Getting father-in-law off of UBS & its 1.5% AUM fee

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TinkerPDX
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Getting father-in-law off of UBS & its 1.5% AUM fee

Post by TinkerPDX » Tue Sep 19, 2017 8:06 am

I have seen lots of good suggestions here about helping some family member or another see the light of focusing on lower fees and diversification.

My father-in-law is a classic case of paying for poor performance; his UBS advisor charges him 1.5% (even though his portfolio is 7 figures), and has him, from the little bits I've seen, in funds with an average management fee of over 1%. For someone at the start of retirement who I believe is at 40-60, that means more than half of his expected return is going to the snake.

He's pretty sensitive about it and I try not to bring it up too much, but whenever there's an opportunity or it comes up naturally, I try to move him a little bit. DMIL would love to get him off the UBS guy; she gets it.

A thing he pushed back with lately was "if it's such a bad idea, then why do most people do it?"

I was able to find at least some data on how much money is in index/passive vs. active funds (which I can't find again now), and while it showed that we aren't yet to most money being in index funds, that is at least the trend. So the answer there is that cheap index funds are a relatively recent innovation, and the market is responding by moving money into them. (If someone can point to solid data on this, I'd appreciate it)

I have not been able to find data on how much money is self-managed vs. advisor-managed -- any idea where I can find that data?

John Laurens
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Re: Getting father-in-law off of UBS & its 1.5% AUM fee

Post by John Laurens » Tue Sep 19, 2017 8:33 am

Beyond the "what do you receive for the $25,000 per year per million invested?" there is probably not a lot you can say or do with a FATHER IN LAW. Tread lightly young fella.

Regards,
John

cas
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Re: Getting father-in-law off of UBS & its 1.5% AUM fee

Post by cas » Tue Sep 19, 2017 8:46 am

TinkerPDX wrote:
Tue Sep 19, 2017 8:06 am
I was able to find at least some data on how much money is in index/passive vs. active funds (which I can't find again now), and while it showed that we aren't yet to most money being in index funds, that is at least the trend. . . . (If someone can point to solid data on this, I'd appreciate it)
As far as the data question, Morningstar puts out a monthly (and yearly) report on assets flows, sliced and diced all different kinds of ways, including active/passive. They have been changing their website around so that I'm having problems getting at these reports now-a-days. But, if I google "asset flows morningstar filetype:pdf", here's a review of 2016 (published January 2017) that seems to be publicly available and have active/passive data of the type you seem to want:

"Morningstar DirectSM Asset Flows Commentary: United States" (Jan 11, 2017)
https://corporate.morningstar.com/us/do ... an2017.pdf

As far as the interpersonal aspects ... well, that's another ball of wax that I'm not addressing in this reply.

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Re: Getting father-in-law off of UBS & its 1.5% AUM fee

Post by Jack FFR1846 » Tue Sep 19, 2017 8:55 am

Fees are constantly going down everywhere. Maybe take your average annual fee % and do a quick comparison for him. If it were me, I'd say "you're paying 2.5% in fees in total. On your million dollar investment, that's $25,000 a year. Not a really nice car, but a Subaru Crosstrek Limited after negotiation. Every year. On my portfolio, I'm paying 0.035% average, so for the same million dollars, I'm paying only $350 or the price of 10 tanks of gas." Let's say you keep this money for 3 years. You'd have $75k to buy a pretty nice E350. By the way, is your adviser driving an E350 or is he combining your fees and several other clients' fees to drive an S class?
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delamer
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Re: Getting father-in-law off of UBS & its 1.5% AUM fee

Post by delamer » Tue Sep 19, 2017 3:47 pm

Have you thought about steering them toward the Vanguard Personal Advisor Services?

Then it becomes "Here is a less expensive way to do what you are already doing." Rather than a "You are doing this wrong. I will show you a better way."

deltaneutral83
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Re: Getting father-in-law off of UBS & its 1.5% AUM fee

Post by deltaneutral83 » Tue Sep 19, 2017 4:10 pm

1.5% AUM on a million, wow, adviser probably rakes what, 80% of that, so 1.2%?

J G Bankerton
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Re: Getting father-in-law off of UBS & its 1.5% AUM fee

Post by J G Bankerton » Tue Sep 19, 2017 4:20 pm

TinkerPDX wrote:
Tue Sep 19, 2017 8:06 am
A thing he pushed back with lately was "if it's such a bad idea, then why do most people do it?"
Most people in his circle may do it but not in our circle. Send him here but with a father-in-law you may not even be able to lead him to water.
deltaneutral83 wrote:
Tue Sep 19, 2017 4:10 pm
1.5% AUM on a million, wow, adviser probably rakes what, 80% of that, so 1.2%?
That"s one client out of hundreds. :moneybag

NotWhoYouThink
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Re: Getting father-in-law off of UBS & its 1.5% AUM fee

Post by NotWhoYouThink » Tue Sep 19, 2017 4:45 pm

Ridicule.

Don't make fun of your FIL, of course, that would be rude. And don't dwell on the subject every time you see him. That would be tiresome. But every month or so (or every quarter or so, depending on how often you see him), throw out a couple of one-liners you've heard here.

(From livesoft, I think), you can mention you heard that the UBS motto is "Turning your money and our experience into our money and your experience."

Bring up Fred Schwed's iconic question - "Where are the customer's yachts?" - when he mentions his advisor. Or use Taylor Larimore's story about his former friend and financial advisor who used to take him sailing every year. Until Taylor quit employing him as an advisor, at which time the invitations and friendship ended.

Your FIL is not responding to earnest well-meant advice from you. Taking your advice means admitting he's been doing it wrong all these years. But if he thinks people are laughing at him behind his back as they take his money, that might cause him to look into it a bit more.

And if he doesn't change, let it go. I thought my in-laws could have used more exercise and fewer desserts, but I kept my mouth shut about it.
Last edited by NotWhoYouThink on Wed Sep 20, 2017 8:39 am, edited 1 time in total.

Sharpematt
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Re: Getting father-in-law off of UBS & its 1.5% AUM fee

Post by Sharpematt » Tue Sep 19, 2017 6:42 pm

That fee seems quite high for a fully managed relationship. Most people on this website don't understand advisory fees very well particularly for 7+ figure accounts.

The expense ratio for investments is also how large wire houses get paid for a variety of ancillary work that comes with the fund expense. For example these are things that good advisors provide at no charge in addition to what you pay to the fund or SMA:

-Trust and Estate planning
-Education account advice and selection
-Referrals to service providers; specifically CPAs and attorneys
-Access to unique private equity deals. PE has returned better than any stock market on a net basis over long timeframes.
-OTC hedging on large single name equity positions
-block trading algorithms for selling volume disruptive sized lots
-custom bond ladders with actual advice on the issuer
-tax loss harvesting
-Far better service (they know your situation and will proactively work with your CPA at tax time to take you out of the loop entirely if you request it). Also, you have their personal cell not a 800 number with a random contact from another state.
-Access to unique private events that are designed for clients to share business ideas and grow their network with very valuable contacts
-One contact for all issues. For example you can call someone and say find me the best rate on a 7 year ARM. You can also call that person and say I need to be a durable power of attorney on my mothers account. One person tasked with making your requests happen. No call transfers. No wait time. No sitting on hold. No calls to follow up and see if it actually happened.
-Custom reporting that fits your specific desires. You can say here's an Excel file of my personal balance sheet I created. I'd like you to populate this monthly and email it to me. No discount broker would ever do that.
-the ability to quickly create, open, and fund entity accounts in a time crunch.

Each of those services comes at no charge in addition to what someone pays for asset management.

I could go on forever on why some people use advisors. I can tell you it's no coincidence people with $10mm+ don't just toss their money in a three fund portfolio. These people are not idiots and understand the trade offs. Often time I see Bogleheads just considering the value of an advisor as their ability to allocate assets to various mutual funds. If that's all they are offering you, then yes it is a bad deal.

Perhaps it would be helpful to understand what your father in law desires out of his financial advisor.

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unclescrooge
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Re: Getting father-in-law off of UBS & its 1.5% AUM fee

Post by unclescrooge » Tue Sep 19, 2017 6:52 pm

deltaneutral83 wrote:
Tue Sep 19, 2017 4:10 pm
1.5% AUM on a million, wow, adviser probably rakes what, 80% of that, so 1.2%?
nah, more like 30-40%. That's why there's so much turnover in the industry. Once you're managing $400-500 million, you want to keep a large slice of the pie so you'll move to anyone offering you an extra 5%.

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Re: Getting father-in-law off of UBS & its 1.5% AUM fee

Post by unclescrooge » Tue Sep 19, 2017 6:57 pm

TinkerPDX wrote:
Tue Sep 19, 2017 8:06 am
I have seen lots of good suggestions here about helping some family member or another see the light of focusing on lower fees and diversification.

My father-in-law is a classic case of paying for poor performance; his UBS advisor charges him 1.5% (even though his portfolio is 7 figures), and has him, from the little bits I've seen, in funds with an average management fee of over 1%. For someone at the start of retirement who I believe is at 40-60, that means more than half of his expected return is going to the snake.

He's pretty sensitive about it and I try not to bring it up too much, but whenever there's an opportunity or it comes up naturally, I try to move him a little bit. DMIL would love to get him off the UBS guy; she gets it.

A thing he pushed back with lately was "if it's such a bad idea, then why do most people do it?"

I was able to find at least some data on how much money is in index/passive vs. active funds (which I can't find again now), and while it showed that we aren't yet to most money being in index funds, that is at least the trend. So the answer there is that cheap index funds are a relatively recent innovation, and the market is responding by moving money into them. (If someone can point to solid data on this, I'd appreciate it)

I have not been able to find data on how much money is self-managed vs. advisor-managed -- any idea where I can find that data?
Ask him if he thinks his advisor is a fiduciary.

After you explain what that means, and he says of course he is, tell him to call the advisor up tomorrow and ask for it in writing.

I had a friend do that, and the answer he got from UBS was "sometimes". :mrgreen:

J G Bankerton
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Re: Getting father-in-law off of UBS & its 1.5% AUM fee

Post by J G Bankerton » Tue Sep 19, 2017 7:03 pm

unclescrooge wrote:
Tue Sep 19, 2017 6:57 pm
Ask him if he thinks his advisor is a fiduciary.
Good advice. That should put an end to it if FL truly understands that means he is not put first when it comes to investing his money.

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Re: Getting father-in-law off of UBS & its 1.5% AUM fee

Post by celia » Tue Sep 19, 2017 8:06 pm

TinkerPDX wrote:
Tue Sep 19, 2017 8:06 am
A thing he pushed back with lately was "if it's such a bad idea, then why do most people do it?"
Why does he think "most people do it"? Maybe his friends do it, but that is not "most people". Maybe the broker's other clients do it, but that is not "most people".

The people who keep paying an advisor like that are most likely those who are older and "comfortable" with the way things are. They resist change because that involves some effort on their part. They're the ones who are happy that their portfolio made 8% during the time the stock market grew 12% (including distributions of dividends, capital gains). Their advisor has put them in a portfolio that looks so complicated that they don't understand it all. (I wouldn't be surprised if your FIL had 30+ holdings and the advisor churned 3 or 4 a year to generate some commissions.)

I remember talking to an advisor back in the 70s who "only" charged 8% a year. I asked how would I be able to grow my assets with fees like that? He responded because they know how to grow assets more than 8%. We would be able to keep the excess. :!: We got out of there as fast as we could.

Advisor fees have come down a lot, but still....

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Re: Getting father-in-law off of UBS & its 1.5% AUM fee

Post by tibbitts » Tue Sep 19, 2017 8:36 pm

To me one issue here is past performance. Yes, we know past performance shouldn't matter, but if the broker is beating some reasonable benchmark after his fees over a long term, and that's possible, don't even think about arguing. Then there is spending, which you haven't addressed. If you sincerely believe those fees will impact you by having to support him in the future, then you can have that talk. But if your FIL is living on 1%, let it go. Sometime we get these posts and then eventually somebody mentions "oh incidentally he has a pension and social security that pay all his expenses."

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Re: Getting father-in-law off of UBS & its 1.5% AUM fee

Post by J G Bankerton » Tue Sep 19, 2017 9:25 pm

tibbitts wrote:
Tue Sep 19, 2017 8:36 pm
To me one issue here is past performance.
OP, show him the total return of VOO and compare it to his returns.
500 Index Fund Adm 1 year 16.19% 3 year 9.51% 5 years 14.30%.
His returns will be hundreds of basis points lower.

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Re: Getting father-in-law off of UBS & its 1.5% AUM fee

Post by LadyGeek » Tue Sep 19, 2017 9:36 pm

This thread is now in the Investing - Help with Personal Investments forum (portfolio help).
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Re: Getting father-in-law off of UBS & its 1.5% AUM fee

Post by deltaneutral83 » Wed Sep 20, 2017 8:24 am

tibbitts wrote:
Tue Sep 19, 2017 8:36 pm
To me one issue here is past performance. Yes, we know past performance shouldn't matter, but if the broker is beating some reasonable benchmark after his fees over a long term, and that's possible, don't even think about arguing. Then there is spending, which you haven't addressed. If you sincerely believe those fees will impact you by having to support him in the future, then you can have that talk. But if your FIL is living on 1%, let it go. Sometime we get these posts and then eventually somebody mentions "oh incidentally he has a pension and social security that pay all his expenses."
I agree with you, but major gains (read: small caps) from 1975-1982(have to check my years) that dominated the S&P is certainly no justification for not indexing today and pretty much the last twenty years when indexing went semi mainstream. While the numbers from the last 40 years of 4-6% of managers beating the S&P net of fees is bleak, I think it's going to be more like 1-2% of money managers the next 40 years due to the million reasons discussed here daily.

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Re: Getting father-in-law off of UBS & its 1.5% AUM fee

Post by TinkerPDX » Fri Sep 29, 2017 1:25 pm

Great thoughts from all, thanks!
delamer wrote:
Tue Sep 19, 2017 3:47 pm
Have you thought about steering them toward the Vanguard Personal Advisor Services?

Then it becomes "Here is a less expensive way to do what you are already doing." Rather than a "You are doing this wrong. I will show you a better way."
Exactly where I'd like to get to - he'll never want to DIY it, or to use a pure robo advisor, but I think he could be comfortable with this.
cas wrote:
Tue Sep 19, 2017 8:46 am

As far as the data question, Morningstar puts out a monthly (and yearly) report on assets flows, sliced and diced all different kinds of ways, including active/passive. They have been changing their website around so that I'm having problems getting at these reports now-a-days. But, if I google "asset flows morningstar filetype:pdf", here's a review of 2016 (published January 2017) that seems to be publicly available and have active/passive data of the type you seem to want:

"Morningstar DirectSM Asset Flows Commentary: United States" (Jan 11, 2017)
https://corporate.morningstar.com/us/do ... an2017.pdf
Thanks!
NotWhoYouThink wrote:
Tue Sep 19, 2017 4:45 pm
Ridicule.

Don't make fun of your FIL, of course, that would be rude. And don't dwell on the subject every time you see him. That would be tiresome. But every month or so (or every quarter or so, depending on how often you see him), throw out a couple of one-liners you've heard here.

(From livesoft, I think), you can mention you heard that the UBS motto is "Turning your money and our experience into our money and your experience."

Bring up Fred Schwed's iconic question - "Where are the customer's yachts?" - when he mentions his advisor. Or use Taylor Larimore's story about his former friend and financial advisor who used to take him sailing every year. Until Taylor quit employing him as an advisor, at which time the invitations and friendship ended.

Your FIL is not responding to earnest well-meant advice from you. Taking your advice means admitting he's been doing it wrong all these years. But if he thinks people are laughing at him behind his back as they take his money, that might cause him to look into it a bit more.

And if he doesn't change, let it go. I thought my in-laws could have used more exercise and fewer desserts, but I kept my mouth shut about it.
Been on this strategy approximately, and will eventually give up - but I like the idea with the quips, and I've been trying to ridicule the FA industry, not him. We currently live together pending completion of their ADU/small house in the back yard, so there's plenty of opportunity...
Sharpematt wrote:
Tue Sep 19, 2017 6:42 pm

I could go on forever on why some people use advisors. I can tell you it's no coincidence people with $10mm+ don't just toss their money in a three fund portfolio. These people are not idiots and understand the trade offs. Often time I see Bogleheads just considering the value of an advisor as their ability to allocate assets to various mutual funds. If that's all they are offering you, then yes it is a bad deal.

Perhaps it would be helpful to understand what your father in law desires out of his financial advisor.
We're talking about a ~$2mm portfolio here, and he's getting nothing but placement into high-fee funds and advice to time the market. I think it's really just that he's been an expert in his field, so he's comfortable relying on "experts" in other fields.
unclescrooge wrote:
Tue Sep 19, 2017 6:57 pm
Ask him if he thinks his advisor is a fiduciary.

After you explain what that means, and he says of course he is, tell him to call the advisor up tomorrow and ask for it in writing.

I had a friend do that, and the answer he got from UBS was "sometimes". :mrgreen:
Have used this angle once or twice - he's an attorney so he should understand this well, but it hasn't gotten through. Worth repeating, good reminder.
J G Bankerton wrote:
Tue Sep 19, 2017 9:25 pm
OP, show him the total return of VOO and compare it to his returns.
500 Index Fund Adm 1 year 16.19% 3 year 9.51% 5 years 14.30%.
His returns will be hundreds of basis points lower.
I'm sort of building up towards getting my hand on his statements so I can run an apples:apples with appropriate index-based allocation, and minus the FA fee.

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Pajamas
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Re: Getting father-in-law off of UBS & its 1.5% AUM fee

Post by Pajamas » Fri Sep 29, 2017 1:31 pm

Give him a book to read and realize that you can lead a horse to water but you can't make it drink. That is especially true if the horse is your father-in-law and your mother-in-law hasn't been able to do it. :beer

rgs92
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Re: Getting father-in-law off of UBS & its 1.5% AUM fee

Post by rgs92 » Fri Sep 29, 2017 1:33 pm

Personally, I suggest that if he is comfortable with it, I wouldn't say anything. It could be much more costly if he changed to something more self-directed, got nervous, and started buying/selling actively. If this was a clear fraud situation or some very high cost product like a variable annuity, that maybe would be a different story, but that's not the case.

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Re: Getting father-in-law off of UBS & its 1.5% AUM fee

Post by limeyx » Fri Sep 29, 2017 3:22 pm

Sharpematt wrote:
Tue Sep 19, 2017 6:42 pm
That fee seems quite high for a fully managed relationship. Most people on this website don't understand advisory fees very well particularly for 7+ figure accounts.

The expense ratio for investments is also how large wire houses get paid for a variety of ancillary work that comes with the fund expense. For example these are things that good advisors provide at no charge in addition to what you pay to the fund or SMA:

-Trust and Estate planning
-Education account advice and selection
-Referrals to service providers; specifically CPAs and attorneys
-Access to unique private equity deals. PE has returned better than any stock market on a net basis over long timeframes.
-OTC hedging on large single name equity positions
-block trading algorithms for selling volume disruptive sized lots
-custom bond ladders with actual advice on the issuer
-tax loss harvesting
-Far better service (they know your situation and will proactively work with your CPA at tax time to take you out of the loop entirely if you request it). Also, you have their personal cell not a 800 number with a random contact from another state.
-Access to unique private events that are designed for clients to share business ideas and grow their network with very valuable contacts
-One contact for all issues. For example you can call someone and say find me the best rate on a 7 year ARM. You can also call that person and say I need to be a durable power of attorney on my mothers account. One person tasked with making your requests happen. No call transfers. No wait time. No sitting on hold. No calls to follow up and see if it actually happened.
-Custom reporting that fits your specific desires. You can say here's an Excel file of my personal balance sheet I created. I'd like you to populate this monthly and email it to me. No discount broker would ever do that.
-the ability to quickly create, open, and fund entity accounts in a time crunch.

Each of those services comes at no charge in addition to what someone pays for asset management.

I could go on forever on why some people use advisors. I can tell you it's no coincidence people with $10mm+ don't just toss their money in a three fund portfolio. These people are not idiots and understand the trade offs. Often time I see Bogleheads just considering the value of an advisor as their ability to allocate assets to various mutual funds. If that's all they are offering you, then yes it is a bad deal.

Perhaps it would be helpful to understand what your father in law desires out of his financial advisor.
I've had multiple advisors over the years (now, thankfully free of all of them)
They have all promised the above but when time comes to deliver it never really happens

My prior one
- Paid higher per-trade fees than me @ Schwab (I am sure some of this going into their pocket)
- Could ONLY give me investments Schwab had
- When asked about where he thought we should be investing could only say "US Stocks seem really high right now"

And he was one of the better ones
The Tax loss harvesting, working with CPA, tax planning ... none of it ever happened

Finally this year they did partner with a guy who would do pure financial planning of the kind of (prepare a budget, check what insurance you have...) for $1200-2400 Per *year* on top of the existing fees

So yeah while these may be theoretical benefits ...

One good thing is that I did challenge him on a number of occasions
"If your fee is 1% and I invest in a bond paying 1.6% then I am really earning 0.6% and so why would I not move my money out and invest in the same bond fund, or a CD and make the real return"
"So by paying your fee, you believe you can earn me an extra percentage point of return over & above what I could do myself"

Which caused him to at least cut his fee from 1% to 0.65
So it may be possible for the OP to get his father-in-law to try the same

Although my FIL is in the exact same position and wont move or ask for a fee reduction. I think mostly because he wants to retire and is scared he will mess it up and not have enough money....

navyitaly
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Re: Getting father-in-law off of UBS & its 1.5% AUM fee

Post by navyitaly » Sat Sep 30, 2017 9:17 am

Stay out of your spouse's family personal business? End of day who cares..not your issue...if anyone inherits anything, it's not you, it's your spouse....make your marriage easy...

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Re: Getting father-in-law off of UBS & its 1.5% AUM fee

Post by TheTimeLord » Sat Sep 30, 2017 9:29 am

TinkerPDX wrote:
Tue Sep 19, 2017 8:06 am
I have seen lots of good suggestions here about helping some family member or another see the light of focusing on lower fees and diversification.
I am always fascinated and confused by 2 things that repeatedly come up on this forum, the need people feel to directly insert themselves in the finances of older successful family members, and their surprise that people with 7 and 8 figure portfolio don't jump at the advice from people with 5 and 6 figure portfolios. My advice is if you want to talk about this topic, talk about what your doing and why, if they are interested they will ask you questions or you can ask them how they are investing and why. Fewer older adults like to be lectured to by the younger generation. Either they will start to see the wisdom in your advice and become interested or they won't. If they do maybe suggest they try it with a couple hundred thousand dollars first to see if they are comfortable with managing their own money and let the relationship grow from there. Second, realize whether you intend or not you may coming off like you are trying to manage how your inheritance is invested, in other words you are self interested or self serving, not that you are trying to help them with there finances. Just some food for thought.
Run, You Clever Boy! [8944]

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TheTimeLord
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Re: Getting father-in-law off of UBS & its 1.5% AUM fee

Post by TheTimeLord » Sat Sep 30, 2017 9:29 am

navyitaly wrote:
Sat Sep 30, 2017 9:17 am
Stay out of your spouse's family personal business? End of day who cares..not your issue...if anyone inherits anything, it's not you, it's your spouse....make your marriage easy...
Sound advice.
Run, You Clever Boy! [8944]

BF2011
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Re: Getting father-in-law off of UBS & its 1.5% AUM fee

Post by BF2011 » Sat Sep 30, 2017 10:06 am

limeyx wrote:
Fri Sep 29, 2017 3:22 pm
Sharpematt wrote:
Tue Sep 19, 2017 6:42 pm
That fee seems quite high for a fully managed relationship. Most people on this website don't understand advisory fees very well particularly for 7+ figure accounts.

The expense ratio for investments is also how large wire houses get paid for a variety of ancillary work that comes with the fund expense. For example these are things that good advisors provide at no charge in addition to what you pay to the fund or SMA:

-Trust and Estate planning
-Education account advice and selection
-Referrals to service providers; specifically CPAs and attorneys
-Access to unique private equity deals. PE has returned better than any stock market on a net basis over long timeframes.
-OTC hedging on large single name equity positions
-block trading algorithms for selling volume disruptive sized lots
-custom bond ladders with actual advice on the issuer
-tax loss harvesting
-Far better service (they know your situation and will proactively work with your CPA at tax time to take you out of the loop entirely if you request it). Also, you have their personal cell not a 800 number with a random contact from another state.
-Access to unique private events that are designed for clients to share business ideas and grow their network with very valuable contacts
-One contact for all issues. For example you can call someone and say find me the best rate on a 7 year ARM. You can also call that person and say I need to be a durable power of attorney on my mothers account. One person tasked with making your requests happen. No call transfers. No wait time. No sitting on hold. No calls to follow up and see if it actually happened.
-Custom reporting that fits your specific desires. You can say here's an Excel file of my personal balance sheet I created. I'd like you to populate this monthly and email it to me. No discount broker would ever do that.
-the ability to quickly create, open, and fund entity accounts in a time crunch.

Each of those services comes at no charge in addition to what someone pays for asset management.

I could go on forever on why some people use advisors. I can tell you it's no coincidence people with $10mm+ don't just toss their money in a three fund portfolio. These people are not idiots and understand the trade offs. Often time I see Bogleheads just considering the value of an advisor as their ability to allocate assets to various mutual funds. If that's all they are offering you, then yes it is a bad deal.

Perhaps it would be helpful to understand what your father in law desires out of his financial advisor.
I've had multiple advisors over the years (now, thankfully free of all of them)
They have all promised the above but when time comes to deliver it never really happens

My prior one
- Paid higher per-trade fees than me @ Schwab (I am sure some of this going into their pocket)
- Could ONLY give me investments Schwab had
- When asked about where he thought we should be investing could only say "US Stocks seem really high right now"

And he was one of the better ones
The Tax loss harvesting, working with CPA, tax planning ... none of it ever happened

Finally this year they did partner with a guy who would do pure financial planning of the kind of (prepare a budget, check what insurance you have...) for $1200-2400 Per *year* on top of the existing fees

So yeah while these may be theoretical benefits ...

One good thing is that I did challenge him on a number of occasions
"If your fee is 1% and I invest in a bond paying 1.6% then I am really earning 0.6% and so why would I not move my money out and invest in the same bond fund, or a CD and make the real return"
"So by paying your fee, you believe you can earn me an extra percentage point of return over & above what I could do myself"

Which caused him to at least cut his fee from 1% to 0.65
So it may be possible for the OP to get his father-in-law to try the same

Although my FIL is in the exact same position and wont move or ask for a fee reduction. I think mostly because he wants to retire and is scared he will mess it up and not have enough money....
The HIght Net Worth accounts at UBS start at $10M and while they have access to some of their proprietary trading products they don’t really get much value. The UHNW clients use UBS as part of their diversification and have access to products such as art or wine investment. They rarely have their entire investment at one firm. So as part of diversification, it works quite well. There is a reason why UBS is the largest wealth management firm in the world and a lot of its clientele is “old money”. I don’t think you can use the bogleheads mentality to judge that group.

JW-Retired
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Re: Getting father-in-law off of UBS & its 1.5% AUM fee

Post by JW-Retired » Sat Sep 30, 2017 10:40 am

TinkerPDX wrote:
Fri Sep 29, 2017 1:25 pm
Been on this strategy approximately, and will eventually give up - but I like the idea with the quips, and I've been trying to ridicule the FA industry, not him. We currently live together pending completion of their ADU/small house in the back yard, so there's plenty of opportunity...

........................

We're talking about a ~$2mm portfolio here, and he's getting nothing but placement into high-fee funds and advice to time the market. I think it's really just that he's been an expert in his field, so he's comfortable relying on "experts" in other fields.
Who's backyard and who is going to live in the ADU house? It might help us to know more about how critical this $2M is to their total living expenses. Is there is some real danger that they will actually burn through it through the high fees + their withdrawal needs/wants, and you will end up having to support them? If so, maybe you would have more standing to butt into it?

This sort of running out of money thing happens. I doubt if FIL plans to split the very safe 4% gross portfolio drawdown rate into 2% toward adviser/fund expenses, and 2% for your inlaws. He will likely be taking out 6%+.

JW
ps: you might check out https://retirementplans.vanguard.com/VG ... ggCalc.jsf
Retired at Last

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ps56k
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Re: Getting father-in-law off of UBS & its 1.5% AUM fee

Post by ps56k » Sat Sep 30, 2017 3:02 pm

We have some family members that are part of - Edward Jones - and are very supportive of their agent.

It's an emotional connection - like any other service provider.... plumber, roofer, doctor, banker, insurance, etc -
If you need someone to perform a service for you,
and you feel comfortable with them, then the connection is made.... and you go to them for that service.

We have a dentist that we go to - and we know it costs us a little more than others - even with insurance.
The dentist plays the system..... he requires full payment at delivery of services, and then bills the dental insurance.
WHY - because the insurance company will knock down the billed amount, and then only reimburse for the approved percentage.
SO - the dentist gets his full amount, and instead of us paying our 20%, we pick up another 10% - paying around 30% out of pocket.

Same with the financial advisors - if you feel comfortable with them.... then your pay the extra $$ for that level of comfort.

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TinkerPDX
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Re: Getting father-in-law off of UBS & its 1.5% AUM fee

Post by TinkerPDX » Tue Oct 03, 2017 4:05 pm

TheTimeLord wrote:
Sat Sep 30, 2017 9:29 am
TinkerPDX wrote:
Tue Sep 19, 2017 8:06 am
I have seen lots of good suggestions here about helping some family member or another see the light of focusing on lower fees and diversification.
I am always fascinated and confused by 2 things that repeatedly come up on this forum, the need people feel to directly insert themselves in the finances of older successful family members, and their surprise that people with 7 and 8 figure portfolio don't jump at the advice from people with 5 and 6 figure portfolios. My advice is if you want to talk about this topic, talk about what your doing and why, if they are interested they will ask you questions or you can ask them how they are investing and why. Fewer older adults like to be lectured to by the younger generation. Either they will start to see the wisdom in your advice and become interested or they won't. If they do maybe suggest they try it with a couple hundred thousand dollars first to see if they are comfortable with managing their own money and let the relationship grow from there. Second, realize whether you intend or not you may coming off like you are trying to manage how your inheritance is invested, in other words you are self interested or self serving, not that you are trying to help them with there finances. Just some food for thought.
Point well taken. I know he doesn't want my lectures. As for the big portfolio holder not being interested in the small portfolio holder's advice, I'm certain ours is in better shape than his was at the same point in the career, and we are on track to finish much stronger... but I don't ever say that.

My concern isn't self-interested, though it is in my self-interest. I'm motivated by the future needs of DMIL, who will likely live much longer than DFIL, and who is very aware of how the advisor has been taking a bunch of their money to produce no value. But in the end, they aren't going to end up in the poor house (or even to need our support), so I agree that it isn't worth pushing too much--and I don't.

Just hard to see a loved one taken advantage of to the tune of $15-30k/year... one of the assistant advisors he just met with last month about a small amount he was transferring into the account ($100k or so) gave him the brilliant advice that "the market is probably going to go down at the end of this year, so best to keep it in cash." At least they didn't put him into some high-fee market neutral fund, I guess..

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Re: Getting father-in-law off of UBS & its 1.5% AUM fee

Post by anonyvestor » Fri Jan 12, 2018 3:25 pm

I hear a lot of sound cautionary advice.

On the other hand, consider the following:

If your in-laws have been invested with UBS for a long time, there may be a significant capital gains exposure to making a switch. It will take X years to pay off this large up-front expense.

I will also acknowledge that an aging investor with declining mental capacity might be able to continue with a sense of individual control through the use of the UBS advisor.. This might offer a sense of financial security, which is ultimately what we all seek. Don't be surprised if they trust their UBS advisor more than their son in law. The potential risk might at least be limited to just 2.5%.

I don't mean to talk you out of trying, but I would not count on winning this one.

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Re: Getting father-in-law off of UBS & its 1.5% AUM fee

Post by Dottie57 » Fri Jan 12, 2018 3:33 pm

TheTimeLord wrote:
Sat Sep 30, 2017 9:29 am
navyitaly wrote:
Sat Sep 30, 2017 9:17 am
Stay out of your spouse's family personal business? End of day who cares..not your issue...if anyone inherits anything, it's not you, it's your spouse....make your marriage easy...
Sound advice.
I agree.

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Index Fan
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Re: Getting father-in-law off of UBS & its 1.5% AUM fee

Post by Index Fan » Fri Jan 12, 2018 3:46 pm

1.5% fee? Shark attack!

Sad.

I'd only give my opinion if I were asked for it. Family and money never, ever, mix well.
"Optimum est pati quod emendare non possis." | -Seneca

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Re: Getting father-in-law off of UBS & its 1.5% AUM fee

Post by J295 » Fri Jan 12, 2018 4:01 pm

While I admire the enthusiasm of OP, unless FIL has specifically asked for this conversation and assistance, I think OP should stand down. FIL’s seven figure portfolio is his business

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