Am I overpaying my financial advisor?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Our FA is also our CPA. We are paying him .5% annually to manage just under $3M. We have a other assets in other funds (401K, Deferred Comp, Company Stock, Stock Options, 529, donor advised fund, etc.) which he doesn't manage, but still gives advice on allocations and other issues that would have tax implications. Our total investments, including the assets he manages, are about $12M.

He also helped us update our estate plan and made sure we are insured appropriately.

We like the convenience of having a CPA who understands our tax situation manage our funds and advise us on our other funds. My husband is also approaching retirement, so it has been reassuring having someone who can help us plan, which will be in about a year.

+1

Our FA is not our CPA, but they work closely with our CPA and our Estate Planner and everyone involved in our Wealth management team. They are the "glue that holds it all together". Sure I could pay less and manage it myself. But it's nice to just call/email/text and have them manage it for me. That is what you get for your 0.5% for everything they manage (for us it's $~10M). They also advise on our 529, 401K and everything financial even if they are not collecting a fee on that portion. They handle all of our treasury/CD/short term investments with out any fees (that is much more than $10M). Making sure it's all in best options for highest return when they come due. Also follows up when some has been in CDs at banks that have gone under (there have been a few in last 2 years----that happens when you spread it all out to keep FDIC insurance). That means I don't have to have accounts at 20+ banks to manage myself. That part all comes at "no fee" to us. Sure paying $25K+ per year may seem like a lot for most people, but when you are at HNW/UHNW it's just a part of managing your finances. And a great FA makes it all run smoothly. I know, because I used to manage our CD/Treasuries/MM previously and am very happy I don't have to do it anymore.

Thanks for sharing this. You mentioned you were paying approximately $25K in fees for $10M, so is your rate .25%? And do you feel for $3M in assets that .5% is a good rate?

I think that is a good rate for $3M. Especially if they do not charge a fee for your "cash" holdings (Treasuries/CD/MM/etc) or your 529s. And are very responsive to your needs.

We have been with our FA for 20+ years. So since we were only worth $1-2M. We chose to stay with them because we trust them. Even when we made the quick switch to UHNW 3 years ago we stayed---because they showed us they could (and would ) manage everything for us, they had access to wealth management team that is amazing. At that level, most of the FA who want your business are slimy and pushy and I didn't want to work with any of them. We interviewed a few just to see and I couldn't' stomach it. They are just annoying and sleezy to me.

I like that we are most likely our FA top client, not just another UHNW/HNW family.

What in tarnation does a wealth management team do?

Mostly it's about adding detailed tax advice (slash avoidance let's be honest), and estate planning. Those usually aren't a major part of traditional financial planning/management.

Not really. Tax advice and estate planning are literally what a financial planner does. This is nothing special and you don't need a wealth management team to get that advice.

But you do need to pay for this wealth management team's salaries. If you are the caring, charitable type, you could find a firm to do similar and donate the savings to the many non-profits that need your money.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Our FA is also our CPA. We are paying him .5% annually to manage just under $3M. We have a other assets in other funds (401K, Deferred Comp, Company Stock, Stock Options, 529, donor advised fund, etc.) which he doesn't manage, but still gives advice on allocations and other issues that would have tax implications. Our total investments, including the assets he manages, are about $12M.

He also helped us update our estate plan and made sure we are insured appropriately.

We like the convenience of having a CPA who understands our tax situation manage our funds and advise us on our other funds. My husband is also approaching retirement, so it has been reassuring having someone who can help us plan, which will be in about a year.

+1

Our FA is not our CPA, but they work closely with our CPA and our Estate Planner and everyone involved in our Wealth management team. They are the "glue that holds it all together". Sure I could pay less and manage it myself. But it's nice to just call/email/text and have them manage it for me. That is what you get for your 0.5% for everything they manage (for us it's $~10M). They also advise on our 529, 401K and everything financial even if they are not collecting a fee on that portion. They handle all of our treasury/CD/short term investments with out any fees (that is much more than $10M). Making sure it's all in best options for highest return when they come due. Also follows up when some has been in CDs at banks that have gone under (there have been a few in last 2 years----that happens when you spread it all out to keep FDIC insurance). That means I don't have to have accounts at 20+ banks to manage myself. That part all comes at "no fee" to us. Sure paying $25K+ per year may seem like a lot for most people, but when you are at HNW/UHNW it's just a part of managing your finances. And a great FA makes it all run smoothly. I know, because I used to manage our CD/Treasuries/MM previously and am very happy I don't have to do it anymore.

Thanks for sharing this. You mentioned you were paying approximately $25K in fees for $10M, so is your rate .25%? And do you feel for $3M in assets that .5% is a good rate?

I think that is a good rate for $3M. Especially if they do not charge a fee for your "cash" holdings (Treasuries/CD/MM/etc) or your 529s. And are very responsive to your needs.

We have been with our FA for 20+ years. So since we were only worth $1-2M. We chose to stay with them because we trust them. Even when we made the quick switch to UHNW 3 years ago we stayed---because they showed us they could (and would ) manage everything for us, they had access to wealth management team that is amazing. At that level, most of the FA who want your business are slimy and pushy and I didn't want to work with any of them. We interviewed a few just to see and I couldn't' stomach it. They are just annoying and sleezy to me.

I like that we are most likely our FA top client, not just another UHNW/HNW family.

What in tarnation does a wealth management team do?

Help coordinate your CPA, estate planning, creating a foundation, etc. Not something most people need, but when you hit the UHNW ($30M+) there are many new issues that need to be addressed. We have an estate consultant (not our lawyer) who for no fee will spend hours helping us develop/tweak our estate plans, available for consultation as much as needed. There are also other experts on specific estate subjects/foundation creation/etc that we can consult with as needed. Then we take those ideas to our actual lawyer to draw them up. So basically, rather than paying $400+/hr to discuss complex estate planning (which at that level involves tax planning as well/ tax avoidance for when you die), we do that with him and others from the wealth management team to craft the plan, then just pay the lawyer for 4-5 hours of work. In the last 3 years, we have gotten 50+ hours of consultation for free and only had to pay the lawyer for less than 10 Hours. Given that the main person is actually a lawyer (but not working as a lawyer currently, so not allowed to officially give "legal advice") we are getting top notch consultation for free. It's part of our FA/Wealth management team that becomes available to you when you reach a certain level of wealth. Lots of perks become available at a certain wealth level. They want your business and quite frankly it's much easier to manage it all where everyone works for same company and has access to all your details.

So yes, if you have a net worth of only $2M your estate and wills are very simple. And a simple lawyer familiar with wills will be fine and you can use a good FA. But once you hit $10-15M you typically need more resources available for you.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Our FA is also our CPA. We are paying him .5% annually to manage just under $3M. We have a other assets in other funds (401K, Deferred Comp, Company Stock, Stock Options, 529, donor advised fund, etc.) which he doesn't manage, but still gives advice on allocations and other issues that would have tax implications. Our total investments, including the assets he manages, are about $12M.

He also helped us update our estate plan and made sure we are insured appropriately.

We like the convenience of having a CPA who understands our tax situation manage our funds and advise us on our other funds. My husband is also approaching retirement, so it has been reassuring having someone who can help us plan, which will be in about a year.

+1

Our FA is not our CPA, but they work closely with our CPA and our Estate Planner and everyone involved in our Wealth management team. They are the "glue that holds it all together". Sure I could pay less and manage it myself. But it's nice to just call/email/text and have them manage it for me. That is what you get for your 0.5% for everything they manage (for us it's $~10M). They also advise on our 529, 401K and everything financial even if they are not collecting a fee on that portion. They handle all of our treasury/CD/short term investments with out any fees (that is much more than $10M). Making sure it's all in best options for highest return when they come due. Also follows up when some has been in CDs at banks that have gone under (there have been a few in last 2 years----that happens when you spread it all out to keep FDIC insurance). That means I don't have to have accounts at 20+ banks to manage myself. That part all comes at "no fee" to us. Sure paying $25K+ per year may seem like a lot for most people, but when you are at HNW/UHNW it's just a part of managing your finances. And a great FA makes it all run smoothly. I know, because I used to manage our CD/Treasuries/MM previously and am very happy I don't have to do it anymore.

Thanks for sharing this. You mentioned you were paying approximately $25K in fees for $10M, so is your rate .25%? And do you feel for $3M in assets that .5% is a good rate?

I think that is a good rate for $3M. Especially if they do not charge a fee for your "cash" holdings (Treasuries/CD/MM/etc) or your 529s. And are very responsive to your needs.

We have been with our FA for 20+ years. So since we were only worth $1-2M. We chose to stay with them because we trust them. Even when we made the quick switch to UHNW 3 years ago we stayed---because they showed us they could (and would ) manage everything for us, they had access to wealth management team that is amazing. At that level, most of the FA who want your business are slimy and pushy and I didn't want to work with any of them. We interviewed a few just to see and I couldn't' stomach it. They are just annoying and sleezy to me.

I like that we are most likely our FA top client, not just another UHNW/HNW family.

What in tarnation does a wealth management team do?

Mostly it's about adding detailed tax advice (slash avoidance let's be honest), and estate planning. Those usually aren't a major part of traditional financial planning/management.

Not really. Tax advice and estate planning are literally what a financial planner does. This is nothing special and you don't need a wealth management team to get that advice.

But you do need to pay for this wealth management team's salaries. If you are the caring, charitable type, you could find a firm to do similar and donate the savings to the many non-profits that need your money.

No, typical financial planners do NOT provide estate planning when you are higher net worth. Sure, they know when to harvest tax losses, etc. And they know the basics of when the death tax kicks in at federal and state levels (if applicable). But unless they are also a lawyer, they definately do not know the intricacies of UHNW/HNW estate planning.

As far as "WM team salaries", those are at our investment firm, whether we use them or not. When we only had $5M with them, we didn't need (or really qualify ) for the advanced services. Now that we have more $$$ we still don't pay any higher percentage, if anything, we negotiated lower rates over various tiers. So our FA would still be getting our percentage of investments, whether we use these advanced services or not.

Most do NOT need the wealth management team. But once you hit a certain level, you certainly do. And its easiest to have it all "under one roof". Our FA coordinates it all as needed.

[Anonymous]

Anonymous wrote:

Anonymous wrote:I think you have to have 1 - 2MM to get it down to 1%, then it's easier to get down.

I would also look to see if you are paying 1.25% PLUS the fees charged to be in the different funds. That was the surprise to me. With 5MM we were paying .75% with one of the top wealth management funds, but also paying for the different vehicles were were in with other companies. Ex: .75% financial advisor and .03 for VOO that he put us in. (It wasn't actually VOO--we switched to that when we left them--but most funds have their own fees. I would see if that is the case for you.)

We left and are now doing ourselves.

Op here. Thank you for the warning. I will look into this. To my knowledge, we don’t pay other fees but I’ll look into it. And it’s inspiring to see that you’ve made the switch and it’s working out well.

Every single mutual fund has a fee attached.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Our FA is also our CPA. We are paying him .5% annually to manage just under $3M. We have a other assets in other funds (401K, Deferred Comp, Company Stock, Stock Options, 529, donor advised fund, etc.) which he doesn't manage, but still gives advice on allocations and other issues that would have tax implications. Our total investments, including the assets he manages, are about $12M.

He also helped us update our estate plan and made sure we are insured appropriately.

We like the convenience of having a CPA who understands our tax situation manage our funds and advise us on our other funds. My husband is also approaching retirement, so it has been reassuring having someone who can help us plan, which will be in about a year.

+1

Our FA is not our CPA, but they work closely with our CPA and our Estate Planner and everyone involved in our Wealth management team. They are the "glue that holds it all together". Sure I could pay less and manage it myself. But it's nice to just call/email/text and have them manage it for me. That is what you get for your 0.5% for everything they manage (for us it's $~10M). They also advise on our 529, 401K and everything financial even if they are not collecting a fee on that portion. They handle all of our treasury/CD/short term investments with out any fees (that is much more than $10M). Making sure it's all in best options for highest return when they come due. Also follows up when some has been in CDs at banks that have gone under (there have been a few in last 2 years----that happens when you spread it all out to keep FDIC insurance). That means I don't have to have accounts at 20+ banks to manage myself. That part all comes at "no fee" to us. Sure paying $25K+ per year may seem like a lot for most people, but when you are at HNW/UHNW it's just a part of managing your finances. And a great FA makes it all run smoothly. I know, because I used to manage our CD/Treasuries/MM previously and am very happy I don't have to do it anymore.

Thanks for sharing this. You mentioned you were paying approximately $25K in fees for $10M, so is your rate .25%? And do you feel for $3M in assets that .5% is a good rate?

I think that is a good rate for $3M. Especially if they do not charge a fee for your "cash" holdings (Treasuries/CD/MM/etc) or your 529s. And are very responsive to your needs.

We have been with our FA for 20+ years. So since we were only worth $1-2M. We chose to stay with them because we trust them. Even when we made the quick switch to UHNW 3 years ago we stayed---because they showed us they could (and would ) manage everything for us, they had access to wealth management team that is amazing. At that level, most of the FA who want your business are slimy and pushy and I didn't want to work with any of them. We interviewed a few just to see and I couldn't' stomach it. They are just annoying and sleezy to me.

I like that we are most likely our FA top client, not just another UHNW/HNW family.

What in tarnation does a wealth management team do?

Help coordinate your CPA, estate planning, creating a foundation, etc. Not something most people need, but when you hit the UHNW ($30M+) there are many new issues that need to be addressed. We have an estate consultant (not our lawyer) who for no fee will spend hours helping us develop/tweak our estate plans, available for consultation as much as needed. There are also other experts on specific estate subjects/foundation creation/etc that we can consult with as needed. Then we take those ideas to our actual lawyer to draw them up. So basically, rather than paying $400+/hr to discuss complex estate planning (which at that level involves tax planning as well/ tax avoidance for when you die), we do that with him and others from the wealth management team to craft the plan, then just pay the lawyer for 4-5 hours of work. In the last 3 years, we have gotten 50+ hours of consultation for free and only had to pay the lawyer for less than 10 Hours. Given that the main person is actually a lawyer (but not working as a lawyer currently, so not allowed to officially give "legal advice") we are getting top notch consultation for free. It's part of our FA/Wealth management team that becomes available to you when you reach a certain level of wealth. Lots of perks become available at a certain wealth level. They want your business and quite frankly it's much easier to manage it all where everyone works for same company and has access to all your details.

So yes, if you have a net worth of only $2M your estate and wills are very simple. And a simple lawyer familiar with wills will be fine and you can use a good FA. But once you hit $10-15M you typically need more resources available for you.

With 30M + , you have extra options that would require a high level attorney.

Under 10M, your issues are simple and are able to be handled by most financial planners.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I think you have to have 1 - 2MM to get it down to 1%, then it's easier to get down.

I would also look to see if you are paying 1.25% PLUS the fees charged to be in the different funds. That was the surprise to me. With 5MM we were paying .75% with one of the top wealth management funds, but also paying for the different vehicles were were in with other companies. Ex: .75% financial advisor and .03 for VOO that he put us in. (It wasn't actually VOO--we switched to that when we left them--but most funds have their own fees. I would see if that is the case for you.)

We left and are now doing ourselves.

Op here. Thank you for the warning. I will look into this. To my knowledge, we don’t pay other fees but I’ll look into it. And it’s inspiring to see that you’ve made the switch and it’s working out well.

Every single mutual fund has a fee attached.

They all have expense fees. What many do not have are front end or level load fees, which curiously most of the funds OP's FA put her into have.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Our FA is also our CPA. We are paying him .5% annually to manage just under $3M. We have a other assets in other funds (401K, Deferred Comp, Company Stock, Stock Options, 529, donor advised fund, etc.) which he doesn't manage, but still gives advice on allocations and other issues that would have tax implications. Our total investments, including the assets he manages, are about $12M.

He also helped us update our estate plan and made sure we are insured appropriately.

We like the convenience of having a CPA who understands our tax situation manage our funds and advise us on our other funds. My husband is also approaching retirement, so it has been reassuring having someone who can help us plan, which will be in about a year.

+1

Our FA is not our CPA, but they work closely with our CPA and our Estate Planner and everyone involved in our Wealth management team. They are the "glue that holds it all together". Sure I could pay less and manage it myself. But it's nice to just call/email/text and have them manage it for me. That is what you get for your 0.5% for everything they manage (for us it's $~10M). They also advise on our 529, 401K and everything financial even if they are not collecting a fee on that portion. They handle all of our treasury/CD/short term investments with out any fees (that is much more than $10M). Making sure it's all in best options for highest return when they come due. Also follows up when some has been in CDs at banks that have gone under (there have been a few in last 2 years----that happens when you spread it all out to keep FDIC insurance). That means I don't have to have accounts at 20+ banks to manage myself. That part all comes at "no fee" to us. Sure paying $25K+ per year may seem like a lot for most people, but when you are at HNW/UHNW it's just a part of managing your finances. And a great FA makes it all run smoothly. I know, because I used to manage our CD/Treasuries/MM previously and am very happy I don't have to do it anymore.

Thanks for sharing this. You mentioned you were paying approximately $25K in fees for $10M, so is your rate .25%? And do you feel for $3M in assets that .5% is a good rate?

I think that is a good rate for $3M. Especially if they do not charge a fee for your "cash" holdings (Treasuries/CD/MM/etc) or your 529s. And are very responsive to your needs.

We have been with our FA for 20+ years. So since we were only worth $1-2M. We chose to stay with them because we trust them. Even when we made the quick switch to UHNW 3 years ago we stayed---because they showed us they could (and would ) manage everything for us, they had access to wealth management team that is amazing. At that level, most of the FA who want your business are slimy and pushy and I didn't want to work with any of them. We interviewed a few just to see and I couldn't' stomach it. They are just annoying and sleezy to me.

I like that we are most likely our FA top client, not just another UHNW/HNW family.

What in tarnation does a wealth management team do?

Mostly it's about adding detailed tax advice (slash avoidance let's be honest), and estate planning. Those usually aren't a major part of traditional financial planning/management.

Not really. Tax advice and estate planning are literally what a financial planner does. This is nothing special and you don't need a wealth management team to get that advice.

But you do need to pay for this wealth management team's salaries. If you are the caring, charitable type, you could find a firm to do similar and donate the savings to the many non-profits that need your money.

No, typical financial planners do NOT provide estate planning when you are higher net worth. Sure, they know when to harvest tax losses, etc. And they know the basics of when the death tax kicks in at federal and state levels (if applicable). But unless they are also a lawyer, they definately do not know the intricacies of UHNW/HNW estate planning.

As far as "WM team salaries", those are at our investment firm, whether we use them or not. When we only had $5M with them, we didn't need (or really qualify ) for the advanced services. Now that we have more $$$ we still don't pay any higher percentage, if anything, we negotiated lower rates over various tiers. So our FA would still be getting our percentage of investments, whether we use these advanced services or not.

Most do NOT need the wealth management team. But once you hit a certain level, you certainly do. And its easiest to have it all "under one roof". Our FA coordinates it all as needed.

What do you consider higher net worth? Anything under $10M is does not require a special team. Financial planners work with clients under 10M every day. They partner with regular old estate planning attorneys.

You are always paying, with one hand or the other.

[Anonymous]

Anonymous wrote:Ours is 1%, and he does a great job.

Studies have shown that index funds (set it and forget it) beat financial advisors over time.

I hate to break that to you (but they never will).

[Anonymous]

Anonymous wrote:I have met with one a few times who wants to charge us 1.45%. He also shared that he would like us to consolidate several accounts to get a better rate of return, and that he does sometimes get a commission when clients invest in certain products.

Too much! Keep looking.

[Anonymous]

Garret Planning Network is a directory of Fee only advisors. The website tells how they are compensated and what their expertise /certification is.

They all tend to offer a free half hour introductory meeting.

[Anonymous]

Anonymous wrote:Get the fee down to 0.85 to 1.0%

Then, stick with them if you are using them for financial advice too, not just to manage your investments. For example, estate planning, tax minimization strategies (I assume they have suggsted donating appreciated stock to charity insteda of cash right? and they'll do all the paperwork too).

As for comparing returns, it depends on your risk profile. You know, you could've invested in Bitcoin a year ago, and you'd be up 239%.. but at much higher risk. Where a financial advisor can shine is when the market's down, and you don't lose as much as those who bet on a straight S&P500 return because you were diversified. Also they tend to look more at tax implications and avoid getting you stuck with too much taxable dividends.

I think we found the other advisor. You have to have SO much money to need "estate planning" and tax minimization strategy of appreciated stock is hardly rocket science.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I think you have to have 1 - 2MM to get it down to 1%, then it's easier to get down.

I would also look to see if you are paying 1.25% PLUS the fees charged to be in the different funds. That was the surprise to me. With 5MM we were paying .75% with one of the top wealth management funds, but also paying for the different vehicles were were in with other companies. Ex: .75% financial advisor and .03 for VOO that he put us in. (It wasn't actually VOO--we switched to that when we left them--but most funds have their own fees. I would see if that is the case for you.)

We left and are now doing ourselves.

Op here. Thank you for the warning. I will look into this. To my knowledge, we don’t pay other fees but I’ll look into it. And it’s inspiring to see that you’ve made the switch and it’s working out well.

Every single mutual fund has a fee attached.

They all have expense fees. What many do not have are front end or level load fees, which curiously most of the funds OP's FA put her into have.

OP here. Where would I find what we’ve paid in fees? Not his AUM fee (on our 1099) but the fund fees. Thanks!

[Anonymous]

Look up the exact title of the funds he has invested in and see what their load fees and expenses are.

[Anonymous]

Anonymous wrote:Look up the exact title of the funds he has invested in and see what their load fees and expenses are.

Yes, I don't think these appear on the 1099. Front end load fees are taken directly from the funds you are investing.

So If you are investing $10,000 in a fund with a front end load fee of 5%, $500 is taken off the top and given as a commission to the broker, who then invests the remaining $9,500 for you in the fund.

[Anonymous]

Anonymous wrote:Look up the exact title of the funds he has invested in and see what their load fees and expenses are.

Here is an example of the basic Vanguard federal money market fund:

https://investor.vanguard.com/investment-products/mutual-funds/profile/vmfxx#performance-fees

Scroll down to where it says "Expense Ratio" and "Fund-Specific Fees"

The Vanguard money market fund:

"VMFXX 0.11%

Average expense ratio of similar funds — (nothing listed as comparable)

Fund-specific fees

Purchase fee None

Fund family redemption fee None

12b-1 fee None"

For your first fund listed earlier (CMNIX)- Class A shares:

"Gross expense ratio: 1.22%
Maximum Sales Charge: 2.75%"