Am I overpaying my financial advisor?

[Anonymous]

Anonymous wrote:It should never be more than 1%. But I agree asset under management fees are generally not worth it unless you really are allergic to doing this yourself, in which case, I would just go with Vanguard Personal Advisors or similar, which runs 0.30% for all index to 0.40% for mix of indexes and individual investments.

But at $750,000 you can do it yourself. The clearance list would not be an issue for a broad based index fund like the S and P 500, so you wouldn't need to worry about that. If you need bonds, you can do a government bond fund, which also should not need clearance. So I don't think that service is worth much. And really, why does anyone need to invest outside of these indexes unless it a hobby or passion (clearly not your case)?

A backdoor Roth is super simple and takes very little time once a year through an account at Vanguard, Fidelity, or Scwab. Google whitecoatinvestor backdoor Roth for step by step instructions.

I would move everything at once to Vanguard or the other two. Pay for the really cheap personal advisor option and drop it once you are comfortable doing everything on your own.

Do you have sizable IRAs? Then a back door Roth is going to cost you $$$ in taxes. Beware of internet posters bloviating about which they know little. Your advisor may be worth his fee. Most great advisors don’t take on accounts of your size so that may be his fee for smaller households.

[Anonymous]

Anonymous wrote:

Anonymous wrote:It should never be more than 1%. But I agree asset under management fees are generally not worth it unless you really are allergic to doing this yourself, in which case, I would just go with Vanguard Personal Advisors or similar, which runs 0.30% for all index to 0.40% for mix of indexes and individual investments.

But at $750,000 you can do it yourself. The clearance list would not be an issue for a broad based index fund like the S and P 500, so you wouldn't need to worry about that. If you need bonds, you can do a government bond fund, which also should not need clearance. So I don't think that service is worth much. And really, why does anyone need to invest outside of these indexes unless it a hobby or passion (clearly not your case)?

A backdoor Roth is super simple and takes very little time once a year through an account at Vanguard, Fidelity, or Scwab. Google whitecoatinvestor backdoor Roth for step by step instructions.

I would move everything at once to Vanguard or the other two. Pay for the really cheap personal advisor option and drop it once you are comfortable doing everything on your own.

Do you have sizable IRAs? Then a back door Roth is going to cost you $$$ in taxes. Beware of internet posters bloviating about which they know little. Your advisor may be worth his fee. Most great advisors don’t take on accounts of your size so that may be his fee for smaller households.

Looks like we found the percentage based advisor who is worried about his business drying up. From the OP:

"handling of our backdoor Roth IRAs each year"

If they are doing it each year that's almost surely post-tax contributions to a $0 IRA, up to the annual IRA max, and then 1 or 2 days later doing the Roth conversion of the whole IRA. Nothing complicated about it once you have done it, and the tax implications are zero other than a couple of forms that tax software will do for you, based off of forms Vanguard gives you in February each year. I do it every year in January, takes 5 minutes on a Monday, and then 5 minutes on Wednesday.

[Anonymous]

Anonymous wrote:

Anonymous wrote:It should never be more than 1%. But I agree asset under management fees are generally not worth it unless you really are allergic to doing this yourself, in which case, I would just go with Vanguard Personal Advisors or similar, which runs 0.30% for all index to 0.40% for mix of indexes and individual investments.

But at $750,000 you can do it yourself. The clearance list would not be an issue for a broad based index fund like the S and P 500, so you wouldn't need to worry about that. If you need bonds, you can do a government bond fund, which also should not need clearance. So I don't think that service is worth much. And really, why does anyone need to invest outside of these indexes unless it a hobby or passion (clearly not your case)?

A backdoor Roth is super simple and takes very little time once a year through an account at Vanguard, Fidelity, or Scwab. Google whitecoatinvestor backdoor Roth for step by step instructions.

I would move everything at once to Vanguard or the other two. Pay for the really cheap personal advisor option and drop it once you are comfortable doing everything on your own.

Do you have sizable IRAs? Then a back door Roth is going to cost you $$$ in taxes. Beware of internet posters bloviating about which they know little. Your advisor may be worth his fee. Most great advisors don’t take on accounts of your size so that may be his fee for smaller households.

OP already is doing backdoor Roths through her advisor. So it is fair to assume, the FA is putting up the limit in an IRA that has been zeroed out and backdooring that to a Roth IRA, which again zeros out the IRA.

All set up for her to do it next year.

Do you work for the industry?

[Anonymous]

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.

[Anonymous]

Financial advisor for under $1M is ridiculous. Just throw it in a 0.1% fee Target Retirement fund for whatever horizon matches your risk tolerance.

[Anonymous]

Op, you're paying over $10,000 a year for investment results that are worse than if you just put everything in index funds. Why are you even talking about trying to talk them down so you're only spending $6,0000 a year to get worse results than you can get yourself?

[Anonymous]

Anonymous wrote:Op, you're paying over $10,000 a year for investment results that are worse than if you just put everything in index funds. Why are you even talking about trying to talk them down so you're only spending $6,0000 a year to get worse results than you can get yourself?

So.. your risk tolerance is index funds? Which index?

For example, the S&P 500 was down 18% in 2022. Some people don't have that level of risk tolerance.

[Anonymous]

Anonymous wrote:

Anonymous wrote:An advisor is not there to lose your money. They go safe, but your money is lost to inflation and fees.
Can you find 2019 annual return? Not 'since', but just for 2019.

OP here. In 2019 it was 20.8%.

Are you happy with that? S and P 500 funds, which are fairly safe and need no advisor, went up over 30% in 2019.
I don't think you are completely happy or you wouldn't be here. I made 144% with one asset since August and 44% since February 28 with another stock. i missed out on a lot more. so, it wasn't like I got lucky. Lucky would have been buying the better one. I knew they were going up. I only have about 6 stocks/crypto.
With so few, I have time to study them and keep an eye on them. I'm not saying you need to go that extreme. I actually don't think mine is extreme at all. I'm in the top assets of the day.
Since you have quite a lot of money, there is not reason why some of it can't take some more risk. Putting everything in Voo is already a good move. Get that clearance for Voo. Get rid of your advisor and done.
Once I told an advisor that I was willing to lose the $13k I gave them and they put me in a stock fund. How in the world do I ever lose money in the stock fund? That's their idea of risky while mine was one stock and/or crypto. I did not ask them to protect me. I asked them to risk it all and they didn't.
At minimum, make sure they follow your risk tolerance with some of the money.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Op, you're paying over $10,000 a year for investment results that are worse than if you just put everything in index funds. Why are you even talking about trying to talk them down so you're only spending $6,0000 a year to get worse results than you can get yourself?

So.. your risk tolerance is index funds? Which index?

For example, the S&P 500 was down 18% in 2022. Some people don't have that level of risk tolerance.

Yeah, if you’re closer to retirement.

OP only has $700,000. Invest it in a broad index fund and don’t peak for years.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Op, you're paying over $10,000 a year for investment results that are worse than if you just put everything in index funds. Why are you even talking about trying to talk them down so you're only spending $6,0000 a year to get worse results than you can get yourself?

So.. your risk tolerance is index funds? Which index?

For example, the S&P 500 was down 18% in 2022. Some people don't have that level of risk tolerance.

There’s only one that matters…VTSAX and chill. Pay your monthly bills and then plow whatever’s left over into VTSAX without fail. There’s simply no need to ever look at your account balance if you’re consistent, only to check for a tax loss harvesting opportunity on a really bad day or near the end of December.. You can thank me later.

[Anonymous]

The advisor is stealing your hard earned wealth. That's the reality.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Op, you're paying over $10,000 a year for investment results that are worse than if you just put everything in index funds. Why are you even talking about trying to talk them down so you're only spending $6,0000 a year to get worse results than you can get yourself?

So.. your risk tolerance is index funds? Which index?

For example, the S&P 500 was down 18% in 2022. Some people don't have that level of risk tolerance.

There’s only one that matters…VTSAX and chill. Pay your monthly bills and then plow whatever’s left over into VTSAX without fail. There’s simply no need to ever look at your account balance if you’re consistent, only to check for a tax loss harvesting opportunity on a really bad day or near the end of December.. You can thank me later.

VTSAX was down 19% in 2022. I realize markets have ups and downs, but if you ask a lot of people if they are willing to invest in an investment that can lose up 20% a year, many will say they don't have that level of risk appetite.

[Anonymous]

Anonymous wrote:

Anonymous wrote:OP, a better option would be to meet with a financial planner, that will go over your estate plan, all of your insurances, tax planning , retirement planning and investment management for a year. After the year, you can decide if you need them further. If your life is not complicated, you might not need to see a financial planner till you are a few years from retirement. This approach will save you money in the long run.

OP here. This is what our FA did the first time we met with him. Isn’t it the same thing or very similar?

It depends on the level of diligence that was provided. How long have you been with them? Can you tell us investments the advisor put you in and how much money roughly is in them?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:OP, a better option would be to meet with a financial planner, that will go over your estate plan, all of your insurances, tax planning , retirement planning and investment management for a year. After the year, you can decide if you need them further. If your life is not complicated, you might not need to see a financial planner till you are a few years from retirement. This approach will save you money in the long run.

OP here. This is what our FA did the first time we met with him. Isn’t it the same thing or very similar?

It depends on the level of diligence that was provided. How long have you been with them? Can you tell us investments the advisor put you in and how much money roughly is in them?

OP there are fee only and advice only financial advisors. You are with, I think, a fee only advisor. What that means is that he is helping you with your financial planning, charging you only that 1.25% asset under management (AUM) fee, and is not collecting commissions on the products he is selling to you. (If he is charging commissions in addition to the AUM fee, flee immediately; the advisor is not fee only.)

An advice only financial advisor gives you advice only for your financial planning, which you then execute. Typically, you pay such advisors by the hour or a set fee for a complete financial plan. Even among advice only advisors, there are differences. Some will charge a fee like $5000 for a comprehensive financial plan and then charge by the hour for a further update if you need it. Others will charge a set fee for a particular project that would be much lower. Still others will charge an annual fee for the upfront plan and ongoing advice--some of these could be quite high like $5000 to $6000 a year.

I am strictly DIY but am in the process of engaging a fee-only advisor for a particular set of tax issues I am facing. In the words of one well known fee-only advisor, investing is easy, taxes are hard! This will cost me less than $1000.

If you already have received a comprehensive plan from your financial advisor covering the topics the PP listed, all you need to do is execute it yourself using Vanguard or similar. It helps if you have already determined your risk tolerance and the corresponding asset allocation (that is, split between stock and bonds) that fit your situation and risk profile. A common split is 60/40. I have a generous pension and have an estate maximization objective, so mine is 100/0 (aside from a healthy emergency fund buffer).

If you have a good grasp of your financial plan but feel you need some hand holding, you could go with something like the cheap Personal Advisors Service from Vanguard or a similar service from Schwab or Fidelity as had been suggested earlier.

[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.

I would assume the 1.25% is in addition to the fund expense fees. In fairness, you have to pay those even if you DIY.

+1. Surprised this response is so far down the list. Total cost may be more than 1.25%.

Also, although there are fund fees for DIY we don't know whether the FA is using high fee funds or funds with front/back loads so the costs of DIY may be much less.