Indexed Portfolio - Boglehead opinions

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Excluding the costs of the index funds themselves, what is a reasonable annual cost (as a % of assets) for an adviser to charge for a $250K portfolio?

Less than 0.5%
18
62%
Moret than 0.5% but less than 1.0%
8
28%
More than 1.0% but less than 1.5%
3
10%
More than 1.5% but less than 2.0%
0
No votes
More than 1.5% but less than 2.0%
0
No votes
 
Total votes : 29

Indexed Portfolio - Boglehead opinions

Postby Allan Roth » Tue Nov 03, 2009 1:18 pm

I'm working on a column on the costs of indexing and would like your opinion:

Thanks.
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Re: Indexed Portfolio - Boglehead opinions

Postby Boglenaut » Tue Nov 03, 2009 1:27 pm

Allan Roth wrote:I'm working on a column on the costs of indexing and would like your opinion:

Thanks.


I didn't vote.

Advisers should be paid by the hour.
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Postby Alex Frakt » Tue Nov 03, 2009 1:38 pm

What services does the hypothetical adviser provide for the client? I also think you might be skewing the responses by using such a small portfolio, Considering the work and overhead that goes with professional money management, 500k is a more reasonable minimum for an adviser to take on someone on an AUM fee basis. I'd be concerned that anyone taking it on for less is going to find a way make up their costs somehow - to the investor's detriment. Someone with a 250k portfolio is better off paying for advice on an hourly basis.
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Postby EmergDoc » Tue Nov 03, 2009 1:41 pm

Alex Frakt wrote:What services does the hypothetical adviser provide for the client?


Exactly the right question.
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course
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Re: Indexed Portfolio - Boglehead opinions

Postby Allan Roth » Tue Nov 03, 2009 2:45 pm

Boglenaut wrote:
Allan Roth wrote:I'm working on a column on the costs of indexing and would like your opinion:

Thanks.


I didn't vote.

Advisers should be paid by the hour.


I am very biased here, as an hourly adviser, but I completely agree. Nonetheless, even hourly can create some bad incentives such as claiming to need to rebalance too often, creating complex index portfolios, etc.
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Postby ruralavalon » Tue Nov 03, 2009 9:00 pm

Is the advisor just providing a plan, does he/she manage the account, or both? It makes a great deal of difference what the advisor's function is.

IMO a planner should generally charge by the hour or by the project. The portfolio manager might be better compensated on a percentage basis, but I have no real opinion on that.
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Re: Indexed Portfolio - Boglehead opinions

Postby slick_dealer_05 » Tue Nov 03, 2009 9:45 pm

Allan Roth wrote:I'm working on a column on the costs of indexing and would like your opinion:
Thanks.


If you are working on a column, you can mention that the best financial advice can be found on the bogleheads forum free of cost

Seriously...for just a 250K portfolio, there is no need of any advisor
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Postby Triple digit golfer » Tue Nov 03, 2009 9:52 pm

Just something to consider: You're asking that question at a website where the biggest proponents of low-cost investing hang out! :)

I bet if you asked it at other forums people would give you more votes in the higher costs.

I voted 0.5% - 1.0%. I think $2,500 is very reasonable for a $250k portfolio if you can't or don't want to manage it on your own. By using index funds, it's a piece of cake. If using active funds, I'd say even higher costs would be reasonable because you have to keep up on what those fund managers are currently investing in.

As a Boglehead, I use index funds and do it on my own, spending just minutes a few times a year rebalancing.
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Hiring a financial advisor

Postby Taylor Larimore » Tue Nov 03, 2009 10:17 pm

slick_dealer_05 wrote:
Allan Roth wrote:I'm working on a column on the costs of indexing and would like your opinion:
Thanks.


If you are working on a column, you can mention that the best financial advice can be found on the bogleheads forum free of cost

Seriously...for just a 250K portfolio, there is no need of any advisor


In general, this may be true, but there are many investors, regardless of portfolio size, who can benefit from the services of a low-cost competent advisor. I'll list a few of the reasons one might engage the services of a financial advisor:

* Lack of time.

* Lack of knowledge and unwilling to take the time to learn.

* Investor's subject to emotion and impulsive behavior.

* Investor has made mistakes that need correcting.

* Investors with special needs (a trust for a handicap child for example).

* Investors that travel or live abroad.

* Investors with small but complicated portfolios needing fund selection and portfolio tax advice.

* An advisor can distinguish between good and bad advice from friends, media, and yes, the Boglehead forum.

I'm sure professional advisors can give more reasons, but I doubt if "portfolio size" should be the primary criteria for hiring an advisor.
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Re: Indexed Portfolio - Boglehead opinions

Postby tetractys » Wed Nov 04, 2009 12:08 am

Allan Roth wrote:I'm working on a column on the costs of indexing and would like your opinion:

From what I've seen, fee only advisers are pretty open with their costs. Why not ask a few of them what's involved? -- Tet
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Postby Tall Grass » Wed Nov 04, 2009 11:45 am

By the hour or none at all...
"A wise man should have money in his head, but not in his heart." - Jonathan Swift
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