- quote -

You are probably right, but clients who cannot unemotionally understand
percentages and their proper relationships are exactly the people who
shouldn't be managing thier own money. Look at a more extreme
situation, what if the guy had $5M (court settlement, inheritance,
savings, etc..) and only makes $25K annually? If his investments (self
directed or otherwise) cost him even 50 bps and he has spent his ENTIRE
year's salary on investment related expenses. If the investor follows
the problematic logic expressed above, he would not invest at all (for
he could undoubtedly not do so using only a % of his salary). It would
be a stretch to say this investor is acting unemotionally and in his
best interest.

I could argue that if he did take the time to educate himself, he would
hopefully learn early on the flaw in his original logic and then what
does he do? He has already invested some time and expense into learning
(a sunk cost), but he also realizes that as a percentage of assets, 1%
is not much and he should consider using a financial planner and better
invest his time elsewhere (opportunity cost). What a conundrum!

- quote -

I agree. We do scale down fees as the account balance grows. There is
simply not that much more you can offer a $2.5M client than you can a
$1.5M client. Because of that it is hard to justify charging an extra
$10K a year. We usually start dropping the fees around $1.25M.

po.ning[at]gmail.com wrote:

- quote -

There seems to be two components to this:

If someone is a "millionaire next door" extreme saver, and has $2M in
his portfolio, but earns $75K, it would seem to me that this fellow
would be far more inclined to view the standard 1% fee in comparison to
his own income, and decide that the $20K in savings is worth educating
himself in matters financial. A doctor earning $500K/yr with a similar
amount in savings, would value his own time differently, and would no
sooner manage his own money than mow his own lawn.

Does advice given to the owner of a $500k portfolio differ that much
from $5M? Of course when a new investor with a few thousand dollars gets
started, diversifying can be a struggle. But once a certain level is
reached and the portfolio is diversified to a level all would agree,
then how much do things change by adding another zero to the number?
I've read the question "I have $5 million dollars to invest, and it
seems to me that instead of giving this to one planner to invest, I can
offer two planners $500K each, and invest the remaining $4 million using
a combination of how the two planners are investing my first million."
The answer turned out to be one of ethics, that the planners were being
taken advantage of. But given the limited space of that Q&A, I wondered
more about the resulting portfolio impact, left undiscussed.

BTW, with Gates worth $40B or so, the 1% would be $1M per day just to
manage his money. I'm sure most planners would settle for a bit less.
JOE

<po.ning[at]gmail.com> wrote in message
news:1166308445.964903.182130[at]16g2000cwy.googlegroups.com...

- quote -

I would be happy to give Bill regular advice for 1 percent of his assets on
a yearly basis. On second thought I would do it for one-half of 1 percent.

Don wrote:
- quote -

The more money you have, the more advice you'd need.

Chris Fasano wrote:

- quote -

Because, many advisors aren't interested in managing $25K-$50K and
understandably, can't spend much time on such accounts. By the time the
potential client has enough to be of interest ($250K-$500K) the 1% is
quite a bit. I'd spend the $30 to have my oil changed. For that matter,
I'd pay to mow my lawn, but, as discussed here many times, someone with
the time and inclination can save a small fortune by being their own
planner.
JOE

"rick++" <rick303[at]hotmail.com> wrote in message
news:1166204720.359352.223920[at]73g2000cwn.googlegroups.com...

- quote -

Yes, avoid the "to good to be true" offers at all costs. It should be a
reflex. But it is a trap that is hard to avoid, because the sales pitches
can be subtle. Any sane person will realize that at offer of "25%
guaranteed" is too good to be true, but may be taken in by the offers of
maybe 15% or 12%, or 10% (in the present investing climate). The fact that
is hard for many people to learn is that ANY sales pitch offering
better-than-average returns necessarily comes with higher-than-average risk.

"kastnna" <kastnna[at]auburnalum.org> wrote in message
news:1166194085.250490.114970[at]80g2000cwy.googlegroups.com...

- quote -

That is good. But how do inexperienced investors tell the difference between
a biased advisory service and an ethical one like yours? If they know little
about the business, they are usually at the mercy of chance. They have to
study and learn to make informed decisions, and by that time they might as
well just study and learn how to select financial products on their own.

If someone already had a million dollars from a couple
decades of patient saving and investing, its like they
already know how plan or hired somebody years ago.

This doesnt preclude the "sudden rich"- people who
luck out in business, home sales, IPOs, lotteries,
inheritances, insurance settlements, etc.
I've heard the latter is about 20% of people with
money, but that number could off.

Being middle age and a home owner I get these
"free dinner" investment invitations several times
a year. One sponsor told be they get mailing lists
of age and zip code of homeowners, then mail out
invitations. Usually a swanky restaurant and not
having done one in couple years might turn me.
Investment fads do change with time, and Im curious.

- quote -

I've been investing for a quarter century and have noticed a certain
"fadishness"
among sources I've consulted. My own situtation is sort of a quilt of
past fads,
more or less avoiding the too-good-to-be-true ones. I find niether
myself nor
the specialists have all the best answers.

If someone already had a million dollars from a couple
decades of patient saving and investing, its like they
already know how plan or hired somebody years ago.

This doesnt preclude the "sudden rich"- people who
luck out in business, home sales, IPOs, lotteries,
inheritances, insurance settlements, etc.
I've heard the latter is about 20% of people with
money, but that number could off.

Being middle age and a home owner I get these
"free dinner" investment invitations several times
a year. One sponsor told be they get mailing lists
of age and zip code of homeowners, then mail out
invitations. Usually a swanky restaurant and not
having done one in couple years might turn me.
Investment fads do change with time, and Im curious.

- quote -

We don't run our office solely on a commission based plan. We handle
insurance (not P&C), annuities, estate planning, etc. and they all have
commissions. In those cases you're right, the only thing standing
between the client and an overpriced commission is the FP's ethics;
which can be suspect. As for our clients' assets (which is the scope of
this discussion) we do not receive any commission for asset based
transactions (buying, selling, rebalancing, etc.) The 1% fee is it. We
sell mostly Vanguard ETFs and iShares.

- quote -

That's the big question every investor must ask. The "risk of
receiveing poor advice" still exists if they go it alone (maybe more
so). They are most likely no more experts than a GOOD FP.

WYU,
You're right we are getting a little off topic.

But as for a get rich quick scheme, it is not. However, it is not
nearly as easy as the OP made it out to be. Our office has three agents
(including myself). Between us we have ChFC, CLU, CFP, and an upcoming
CPA certs. The office has been in business for 30 years (primarily as
Life Insurance reps - yuck!). Almost 3 years ago I was hired because
they were moving away from insurance and towards asset based financial
planning. As someone earlier posted, we already had a 1200 person
client base of life insurance policies that made us much more
successful than we otherwise would be. Its easier to work with people
with whom you already are friends. We still service the old insurance
policies, but we focus all new business towards HNW clients. We have
had resounding success. We have not reached the 100 with $1M goal yet,
but we're close and well on pace. In our case though, that's 3 agents
sharing 100 with an entire office of support helping us. After expenses
I take home nowhere near what the OP is implying.

To the original poster, if you were hoping this was an easy path to
riches, please think twice. Going into it with that attitude only makes
it harder for the rest of us down the road when we have to convince
clients that we're worth fee, because they had a bad experience with a
less honest FP.

Good luck

On Thu, 14 Dec 2006 13:55:18 -0600, kastnna wrote:

- quote -

This is an excellent reply and analysis of the financial planning
business. I often use the same analogy of, something like, "most people
in this room are capable of changing their own oil if you wanted, and a
lot of us did that when we were teenagers. You could to to Auto Zone, buy
the oil, and the filter, and the filter wrench, and the special pan to
hold the used oil, because you can't just dump it in the backyard anymore,
and maybe you'd have to buy car stands to get underneath the engine,
because you can't fit anymore either. You could do it if you wanted; it's
not rocket science, but who changes their own oil these days? Surely, a
lot of people do, but don't most of us just take the
car to Jiffy Lube or Pep Boys? This is just like investing. Many
people spend the time and effort to manage their own portfolios, because
there's nothing so secret about it. Anyone can learn to do it. But the
real question is why would you want to go through all that time and effort
when you can just hire someone to do it for you? Someone who does it for
a lot of other people, and can probably do it faster and, in the end, for
less cost than you could do it yourself."

I find people relate to this analogy, and I've developed a few others as
well. As you mentioned, success in this business is getting in front of a
lot of people to whom you can relate your analogy and convince that you're
a dedicated and professional advisor. And this, it seems, is a lot easier
said than done for most financial planners (using the term loosely).

"kastnna" <kastnna[at]auburnalum.org> wrote in message
news:1166126092.418409.33460[at]80g2000cwy.googlegroups.com...

- quote -

The assumption here is that a planners' advice would result in the same
financial returns you could otherwise achieve on your own if you bothered to
take the time to learn. But, apart from the question of convenience, a
common objection is that a financial planners' advice can be biased because
of commissions received from the products recommended. A basic fact is that
all investment has some risk, whether you do it yourself or let someone do
it for you. The real question is: If you let someone to do it for you, does
the convenience and time saved outweigh the risk of receiving poor advice?
Is there "selection of adviser" risk superimposed on market risk?

In article <1166119326.852475.257100[at]f1g2000cwa.googlegroups.com> ,
po.ning[at]gmail.com wrote:

- quote -

I have been had here twice. First, I didn't get the joke, a pretty
good one at that. Second, you nailed me on my advice. It looks
like Mr Gates is on his own, or he has to use the Pat Robertson
method (ie, talk one on one with God).

-john-

--
================================================== ====================
John A. Weeks III 952-432-2708 john[at]johnweeks.com
Newave Communications http://www.johnweeks.com
================================================== ====================

I certainly agree that for the vast majority of people, they just don't
have the will/discipline/desire to learn about finances or taxes or
whatever. The average "FP" charging 6% sales load or 2% expense ratio
is still way better than never investing at all. People probably are
more willing to stick to plans they feel are coming from experts.

But in terms of this thread, I don't feel the people here were
commenting about the usefulness of FPs. The replies were more in the
vein of complete puzzlement a person looking at the FP field couldn't
run the numbers and see how the idea looked like yet another
late-night-get-rich-quick-infomercial. 100 clients w/ 1M each -- that's
100M of funds for a FP to manage. 100M is the low-end of some mutual
funds and at 1% expense charge, that's a 1M yearly salary for a FP.
Anybody telling you this is a reasonable expectation is selling you
something you shouldn't buy. More in the realm of reality, perhaps you
start with 100 clients and over a 20 year timeframe, about 10 of have
enough discipline to save/invest their way to liquid millionaire
status. The other 90, the average will probably be under 100K. That's
still a ~150K yearly salary -- absolutely fantastic for a FP who should
be able to plan/save/invest their own way to millionaire status.


kastnna wrote:
- quote -

Jessica,

Posters on these usenet's will bombard you with thoughts on how
wasteful Financial Planner's are. Fact is, for better or worse, the
majority of the country does seek advice from financial planners (I am
using the term Financial planner VERY loosely; not just CFPs). Superior
returns are not necessarily the reason either.

Its no different from learning how to repair your own car or
representing yourself in court. The principles of investing are not
secrets. You COULD take the time to educate yourself and save the
expense of paying others, but most people would rather have the time to
devote to other things. Time is a scarce resource, just like money. Its
those people who will value your services and if you can convince them
that you are skilled and diligent, they WILL pay for your services.

Maybe once your successful you can learn medicine in your spare time.
Self-surgery ought to save you a fortune : )

- quote -

Bill Gates and others in his league do not need advice about investing. They
are more concerned with advice on the complexities of how to give it away.

John A. Weeks III wrote:
- quote -

I am responding, tongue in cheek, to your comment that you never take
advice from someone who is less wealthy. Since no one is more wealthy
than Gates, he must be floundering in the investment world with no
advice but himself.


- quote -

<wyu[at]talisys.com> wrote in message
news:1166052281.519438.140300[at]73g2000cwn.googlegroups.com...
- quote -

I'm going to add to your line of reasoning.

I didn't have 1 million dollars to invest but as a young male with no debt I
was willing to give 20% of my paycheque to an FP (I have 50% of my cheque to
invest). Unfornately I tried asking co-workers and friends they had any and
I got blank stares. I guess that says alot about the company I keep. My
family is blue collar and has little to invest so no help there with advice
either.

I talked with 3 different FP's and found one I would like to work with.
Two months later he left his office to take another position with the
company and now I have to do it all over again with the woman who is taking
over my portfolio. Now I may have to reject her ideas and go hunting for
another FP. I dunno. Maybe she'll have a more suitable plan then the guy
she replaced. I'll find out first meeting.

Basically I tell the potential FP my 30 year plan and what will they do to
see that my 30 year plan can get fulfilled and what cannot. My 30 year
plan on paper shows about 3 million dollars in growth and assets. In other
words the FP has the potential to build from scratch a portion of that 30
year 3 million dollar plan. I'm a young single guy who should be able
handle downturns or a couple of poor investment choices and losses along the
way so the FP can cover their ass with a client like me right?

Maybe that is the way you get million dollar clients. Work with them for
the long term and turn them into millionaires.

I'm above this mark, but I'm not going to hire anyone to do a work that
I would probably do myself better than you. Only if you can prove that
you can do a better job than me -i.e, you have a better methodology
than mine to estimate the intrinsic value of a company (I'm a convinced
value investor)- I may consider to hire you and pay the 1 percent fee.
Green Jeans wrote:
- quote -