After a passive portfolio is set up - what more to do?

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After a passive portfolio is set up - what more to do?

Postby GeorgePlaten » Fri May 03, 2013 12:49 pm

Hi Bogleheads,

We invested a significant portion (about 2/3s) of our nest egg last year with a well-respected advisor that uses a minimalist approach and charges minimal fees. The AA is simple and, with some help from the market, it's been good to date (nothing like luck, of course).

My question is - now that the portfolio AA is set, I am not sure why I should pay to continue to have the advisor. The approach is passive, so except for reinvesting dividends and other cash, there is not a lot for the advisor to do. I am struggling to understand why I should continue to pay for something that I really do not seem to need very much of.

If the specifics of the portfolio are important let me know and I can provide them.

Thanks!
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Re: After a passive portfolio is set up - what more to do?

Postby gerrym51 » Fri May 03, 2013 12:50 pm

the answer is -drumroll please-be passive.
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Re: After a passive portfolio is set up - what more to do?

Postby GeorgePlaten » Fri May 03, 2013 12:51 pm

Is it necessary to pay to be passive though?
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Re: After a passive portfolio is set up - what more to do?

Postby core5 » Fri May 03, 2013 12:58 pm

Can I ask how much he/she is charging you for management? If he's providing a service such as re-balancing (which normally costs a little bit anywhere) and you're OK with that, I see no problems.

I would consider what percentage you're paying him, too. If you have a $5MM portfolio and you're paying him $20 a year, you're not going to miss that. If you have a $50K and you and you're paying $100 a month, get out now.
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Re: After a passive portfolio is set up - what more to do?

Postby BigFoot48 » Fri May 03, 2013 1:13 pm

You might want to read jay22's comment here: viewtopic.php?f=10&t=88005&p=1685160#p1685160

I think there is no reason for the average investor to pay adviser fees of any amount. It's just too easy to DIY.
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Re: After a passive portfolio is set up - what more to do?

Postby GeorgePlaten » Fri May 03, 2013 1:32 pm

Core5 - the answer is about .35%, which is not high. But the portfolio is large so it amounts to a low 5 figure annual fee - enough for a very nice vacation :^)

I do not mind paying for value - I just don't see rebalancing as such a significant value that it is worth the price - as I see it, I can maintain the AA easily enough by reinvesting in the existing ETFs and other instruments myself once a quarter or once a year. There are less than a dozen instruments in the entire portfolio - (gotta love ETFs, which, of course, have their own fees).
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Re: After a passive portfolio is set up - what more to do?

Postby leonard » Fri May 03, 2013 1:36 pm

GeorgePlaten wrote:Core5 - the answer is about .35%, which is not high. But the portfolio is large so it amounts to a low 5 figure annual fee - enough for a very nice vacation :^)

I do not mind paying for value - I just don't see rebalancing as such a significant value that it is worth the price - as I see it, I can maintain the AA easily enough by reinvesting in the existing ETFs and other instruments myself once a quarter or once a year. There are less than a dozen instruments in the entire portfolio - (gotta love ETFs, which, of course, have their own fees).


Do it yourself - and save.

As an alternative - you could negotiate a flat fee or a lower fee from your current advisor. Perhaps there is a fixed dollar amount you feel reasonable that you wouldn't mind paying for the services the advisor does provide. I think you should do it yourself - but you might want to explore this option.
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Re: After a passive portfolio is set up - what more to do?

Postby patriciamgr2 » Fri May 03, 2013 1:48 pm

Although I DIY, I believe there may be two areas of value provided by an adviser to a passive investor.

1. if the investor or spouse need help "staying the course" when the inevitable volatility occurs, an adviser's counsel might help an investor avoid a costly overreaction to a drop in the market. also, there have been times when it has been difficult for me to rebalance (i don't do it each quarter--with me, it's every 18 mos. unless certain valuation changes occur before then). selling a winner to invest in an asset class hated by me, (& everyone & his brother) is always uncomfortable for me, i admit. It must be done, so I do it--but automating that might be worthwhile (?)

2. if you want access to certain investment vehicles (e.g. DFA) which are not available to the rest of us.
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Re: After a passive portfolio is set up - what more to do?

Postby Rick Ferri » Fri May 03, 2013 1:49 pm

OK. I'm game. I'll defend the other side:

1) The reason you hired the adviser was because you wanted someone else to manage your portfolio.
2) You say you don't need the adviser anymore - than is until something happens in your life or in the markets and you need advice again.
3) When your're dead, who is your spouse going to turn to for help?
4) Most DIY investors do a poor job maintaining their portfolios. Money doesn't get invested. Income doesn't get reinvested. Portfolios are not rebalanced properly or on time. Performance drifts downward like a leaky bucket.
5) Advisers couldn't survive if too many new clients abused them by taking all their research, burning up hours of time, using all the resources of the firm to to create a proper portfolio with full implementation - and then fire them.

Rick Ferri

.
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Re: After a passive portfolio is set up - what more to do?

Postby TomatoTomahto » Fri May 03, 2013 1:50 pm

You can have a great portfolio at a very low cost by reading a book or two (see the wiki for details) and/or just following the advice here.

I don't understand why you'd need a dozen instruments unless your portfolio is into 8 figures (and probably not even then). It sounds like yours is medium/high 7 digit. Enjoy your vacation instead of gifting him one.
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Re: After a passive portfolio is set up - what more to do?

Postby TomatoTomahto » Fri May 03, 2013 1:55 pm

Rick Ferri wrote:OK. I'm game. I'll defend the other side:

1) The reason you hired the manager was because you wanted someone else to manage the portfolio.
2) You say you don't need the manager any more - than is until something happens in your life or in the markets and you need advice again.
3) When your're dead, who is your spouse going to turn to for help?
4) Most DIY investors do a poor job maintaining their portfolios. Money doesn't get invested. Income doesn't get reinvested. Portfolios are not rebalanced properly or on time. Performance drifts downward like a leaky bucket.
5) Advisers couldn't survive if too many new clients abused them by taking all their research, burning up hours of time, using all the resources of the firm to to create a proper portfolio and get it implemented - and then fired them.

Rick Ferri


Rick, with all due respect, I have to disagree with #5. OP already paid his adviser probably $20k from the sounds of it. If the adviser can only survive if fees are paid over multiple years, then their contract should state it.

I can't disagree with points 1 - 4, but if OP feels that he doesn't fit that "type," that's his call. For all we know, his spouse is fine taking care of things after his death, he feels able to handle changing circumstances (or strong enough to stay the course), etc.
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Re: After a passive portfolio is set up - what more to do?

Postby Rick Ferri » Fri May 03, 2013 2:03 pm

Very few client's have "abused" me in this way over the years, but it has happened. We spend many, many hours up-front working with people on the good faith that when they hire us they're going to stick around for a few years so I can make a return on the large time investment on the front-end. We would literally have to close the door and shut down if too many people did this to us.

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Re: After a passive portfolio is set up - what more to do?

Postby nisiprius » Fri May 03, 2013 2:10 pm

It is a problem common to many situations in life where the real need is for occasional episodic professional consultations.

The lawyers don't seem to have cottoned on to this. I've seen a lawyer about five times in my life, each time to have a will re-done, reflecting simple life-related changes in our family situation. For some reason, the lawyers go along with this--a one-time charge for a one-time task. They haven't invented the legal equivalent of the oil change or the dental cleaning. In any other professionak field, the lawyers' office's computer would give you a robocall every six months to "schedule your appointment," and when you got there they would grill you until they could find something in the will, anything, that "needed" to be changed--to keep up with the vibrant, changing, dynamic legal world of today.
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Re: After a passive portfolio is set up - what more to do?

Postby Rick Ferri » Fri May 03, 2013 2:19 pm

I think there might be a confusion with what we do and how we are paid. We are portfolio managers. We're responsible for knowing our clients and managing their assets every day with legal discretion. This is a fiduciary role. It isn't part time or as needed. As such, so we accumulate fees based on average daily balances, just like Vanguard does.

I am not a financial planner who suggests a portfolio, gets paid for the suggestion, and then sends a client on their way to DIY - or not. I'm in a different business.

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Re: After a passive portfolio is set up - what more to do?

Postby BigFoot48 » Fri May 03, 2013 2:25 pm

I will add, regarding my position on DIY being easy for the average investor and Rick's comments, that I don't know if my DW will be "average" after I'm gone, so I have left instructions for her to employ Rick's firm if she feels dealing with our simple portfolio is too difficult. While I'm very happy with Schwab, I don't trust their advisers to make rational Boglehead-type decisions on her behalf, and it will be well worth whatever fees are incurred to take that burden off of her.

I'm currently managing my 86YO mother-in-law's portfolio and see exactly how a person with no experience managing a portfolio needs such help.
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Re: After a passive portfolio is set up - what more to do?

Postby leonard » Fri May 03, 2013 2:39 pm

Rick Ferri wrote:Very few client's have "abused" me in this way over the years, but it has happened. We spend many, many hours up-front working with people on the good faith that when they hire us they're going to stick around for a few years so I can make a return on the large time investment on the front-end. We would literally have to close the door and shut down if too many people did this to us.

Rick Ferri


Hi Rick - then why not have the fees map to the work input in the portfolio. "Match" the upfront effort you put in to the up front fees. Then, have the ongoing fee reflect the ongoing effort.

It seems you are saying that you charge a somewhat higher ongoing management to "recoup" the up front costs. Is that accurate.

btw - I would assume you would feel the need to respond on behalf of this advisor - as I assume your fees reflect the direct value you are adding every time that fee is paid. Seems odd to me you would feel the need to jump in on behalf of the unnamed advisor.
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Re: After a passive portfolio is set up - what more to do?

Postby Bogle101 » Fri May 03, 2013 2:47 pm

what more to do?

Live your life, that's the point of passive investing.

I suggest golf.
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Re: After a passive portfolio is set up - what more to do?

Postby Rick Ferri » Fri May 03, 2013 2:51 pm

We would lose business if we charged upfront fees and management fees because our competitors do not. The only way to recoup our sunk cost is with management fees over time. We have considered some sort of minimum fee at termination if a client quits within the first year, but we haven't done that because only one or two people do this per year.

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Re: After a passive portfolio is set up - what more to do?

Postby leonard » Fri May 03, 2013 3:01 pm

Rick Ferri wrote:We would lose business if we charged upfront fees and management fees because our competitors do not. The only way to recoup our sunk cost is with management fees over time. We have considered some sort of minimum fee at termination if a client quits within the first year, but we haven't done that because only one or two people do this per year.

Rick Ferri


I haven't looked at your fee schedule. Do you adjust your fees down over time to account for the "recoupment"?

Given how transparent you are on this board - I am sure your new customers understand that their ongoing fees repay the up front cost over time.
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Re: After a passive portfolio is set up - what more to do?

Postby Rick Ferri » Fri May 03, 2013 3:24 pm

I'm not looking to end this conversation. My intent was to give the other side of the story.

I think the conversation is important because the OP hired the wrong type of adviser. If he wished to pay for financial planning that included a portfolio recommendation, then he should have hired a hourly-fee planner or someone who charges a flat fee for this type of work. The mistake was made by hiring a portfolio management company who's job is to manage portfolios on an ongoing basis as a legal fiduciary and paid an ongoing fee for doing it.

Here is a simple analogy. You want a cell phone. You can:

1) Buy a 3-year cell plan that includes a free $400 phone because it's rolled into the contract.
2) Buy a $400 phone without a plan and pay for minutes as you use them.

Either one is fine.

What you shouldn't do is buy a 3-year cell plan that includes a free phone, cancel the 3-year contract in the first year, keep the $400 phone and try to pay only for minutes. The cell phone companies couldn't survive if enough people tried this. They base their business model on people sticking with the deal. We do the same.

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Re: After a passive portfolio is set up - what more to do?

Postby bengal22 » Fri May 03, 2013 3:34 pm

For some people it is worth the fee to have someone handle their finances. Sounds like the OP has a good advisor that is not churning accounts for fees. Some people pay someone to do their taxes because they feel more comfortable having someone else do them. And that is perfectly OK. It really depends upon your personality and perhaps how financial savvy you are. DIY may end up losing money versus having an advisor for what they are saving in fees. No right or wrong approach.
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Re: After a passive portfolio is set up - what more to do?

Postby Robert C F » Fri May 03, 2013 4:00 pm

While I don't use a financial advisor. If their fees are reasonable, they may well be worth it, believe some others have handled this well. One of the hardest things I have done is in down markets trade some of the nice safe bond funds and buy the recently hammered sock funds to keep to my asset allocation goals. I'm glad I did now, but a good financial advisor can do this for you. And warn you against chucking your whole plan and selling off during a downturn.

Because I am what I am, my asset allocation strategy is probably more complex than it needs to be. When I die, will leave the name of a few good advisors or firms, for my executors and beneficiaries. Also a list of books (e.g Ferri, Bernstein, Boglehead's Guide) to help them if they want to self manage. My beneficiaries can choose which approach suits their temperament, aptitudes and abilities better.
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Re: After a passive portfolio is set up - what more to do?

Postby jimkinny » Fri May 03, 2013 4:27 pm

OP, I think every one has made valid points. There is no right or wrong answer .

I suspect that a major contribution that an adviser such as Rick Ferri and other's make is keeping you on track with a good plan when your instinct is to bail out in market downturns.

Consider your ability in stressful times to stay with a plan. It is easy in the last 4 years to stay the course but there will be really bad months ahead.

I suspect many of us talk a good game but........

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Re: After a passive portfolio is set up - what more to do?

Postby Call_Me_Op » Fri May 03, 2013 6:27 pm

IMO, if you had to hire an advisor in the first place, you are not capable (or ready) of doing it on your own - and shouldn't fire him or her.
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Re: After a passive portfolio is set up - what more to do?

Postby DiscoBunny1979 » Fri May 03, 2013 7:03 pm

GeorgePlaten wrote:Core5 - the answer is about .35%, which is not high. But the portfolio is large so it amounts to a low 5 figure annual fee - enough for a very nice vacation :^)

I do not mind paying for value - I just don't see rebalancing as such a significant value that it is worth the price - as I see it, I can maintain the AA easily enough by reinvesting in the existing ETFs and other instruments myself once a quarter or once a year. There are less than a dozen instruments in the entire portfolio - (gotta love ETFs, which, of course, have their own fees).


-------------------------------

First thing that comes to mind is whether this is all taxable or in some kind of IRA. Does the 'adviser' provide any other services - like cost basis accounting or reporting to a tax accountant for reporting of sales transactions? If it's a taxable account, who does the taxes to report gains/losses?

.35% is just the fee that he charges. What are the fees of the ETFs/Funds?

Another reason why someone might want to hire an adviser or financial planner is because sometimes people should not do for themselves what they do for other people. What occupation does the OP have?
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Re: After a passive portfolio is set up - what more to do?

Postby Calm Man » Fri May 03, 2013 8:59 pm

Rick of course makes a good point. If you become truly capable of managing by yourself then the question boils down to: do I keep the adviser because he helped set me up and did a lot of work or 2) I feel bad about the time he spent but what am I paying for if I don't need it. Many take the second approach and as Rick points out if too many did, he would have to close up. It reminds me of when I went to an accountant once many years ago to do a tax return for me. I then realized I could do it myself and then did. I don't know how to advise OP as feelings of loyalty, etc play into it and Rick's points are part of this. I am personally a DIY and will not ever pay a penny to anybody. I used to listen to a guy named Bob Brinker and stole a line from him something like: " I look at my adviser every day in the morning in the mirror and know I can trust him." Good luck with your decision OP.
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Re: After a passive portfolio is set up - what more to do?

Postby Bradley » Fri May 03, 2013 10:05 pm

Advisors are paid to set up a plan (strategic allocation ), implement that plan ( buy the appropriate products in the proper amounts ) and MAINTAIN the plan. The products and proportions are often posted/published/revealed by advisors and can be implemented by many. The most important benefit of employing an advisor is the fact the advisor is responsible for and will MAINTAIN the plan. This is where the client benefits most. The emotions felt by investors during volatile markets have and will cause many to abandon their plan at just the wrong time. A competent advisor will act as a circuit breaker and talk you back from the cliff. If your spouse has little knowledge or interest in managing investments, it is a good idea to have some one you have already vetted and trust to take over in the event of your demise. Additionally, your advisors is much better equipped to research and keep abreast of new products which may be better than current products used in the portfolio. Tax lost harvesting, institutional pricing and peace of mind are including in price.

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Re: After a passive portfolio is set up - what more to do?

Postby Five Scoop » Fri May 03, 2013 10:06 pm

OP, most important person to look out for in life is yourself (and your family). If the OP does not see a need for keeping his money with the advisor he should take over control of his portfolio and save the fees. Doing so might burn a bridge and he may not be able to easily go back to the firm if he develops a need later in life but he can always find another firm or pay a one-time fee for future advice. Saving the fees annually will add up over time and that can be money that would improve the financial outlook of the OP or his family.

I don't think leaving the OP would be "abusing" the advisor by leaving. There is an expectation in any business that a client can leave at any moment. No business has a 100% client retention rate. If there are no termination fees for severing the relationship then that is on the advisor (who made the contract), not the client.
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Re: After a passive portfolio is set up - what more to do?

Postby flipflopliving » Sat May 04, 2013 3:19 am

Call_Me_Op wrote:IMO, if you had to hire an advisor in the first place, you are not capable (or ready) of doing it on your own - and shouldn't fire him or her.


+1

I also agree with Rick that perhaps you signed up for the wrong payment option for you. Let's see if we can find a middle ground. How much are you paying in underlying find expenses? Let's say you are in low cost index funds and paying your advisor .35 over and above, that seems like an advisor that has your best interest in mind and relatively speaking charging a small percent. Worth it considering the above comment. My two cents.

Either way, pick and stick.
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Re: After a passive portfolio is set up - what more to do?

Postby GeorgePlaten » Sat May 04, 2013 9:00 am

Rick Ferri wrote:OK. I'm game. I'll defend the other side:

1) The reason you hired the adviser was because you wanted someone else to manage your portfolio.
2) You say you don't need the adviser anymore - that is until something happens in your life or in the markets and you need advice again.
3) When you're dead, who is your spouse going to turn to for help?
4) Most DIY investors do a poor job maintaining their portfolios. Money doesn't get invested. Income doesn't get reinvested. Portfolios are not rebalanced properly or on time. Performance drifts downward like a leaky bucket.
5) Advisers couldn't survive if too many new clients abused them by taking all their research, burning up hours of time, using all the resources of the firm to to create a proper portfolio with full implementation - and then fire them.

Rick Ferri

.


Sorry for the delay in responding (still have the day job). Thanks to all for the valuable feedback. I will respond to 2 posts. First, to Rick:

1) The reason you hired the adviser was because you wanted someone else to manage your portfolio.

We did - and we have received good value for the advice. At the time, I asked myself the question of why I would pay someone to purchase ETFs, which already do so much of the heavy lifting, but there are a lot to choose from and the adviser picked them for us. I am happy to pay for that.

2) You say you don't need the adviser anymore - that is until something happens in your life or in the markets and you need advice again.

I ran a company for almost 30 years and staying the course was essential to its success. I know that up is great, and down is bad, but in the end, staying the course is the only way to succeed and I feel confident I can do that. I have a play account where I trade options and other stuff and have doubled that account in the 6 months since I opened it (to over 6 figures). I have not thought once about what might have happened if I had managed the rest of the money. I think I can resist that temptation (especially with help from my wife :) )

3) When you're dead, who is your spouse going to turn to for help?

My wife managed the financial function for the company we ran - I do not think she would be at a loss to deal with my departure (she helped choose our adviser and could always go back to him if something happens).

4) Most DIY investors do a poor job maintaining their portfolios. Money doesn't get invested. Income doesn't get reinvested. Portfolios are not rebalanced properly or on time. Performance drifts downward like a leaky bucket.

A good point and one reason I posted the question. I have been wondering how much work is actually involved. If I were still working to make the money, and new money would be going in regularly, it would be a lot harder. In my case, any new money I do make is going to be spent, not invested. I am retiring (sort of) and will have time to devote to this (one more thing to keep me busy as far as my wife is concerned).

5) Advisers couldn't survive if too many new clients abused them by taking all their research, burning up hours of time, using all the resources of the firm to create a proper portfolio with full implementation - and then fire them.

I would not say I am "firing" my adviser - I respect his advice and plan to stay long enough to make sure he gets paid for the value provided. My own clients occasionally took my design and initial development work and ran with it. Such customers often made great references. My feeling, somewhat like yours, Rick, is there are plenty of people who do need or want help and you can make a good business serving them. If my wife and I were not in agreement on the portfolio, for example, an adviser would be critically important.


---
The post regarding "anyone who has to ask would not be able to do it" is, of course, often true, but in my case, it was simply that - as many of you probably know - the time where you are selling a business and integrating with a large company is not a really convenient time to learn about the latest investment vehicles (I got my MBA in the early 80s). I am smart enough to know what I do not know and made the decision to go with this adviser for that reason. I am transitioning out soon and will have the time to maintain what has been set up.

---
On another note, it is certainly possible I got the wrong kind of adviser, and could have saved money by having someone just advise me on which things to buy for a passive portfolio (actually, I am not sure if it would have cost more or less). I asked my adviser if there was a termination fee and he said no. If he felt he was at risk he could have turned down the business.

Thanks for the great feedback.
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Re: After a passive portfolio is set up - what more to do?

Postby Dandy » Sat May 04, 2013 9:09 am

The easy answer is you don't need an advisor. Before you jump ship you might want to make sure you understand your risk tolerance. When the market plunges will you have the exerience/fortitutde to rebalance? Do you understand the investment basics e.g. when interest rates rise bonds lose value - but not permanently, the favored location of assets in taxable and tax advantaged accounts etc. Some advisors can help clients throught these issues - some just look for the fee.

If you have reasonable knowledge and fortitude there is no obvious reason why you couldn't manage a passive portfolio and rebalance and save the fee.
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Re: After a passive portfolio is set up - what more to do?

Postby Rick Ferri » Sat May 04, 2013 9:53 am

GeorgePlaten wrote:It is certainly possible I got the wrong kind of adviser, and could have saved money by having someone just advise me on which things to buy for a passive portfolio (actually, I am not sure if it would have cost more or less). I asked my adviser if there was a termination fee and he said no. If he felt he was at risk he could have turned down the business.


No doubt this is an adviser's business risk. We just doesn't know if a potential client is serious about hiring us or just looking for free information. And when we invest a lot of time (and money) in a new client, we don't know if it's their intent to say "Thank-you-very-much, I'll take it from here." We try to avoid both of these situations, but it happens.

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Re: After a passive portfolio is set up - what more to do?

Postby BolderBoy » Sat May 04, 2013 2:11 pm

Rick Ferri wrote:
GeorgePlaten wrote:It is certainly possible I got the wrong kind of adviser, and could have saved money by having someone just advise me on which things to buy for a passive portfolio (actually, I am not sure if it would have cost more or less). I asked my adviser if there was a termination fee and he said no. If he felt he was at risk he could have turned down the business.


No doubt this is an adviser's business risk. We just doesn't know if a potential client is serious about hiring us or just looking for free information. And when we invest a lot of time (and money) in a new client, we don't know if it's their intent to say "Thank-you-very-much, I'll take it from here." We try to avoid both of these situations, but it happens.

Rick Ferri


I think that Rick makes some excellent points. DIY is not for everyone (probably not for the majority, for example).

But Rick isn't your typical advisor, either. At least not in my experience of having had 4 terrible advisors (all market timers.)
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Re: After a passive portfolio is set up - what more to do?

Postby Rick Ferri » Sat May 04, 2013 2:35 pm

But Rick isn't your typical advisor, either. At least not in my experience of having had 4 terrible advisors (all market timers.)


Thanks, but I am not special. I like to earn money just like the next guy. The difference is that I admit publicly that the more I earn the less my clients earn. So, what's the compromise? What's a fair portfolio management fee an adviser should charge so the clients get their fair share of market returns and the adviser is satisfied?

I think the answer has to do with the level of service an investor wants. If a person knew what they wanted before going to an adviser this would make it easier.

A lot of people don't want advice. They hire an adviser for portfolio management only and don't care about anything else. I've talked with hundreds of people who are just seeking access to DFA funds. That's all they're looking for. We're not interested in being a middleman to DFA in this way, but some advisers will take this business all day long. The fee for mechanical portfolio management and no advice should be 0.10% - 0.25% per year.

At the other end of the spectrum is a client who wants to meet face-to-face every quarter over lunch, and receive frequent calls of reassurance anytime the market has a tough day. That type of arrangement is a much higher fee. If this what the clients wants, they're going to pay for it. I'm not interested in providing this high level of service, but advisers who do a lot of hand-holding should get 0.75% to 1.0% per year.

And then there is everything in the middle. We were charging a very low fee and providing some investment planning services. Then we discovered through a survey last year that most clients wanted MORE contact and MORE advice. So, we hired MORE advisers with special knowledge and had to raise our fee slightly to pay for this.

I think the answer is to know what level of service you're looking for and how much you willing to pay for it. I wish there was a website or a guidebook that broke adviser service offerings out and the cost, but these tools don't exist yet, at least not in any usable or unbiased form.

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Re: After a passive portfolio is set up - what more to do?

Postby staythecourse » Sat May 04, 2013 2:49 pm

Even though this is a DIY forum I agree there are MANY, MANY DIY investors who would be better off with professionals running the portfolio. Mike Tyson has the BEST line in investing history when he once said something to the effect of, "everyone thinks they have the perfect plan until they get punched in the face".

When the going goes good it doesn't take a rocket scientist to reinvest dividends over and over and over and ....

Now how many of those same folks were doing the same in 2008???

I actually think FA have a huge potential role, but the problems with most is the focus on things we know don't make a difference, I.e. active management. They should be focusing on tax planning, TLH, preventing behavioral mistakes, estate planning, etc...

The more I learn about investing and see human mistakes around me I can't say having someone with an unemotional view on your money is not such a bad idea for MANY, MANY folks.

Good luck.
...we all think we're above average investors just like we all think we're above average dressers... -Jack Bogle
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Re: After a passive portfolio is set up - what more to do?

Postby nedsaid » Sat May 04, 2013 7:27 pm

I have been mostly DIY as an investor but I have sought advice.

It is important to get an objective look at what you are doing. No matter how much you know, there is always something you have overlooked or not considered.

A good advisor has seen hundreds if not thousands of real life investment portfolios. The advisor has seen the stupid things that people do. The advisor also has seen and knows what works and what doesn't work in real life. A lot of strategies look great on paper but somehow don't work in real life. So really much of what you are paying for is the advisor's experience with real money, real clients, and real situations.

You really only learn when real life dollars are at stake. Similiations and gaming don't really drive home the hard lessons.
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Re: After a passive portfolio is set up - what more to do?

Postby Rick Ferri » Sat May 04, 2013 7:45 pm

After many years working with individual investors, there isn't much I haven't seen or heard. The most common mistake is believing that someone knows something about the future. People then try to figure out who knows what, and this leads to all kinds of potential mistakes. About this time I step in and intervene with a few facts. That tends to defuse the idea. The portfolio is left intact and we all go on our way until next time.

The best quote about investor behavior that I've heard recently is that people can't predict markets, but markets can predict people.

When the market is down, people tend predict bad things are going to happen, and when the market is up, people tend to predict good things will happen. Yet analysis show there is no correlation between where market movements and what actually happens over the next quarter or next year. It's a random walk. See Should the “Anxious Index” Make Investors Anxious?

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