401k money they would be way a head . they all invested to aggressively on their own , bailed and lost money and never returned missing the entire recovery and then some..
to often when giving advice to others we think in terms of ourselves or our boglehead buddies. the typical american has neither the knowledge , the discipline or the desire to even learn how to handle that money on their own.
even with advisor fees it is far more than they will ever do with their money on their own.
folks like us who frequent these financial forums and have a clue what to do are few and far between. remember about sleeping with the enemy i spoke of.
that other world is a totaly different make up then what we see in these forums. most can't even tell you what a money market is.
but ask them a sports stat or sports trivia question and they know it all.
i get e-mail requests all the time from folks here about what to do with their money and while i never give personal advise as i am not qualified to do it ,it does show the level of people who have little or no understanding about even the basics.
a good financial investing plan inter-acts with your total life financial plan and there is so many pieces of the puzzle missing when folks post and others fling advice that as i say simple answers to complex questions are wrong answers.
do not ever feel these folks are wrong for paying advisors fees to handle their money. it may be the best move they ever did. if you think these fees are expensive ,free advice or low cost fund fees coupled with them doing things on their own can cost a whole lot more.
i spend about 125 bucks a year for a newsletter and every so often about 500 bucks for professional advice for levels of knowledge beyond my own.
Last edited by mathjak107; 10-19-2014 at 04:52 AM..
OK, I got details from my friend I mentioned here that only does stocks and all his own trades. He doesn't like mutual funds because they have internal charges. He doesn't like a managed fee portfolios for 1.5% like I currently have because he doesn't like fees. He has a Fidelity account where he tells me he only pays $8.00 a trade. (By the way, ML has Merrill Lynch Edge which charges $6.95 per trade I just found out about, but $8.00 is fine).
For the past 15 years, he has been doing all his own investing and taking frequent trips to the library to study the latest Valueline for investment advice. Any time I talk with him, he always talks about the stock market and spends additional time reading about it. He has bought and sold stocks such as Google, Apple, JNJ and others, and has claimed to make great returns by following his own advice. I have known him for years, and just this week he said "I will send you my performance, and you can see for yourself". He has sent it to me, and here are his results:
Quote:
Going left to right, year to date, last year (2013), 3 years, 5 years, 10 years, and all years (15 years)
So overall for the last 15 years in his IRA account, he has averaged 8.33% return. In his trading (non-retirement) account over the same time period he has averaged 7.35%. I don't have the numbers for what the S&P 500 were doing for the last 15 years, and I don't know why he doesn't have a number for Trading at 10 years.
In summary, after all the time he has invested in doing this himself including trips to the library, subscriptions to information, and managing it himself he has a net return average around 8% a year. My average from the ML's MFA return for the same time period is about the same. I don't see how I could have done better than him considering how knowledgeable he is, and I certainly don't see how I could have done better or even as well as the Merrill Lynch research group that is behind the MFA. After all, they are investment professionals and I'm an IT professional. Yes, the 1.5% fee is annoying, but not nearly as annoying as me losing money all by myself. I think if I spent the next 15 years doing all this myself as some have suggested here and then found out the MFA program I left behind did the same, I would have like an idiot that I wasted my time doing this myself. In that case, I would be the one who felt I was robbed by spending 15 years of my time doing this, when it could have been on auto-pilot for me and gotten similar results like it has been for the past 15 years.
I am not taking into account that there are some who prefer to do things themselves. My friend is like that, he wouldn't go with ML or anyone else to do what I'm doing even if the returns I could prove were better. This reminds me of someone who drives 20 miles out of their way because the gas is cheaper at this one station. Yes, it's cheapest but you spend your gas and time going there to get it.
what are you getting for this 1.50% fee? and is it advice that you should be paying more for just because you have more money invested?
i would have an issue with someone charging me 1.5% of several million dollars and giving me the same advice they give someone for 1.50% of 500k.
i also would have a problem for someone re-charging me for positioning my portfolio year after year and doing nothing or little further on it.
many advisors place the money in buy and hold funds then recharge you each year with that fee.
at least if you are charging me charge me only on the money you made me not what i origonally handed you and you already charged me on.
It's based on a survey of your risk assessment, not how much money you are investing. If you want "moderate risk" for example, I don't see how they are going to select something better for you simply because you have several million dollars invested than a few hundred thousand. It's not like spending $100 for a steak, where you expect it to taste better. I think that's the point of their research and MFA program, is they have several models to fit your objectives and then they follow them. The actual FA doesn't do any trading. He sets this up with you, and reviews it along the way and make recommendations if you want to make changes. MFA is only one of many programs they have, this one just happens to suit my needs. They have a managed program like this for ETFs I'm looking into also.
They are charing year after year, because trading is going on all the time. As I posted in the last 3 months there have been 26 purchased and 6 sales. These are buy and sell orders in Mutual Funds that I didn't have to be involved in at all. No phone calls to get my approval. If they were simply doing a buy and hold for the next 15 years, I could get out of this and just buy the same allocation of Mutual Funds myself at $6.95 a trade and avoid the 1.5% fee. But that isn't what they are doing, they are buying and selling Mutual Funds in my account and reacting to the market following a model they have set up.
I've thought, if I had $100M, I would hire someone to do all this for me personally. But you know what, who is to say that person is going to get net returns any better than a program like a MFA anyway.
no one knows about what happens until it happens to them.
our company didn't go out of business. it just was taken over and the plan ceased to exist anymore and was terminatated.
That's very unfortunate. It reminds me of companies who get involved in legal battles and can't release products they have been working on until matters are settled.
You know, this might sound naïve but why does the 401(k) plan only allow you to roll it out if you leave the company? It seems to me you should be allowed to roll-out the part that is your money plus what you have vested into your own qualified account away from them over time.
Could the employer be actually profiting by keeping the 401(k)?
big mistake paying an advisor to baby sit bonds or cash instruments. however now that i said that ,there are exceptions in the real world:
i think most here are really missing the big picture of things.
i am all for using an advisor for advice but there are enough sources out there including newsletters that paying someone to baby sit your money is not wise if you have the desire to learn..
tax planning ,goal setting and finacial coordinating of lots of pieces of the puzzle are all worth paying for advice but forking over a yearly fee based on asset value is nuts in my opinon UNLESS you truely lack the discipline to even follow advice in a newsletter and require a full time manager to keep the money out of your hands, and yes some people do. in fact many people do from the looks of the small investor returns as opposed to the returns the funds got..
i do get it that some would never be able to stay in the markets left to their own devices and are far to much of a nervouse nellie to handle their own money.
giving up that 15% on compounded gains may be the best deal around compared to how poorly they would do on their own. vanguard ,the grand pappy of do it yourself investing said their own study shows the typical small investor loses 3% a year just trying to do things on their own . that 1.50% fee is a bargain amd may leave them with 50% more..
holy cow, if the youngins in our company 401k had paid for a professional money manager to handle their 401k money they would be way a head . they all invested to aggressively on their own , bailed and lost money and never returned missing the entire recovery and then some..
to often when giving advice to others we think in terms of ourselves or our boglehead buddies. the typical american has neither the knowledge , the discipline or the desire to even learn how to handle that money on their own.
even with advisor fees it is far more than they will ever do with their money on their own.
folks like us who frequent these financial forums and have a clue what to do are few and far between. remember about sleeping with the enemy i spoke of.
that other world is a totaly different make up then what we see in these forums. most can't even tell you what a money market is.
but ask them a sports stat or sports trivia question and they know it all.
i get e-mail requests all the time from folks here about what to do with their money and while i never give personal advise as i am not qualified to do it ,it does show the level of people who have little or no understanding about even the basics.
a good financial investing plan inter-acts with your total life financial plan and there is so many pieces of the puzzle missing when folks post and others fling advice that as i say simple answers to complex questions are wrong answers.
do not ever feel these folks are wrong for paying advisors fees to handle their money. it may be the best move they ever did. if you think these fees are expensive ,free advice or low cost fund fees coupled with them doing things on their own can cost a whole lot more.
i spend about 125 bucks a year for a newsletter and every so often about 500 bucks for professional advice for levels of knowledge beyond my own.
Good post.
I can't treat doing all this myself like I would a DIY project around the house like painting. Sure, I'm not a painting professional, but I will save the money over having a professional painter doing it. In the process I could become a better painter by the time the house is finished. The thing is, the worst paint job in the world can be easily fixed compared to making bad investment choices.
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