wessnjoe[at]netscape.net wrote:
- quote -

There seem to be some misconceptions about what advisors do for their
fees. This is in part self-inflicted, because of the industry emphasis
on performance, but I think a good advisor won't hang his hat on that
alone. I think the "are you beating the market, net of your fees?"
approach can be a valid criteria for a pure money-manager, but most
advisors aren't pure money managers.

In my practice (fee-only) I bill based on what makes the most sense for
the work contemplated. Sometimes that means hourly fees, like when there
isn't any pool of assets to manage and it's more of a "planning" kind of
question. But most often it means ongoing asset-management fees. There
may or may not be a goal of increasing returns, and a lot of the work I
do has nothing to do with that. I think many advisory practices are
similar.

Example - phone call: "Taxes came out higher than expected and I need
$X, where should I get it?" With an ongoing client I know the cost basis
of every holding in the portfolio, the target investment mix, the plans
for sales in the coming months, and the current-year tax considerations.
And I know something about each specific holding. All of those factors
work into answering the question of what to sell. And I know all that
because it's an ongoing client who pays me every quarter to keep track
of it, and to have me available on the other end of the phone.

As an hourly project it wouldn't get done in time, and might have cost a
couple thousand dollars in research time. With a haphazard selection of
"what to sell," short-term gains might have been triggered, or AMT on
other income for 2004, or the portfolio might have gone way out of
whack, or who knows what.

All of that has nothing to do with beating the market, and the question
"did the portfolio do better than the S&P500?" is somewhat irrelevant to
the question of whether my fee was justified. It's hard to quantify the
value of that kind of work, but clients want it done (and are willing to
pay for it).

The OP mentioned 1.5% plus the costs of what sound like no-load mutual
funds. Depending on the expense levels of the funds and the services
being performed that could add up to a big bill for very little work, or
be a bargain. It really depends on what kind of work is contemplated.

-Tad

In article <D1Afc.11825$GT3.5553[at]okepread05> ,
Brent D. Gardner, ChFC <bgardner20[at]cox.net> wrote:
- quote -

You cannot argue that a figure is incorrect, and at the same time
argue that if it were correct, it was for one point in time only. That
is contradictory. Pick an argument, and stick with it. Else you come
off as "I was never married. But it was only for a short time."

<wessnjoe[at]netscape.net> wrote in message
news:48CFFE95.346CAD5B.00ACC7AA[at]netscape.net...
- quote -

Hourly fee financial advice is a non-starter for most. Why? The answer is
exceedingly simple: Talent, like capital, flows to where it is best
compensated, and it stays where it is well treated.

Talent in the investment advisory business has NEVER flowed to hourly fees,
and probably never will. The best in the business charge fees based on
assets under management. Period. End of discusssion, as there is no
successful argument to the contrary.

Plus, there is no basis in fact to support an hourly fee arrangment as
superior. It simply does not exist.

With the advent of segregated accounting programs for separate accounts, one
can bypass the scandal ridden mutual fund industry entirely, starting with
as little as $25,000, with total transparency of ALL fees, including
brokerage costs.

Finally, the 85% figure is incorrect. If it ever was correct, that was one
point in time, only. Anyone that uses one data point to support an argument
in this business is destined for the losing side of the litigation lottery,
with a guaranteed humiliation at the hands of seasoned professionals.

Brent D. Gardner, ChFC
Chartered Financial Consultant
http://members.cox.net/brentdgardner1378/

"Be ever questioning. Ignorance is not bliss. It is oblivion. You don't go
to heaven if you die dumb. Become better informed. Learn from other's
mistakes. You could not live long enough to make them all yourself." - Hyman
George Rickover (1900-86), Admiral, US Navy, advocated development of
nuclear subs & ships

The Chartered Life Underwriter (CLU) and Chartered Financial Consultant
(ChFC), designations owned and exclusively offered by The American College,
signify the highest standards of academic study and professional excellence
in the financial services industry.

My 2 cents is that in such a market 1.5% is going to be a sizeable
fraction of everything you make. I would rather see you pay a
CFP an hourly fee to discuss your goals and your financial state,
and come up with an investment portfolio that you can trust for
the long term. I would have this person concentrate on no-load
funds, and low-expense index funds as a core. This way you will
get to keep most of your money. Have your accounts in a low-fee
brokerage.
I would also suggest going a little up the learning curve so
that you become comfortable with making the occasional change yourself
as your circumstances change. Please note that 85% of all the experts
running mutual funds have historically been unable to equal the
performance of a simple S&P500 index fund that has 0.2% annual fee.
Joe Weinstein


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