[qba335i]

Originally Posted by XutvJet

OK. I'm trying to be snarky or a jerk here. I understand the need for most to have a bit of help when trying to manage a $5M+ portfolio. I could see that as being a bit cumbersome with investment opportunities, taxes (err....legal evasion ), estate planning, wills, etc. But I do have to ask the question, what is that you're doing for the client that warrants $500K in fees for a $20M portfolio? That's $42,000/mo, $9,600/wk, or $240/hr based on a 2,080 hour US working year. I get it that there are admin costs and company costs like research, junior/assistant staff, and the general cost to run a business, but I just don't get what you're company is doing that warrants such high fees. For much of the time, the portfolio/investments run themselves with little intervention. I get that there is a lot of effort and complication when large amounts of money need to get moved around or investments change. But in the end, you charge very high fees for seemingly minimal overall effort. Other than risking losing a client because of some bad intel or advice, what risk are you taking? I just don't see it.

Like I said earlier, I was formerly with Morgan Stanley and had an adviser. They were taking 1% to manage my portfolio. Plus, when I'd change things (which wasn't often), there were many other fees. Once I wised up and started researching more, it really started to irritate me how many fees were buried all throughout my statements. When it was all said and done, I was paying more like 3+%+ a year in fees (all fund/investment fees considered in this, not just his) and my adviser wasn't doing much at all. He was responsive to my questions, was honest (I think), was a really nice guy, but looking back, I don't feel like I ever got the entire story/risk/costs to the investment choices he offered and the ones I requested. He could not be spending more than 10 hours a month with "managing" my portfolio. He had a very nice house in a very nice part of Kansas City, drove a very expensive Benz and his kids went to very pricey schools. His wife didn't work. Long story short, I was ignorant. I felt that it was all too complicated to understand and so I trusted his advice.

Back in early 2015, I decided I needed to learn and gut check what I was invested in. I spent 4 months reading and researching. I came to the conclusion that I was spending a massive amount of money in adviser fees, actively managed fund fees, and the like. My portfolio wasn't close to matching the market. I felt like such an idiot. I took all our money from MS and moved it to Vanguard, bought S&P 500 index funds, a decent amount of Berkshire Class B, and some other low fee funds to spread the risk. I manage everything myself. In four years, our overall portfolio grew about 40%. Granted the market has been amazing for the last 8 years and I get that, but there is no way in hell I'd be at the same place if I stayed at MS. Not even close.

Sad thing is, my story isn't very from most people with decent portfolios ($500K-2M) that left their advisers to manage things themselves. I just don't see the value having an adviser if you've got less than $2M as you don't need to be in anything fancy at all. See Warren Buffet's "15-minute retirement plan" and start there then branch a little once you hit $750K-1M. Advisers are happy to collect a lot of fees, offer advice, and make recommendations, but there is little risk for them. When people accounts/funds take big hits, they send out market letters full of excuses as to why their advice didn't work out as planned. LOL

Originally Posted by NemesisX

My dad hit $15M in liquid net worth this year after 37 years of working/investing. He's 61 and 95% of his money is in Vanguard funds with extremely low expense ratios that track the S&P500. He's well aware that for his age and intended retirement (he wants to retire by 77) his portfolio is extremely aggressive given that it's mostly equities. Income trajectory was $40k to begin, $160k mid 90s, $300k early 2000s, $500k 2010-2015, and recently $800k-$900k the last couple of years. Expenses are around $150,000/year which is why he can afford to be aggressive.

In the late 2000s he tried his hand at a financial advisor by letting an advisor manage $500k of his total portfolio. He chose that amount because it was the minimum amount required to optimize the fee schedule for this brokerage firm. He figured he could always mirror what the advisor was doing with the rest of his money if she ended up doing something special. Over the course of 7 years she failed miserably compared to the S&P500.

She purchased mostly mutual funds from American funds for which she received extra compensation for "selling" their product. Then she stuck to mostly blue chip stocks that are readily listed on their website for free.

The cost to do this? 2% of assets under management. There would have been an additional 2% fee for reinvestment of dividends if the portfolio had been less than $500k.

American Funds have expense ratios around 1% and front loads of around 5.75%. That's in addition to Edward Jone's fees listed above, I think, but don't quote me on that.

Bottom line is firms/financial advisors has zero value if they're not beating the S&P500. The firm needs to beat the market by a certain amount just to break even with their fees and then provide additional value above that.

You want to control volatility and taxes. That's the benefit of a well managed portfolio. A well diversified portfolio will never beat S&P - but will provide "stable" return over time. We always talk about risk adjusted return.

A few benefits of using a portfolio manager/good firm. (HNW clients):
- diversified portfolio, access to active/passive products depending on client needs (individual stocks, funds, ETFs, managed accounts, alternatives..)
- goals based investing - new way to look at asset management
- guidance regarding wealth planning, gifting.. comprehensive view. GRATS, foundations, GST..
- resources and referrals. We can give you recommendations or connect you with the correct person for everything. Have a 10-20M painting for sale, want to sell your business, have a mom that needs a retirement home or maybe need someone to review your insurance coverage (kidnapping insurance for example)?

If a financial advisors offers you a fund with a load just leave. There are so many "sales car type" people in the industry that have no idea about managing money.