Need Advice: Asset Management of Family Portfolio

Ok, this is getting silly. Everyone knows the sixty-year old advisor that really does nothing, but live on the illusion that his clients think he is providing value. He does nothing but play golf and pretend to be working. He is as much a finance professional as my car salesman. I agree super complicated estate matters need high paid professionals, I’m just saying in most case the client is better off paying fee-for-service.

so you have a team with an advisor and a CFA. let’s say the CFA is the whole 20 hours. so the firm gets $200. let’s say the advisor gets 55%, so $110. the advisor pays the CFA say $80/hr average, $100/hr when he’s on billable hours and $40 when he’s not, something like that. the advisor makes $30/hr but has to pay for a handful of other things like terminal costs, some marketing and office stuff. so at the end of the day, if the advisor is generally doing a similar thing as the CFA, he’s only making maybe 10-20% more than CFA but he built the business and is taking huge business risk. now, the advisor could always hire a noodlebrain and pay him $30/hr and laugh his way to the bank while his clients get terrible service. hmm.

i’m not arguing for this guy’s offering. i’m arguing for my offering. the guy probably has a whole bunch of $hit accounts anyway. i have solid clients who value what i do because it’s tangible and because my benchmark is very low. if i charged 1% on $10M, this would be a debate but at 0.5%, i’m close to the passive option and provide more, better advice than any alternative other than doing it all yourself.

^Yup. For MLA’s most complicated client who needs hundreds of hours of work and apparently is in the 52% marginal tax bracket…maybe they break even when ‘all in’ at 0.50%.

The other 99.99999% of clients are getting ripped on wrap fees, its not even a close argument.

using an actual number grounded in reality like $400/hr, that is only 72hrs per year for break-even. plus they don’t have to do ANYTHING. your scenario they are doing something for at least 10 hours a week. our happiest clients are the ones who pay us the most, in dollar terms, because the alternative is much more expensive.

^ We are seeing a lot of new regulatory rules currently being implemented in the financial industry specifically addressing disclosure of fees.

Advisors are running a business, just like a Dr, dentist, eye Dr, Accountant and Lawyer.

@ Ghibli: I’m not sure what your past experiences are in dealing with Advisors but your perceptions here are off the mark. Sorry.

Everybody thinks its so easy to manage money and be an Advisor. Really? Why is the burn out rate so high for new Advisors?

SUNE BRO

So give us some names of the products your clients are in?

All mine are in stuff with zero or negative expense ratios. They do have to pay tiny trading commissions, from which I see nothing. I invest in everything from single stocks, essentially make my own etfs with even better tax management, to bonds to CEFs and BDCs to options. Our execution is passive and usually generates a little apha, compared to a typical mutual funds negative 0.4%.

I just manage the SMAs according to an IPS. They all pay experts, CPAs and attorneys, fee-for-service for their financial planning. They get my two cents on the planning topics for free, which saves them millions, seriously. And my fee is more than covered by mathematical alpha generation. I can demonstrate 1-2 percent a year without even considering if I beat a passive strategy. And it’s a bonus if my asset allocation and/or security selection is superior. Who knows. BS would argue that it is definitely not superior. :slight_smile:

I know. It’s tough to be in high pressure sales. No sweat. No eat.

GOOG, MSFT, JNJ, WFC, individual bonds.

why would we charge craploads and then buy product?

no trading commissions.

FWIW, here’s a link which discusses that the average rate for an advisor is between $125 - $350 per hour.

http://www.bankrate.com/finance/savings/financial-planners-not-just-for-millionaires-anymore-1.aspx

Or google ‘average hourly cost for financial advisor’ and you’ll get similar rates. So, at $400 per hour, you are quite elite.

isnt SUNE the lockdown best

So they’re essentially getting a professionally managed active mutual fund specific to their risk tolerances and everythng else for 0.5%? You might have a point. Sounds like a value. More typical is a fee on top of product from what I’ve seen. Maybe the OP should give you a call. Your distorted politics would turn me away as a client though. You don’t seem to think clearly on those matters. Would make me nervous that you might lapse when dealing with my affairs.

you’re talking about a client with $10M in investable assets. far from average. our $500/hr rate is in CAD so yeah near the top of the range as would be expected. you can go to your local bank branch and get some community college kid to give you advice on your massive estate or you can get a professional who not only can do basic arithmetic, which i’m sure the community college kid would struggle with, but has a near unmatched knowledge of all planning aspects. most “planners” have no idea what they’re doing on the investment side and you’re lucky if they’re any good at the rest.

haha. don’t let politics get in the way of business. it is a very good value. there’s a reason why we never lose clients.

@ Ghibli:

Ya…that would suck. I’m not in that type of business model.

Mike i think the industry does a very poor job of educating and training young men and women who want to be in the profession. The burnout rate is so high because most advisors are foced to sell sell sell right from the start, rather than learning and educating themselves. This industry is perfect for apprenticeships, yet very few exist. A college grad that is interested in becoming an advisor should sign on with someone local and work as an apprentice for years before being expected to support him/herself on their own. Unfortunately there are very limited opportunities for something like that.

Young, smart, thoughtful college grads would be great for the industry, but the only people that can survive in the current structure are those that are willing to sell a product to anyone that will listen. A kid that graduates and goes to work for Northwestern Mutual or someplace like that is taught that insurance soves all problems. So they’ll go out and sell life insurance to anyone they can find. Do they care if they’re selling insurance to someone who doesn’t need it or if they might be over-insuring that person? of course not, they’re pulling in a $500/week salary and need the cash.

The industry chases off many of those that would do well and attracts many with less than ethical intentions. Just how it is.

As soon as the compensation is dependent on what asset or product is chosen, the “advisor” is now a salesman. Certainly not a finance professional

the industry is changing, albeit slowly. new entrants in the business are much smarter and more qualified than before. these new entrants are being given the key to large businesses with the mission to grow these businesses mostly by absorbing smaller advisors and/or their assets or partnering with other savvy advisors. i think 30 years from now, the ability to hustle and bustle your way to the top will not exist and the only path will be to get onto a large team with a large AUM and move your way up by exhibiting expertise and trustworthiness. i think the advisory world will more and more closely reflect the asset management world with time.

/\ There will always be those willing to hustle and those willing to be hustled.