Commission only fiduciary planner

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Pdub
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Commission only fiduciary planner

Post by Pdub » Sat Oct 21, 2017 6:52 am

<t>Hello all,<br/>
<br/>
I will be having an initial free consultation with a team of financial advisors who are fiduciary and take no fees from me. They get paid by commission from the securities only, but offer additional securities for fees if wanted..not necessary though. They utilize the endowment model. They have a great reputation with many of the people I have talked to in the community. According to one person I spoke with who just joined they told her they estimate 6-10% return. Another person who has been with them for a few years told me they are at 12% return. <br/>
<br/>
How does everyone feel about a situation like this? Seems too good to be true? Active managers who do not charge and act in my best interest as fiduciaries? Does it even make sense to be fiduciary and work on commission,
or just a giant conflict of interest? And how about the endowment model? From my understanding it is largely only successful for Yale because of Swenson and has failed or not returned elsewhere. I believe they partner with Kalos financial for endowment planning if that is worth mentioning.

Thank you for any input</t>

neilpilot
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Re: Commission only fiduciary planner

Post by neilpilot » Sat Oct 21, 2017 8:03 am

Pdub wrote:
Sat Oct 21, 2017 6:52 am
According to one person I spoke with who just joined they told her they estimate 6-10% return. Another person who has been with them for a few years told me they are at 12% return. <br/>
Over 10 years? Over the past 1-2 years? In the short term (since 2013) my investments in index funds have met of beat those returns, with a hands-off approach. No changes other than allocation adjustments.

Pdub
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Re: Commission only fiduciary planner

Post by Pdub » Sat Oct 21, 2017 8:42 am

Thank you for the reply

The first person did not know the answer to those questions when asked. I plan to ask for the returns of the last 5, 10, and 15 years on a similar portfolio as one I would need when we meet.

The second person was rendering to 12% currently, I did not ask about the history of her returns.

neilpilot
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Location: Memphis area

Re: Commission only fiduciary planner

Post by neilpilot » Sat Oct 21, 2017 8:51 am

Pdub wrote:
Sat Oct 21, 2017 8:42 am

The second person was rendering to 12% currently, I did not ask about the history of her returns.
Current (2017 YTD) return of a simple index 3-fund portfolio without a manager, based on my funds, has been in the range of 15-20%.

stan1
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Re: Commission only fiduciary planner

Post by stan1 » Sat Oct 21, 2017 8:59 am

What mutual funds or stocks or bonds is this investment manager using? What are the expense ratios of the funds they use? What are the up front loads to purchase mutual funds?

If you can't get a clear answer to questions like this you do not want to invest with them.

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ruralavalon
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Re: Commission only fiduciary planner

Post by ruralavalon » Sat Oct 21, 2017 9:13 am

Pdub wrote:
Sat Oct 21, 2017 8:42 am
Thank you for the reply

The first person did not know the answer to those questions when asked. I plan to ask for the returns of the last 5, 10, and 15 years on a similar portfolio as one I would need when we meet.

The second person was rendering to 12% currently, I did not ask about the history of her returns.
Also you need to know the asset allocation (stock/bond mix; domestic/international mix) associated with the claimed return. What commodities, futures, or high risk investments are used? In other words, what risks are they taking to get the rewards?

Pdub wrote:
Sat Oct 21, 2017 6:52 am
I will be having an initial free consultation with a team of financial advisors who are fiduciary and take no fees from me. They get paid by commission from the securities only, but offer additional securities for fees if wanted..not necessary though. They utilize the endowment model. They have a great reputation with many of the people I have talked to in the community. . . . .
I personally cannot imagine how a commission based fee arrangement can be free of a conflict of interest.

Also, what services do you get on the commission basis, and what additional services or securities do you get that you need to pay for on a fee basis?

Do you want someone to manage your portfolio of investments? Or do you just want someone to advise you on initial set up of an investment portfolio, which you will then manage yourself?

We had a fee-only planner advise us on setting up our investment portfolio, which I manage myself. A couple of years later we went back for a "check up" just to be assured we were still OK, and discuss a few "tweaks". This has worked very well for us.


Pdub wrote:How does everyone feel about a situation like this? Seems too good to be true? Active managers who do not charge and act in my best interest as fiduciaries? Does it even make sense to be fiduciary and work on commission, or just a giant conflict of interest?

It does sound too good to be true, so it probably isn't true. I see a conflict of interest in the commission model no matter how many promises they make of putting the client's interest first.

The promise of fiduciary conduct is not worthless, I think it would probably restrain some of the worst forms of self-dealing. But how could the conflict (impulse to sell a product that reimburses them well) not exist at least at a subconscious level?

My own personal preference is for a fee-only planner or advisor. Here are some resources for finding a fee-only planner or advisor:
www.napfa.org ;and
www.garrettplanningnetwork.com .


Pdub wrote:And how about the endowment model? From my understanding it is largely only successful for Yale because of Swenson and has failed or not returned elsewhere. I believe they partner with Kalos financial for endowment planning if that is worth mentioning.
I'm not exactly sure what they mean by endowment model, perhaps they are copying or mimicing the investing the strategy of Yale or Harvard, hoping it works well for individuals.

An endowment fund with an infinite life can reasonably take risks which a mortal human investor should not. I wonder if they dial the risk back accordingly, or not. Remember return and risk are related.
Last edited by ruralavalon on Sat Oct 21, 2017 9:51 am, edited 10 times in total.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

afan
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Re: Commission only fiduciary planner

Post by afan » Sat Oct 21, 2017 9:19 am

The notion that they are fiduciaries who get paid by commission makes no sense. If you were getting good advice you would never buy anything that had a commission, which would mean your advisors would never get paid. So they would be out of business.

If they really claimed they were fiduciaries they had to be lying.

I would not waste any more time with them.

You don't need anyone to manage your investments for you.

Assembling and maintaining a portfolio is easy. You can do it yourself, pay no commissions and not have to listen to lies from so-called advisors.

The returns they report are meaningless. There is a huge literature establishing that returns on actively managed portfolios are determined by the performance of the underlying markets, fees charged by the managers and chance. The differences between one manager and another over the same time periods are therefore due to fees and luck. Your fees should be as close to zero as possible. With current low cost index funds the effective fees are single digits basis points with no commissions.

By holding the market portfolio you eliminate variance from the market returns due to chance.

You can do this with one to four funds. No commissions. No advisors.
We don't know how to beat the market on a risk-adjusted basis, and we don't know anyone that does know either | --Swedroe | We assume that markets are efficient, that prices are right | --Fama

dbr
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Re: Commission only fiduciary planner

Post by dbr » Sat Oct 21, 2017 9:21 am

If you are paying commissions the service is not free. Sophistry about the difference between costs, fees, and commissions is just another way to take money out of your pocket that you would be better off keeping. You don't even know how much that cost is going to be. "Fiduciary" is a meaningless term that means nothing of benefit to you.

Quotes regarding performance are meaningless to establish future expectations and even worse than meaningless without consideration of the associated risk.

I doubt an "endowment model" would be of any particular advantage to you. It might benefit the advisors by drawing in customers who are impressed by fluff.

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EyeYield
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Re: Commission only fiduciary planner

Post by EyeYield » Sat Oct 21, 2017 10:12 am

Run! Don't even have the initial "consultation" - you'll be fed a word salad that will be delivered through a smiling self assured mouth piece that will mask the shark inside. Commissions mean front end loaded funds that will have high expenses ratios and 12b-1 fees.

12% current? What does that mean? My "current" IRA is 18.13% for the year ending 9/30/2017 and those are Fidelity funds I bought before I became a BH and most have not beat their indexes, so 12% is a rather POOR return currently.

The first thing you need to do is slow down and learn to be smarter than any so called "team of financial advisors" - it's not that hard, all they know how to do is earn commissions that come out of your pocket.

Start here: https://www.bogleheads.org/wiki/Getting_started

Read some books on the recommended list here: https://www.bogleheads.org/wiki/Books:_ ... nd_reviews
A good start would be "The Four Pillars of Investing" by William Bernstein - which for some reason isn't on the list - can someone fix that?

Once you educate yourself a little bit you'll know more of what questions to ask and, following the format suggested here: viewtopic.php?f=1&t=6212, get some answers from some smart, experienced people who DO NOT charge commissions.
"The stock market is a giant distraction from the business of investing." - Jack Bogle

Nate79
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Re: Commission only fiduciary planner

Post by Nate79 » Sat Oct 21, 2017 10:50 am

EyeYield wrote:
Sat Oct 21, 2017 10:12 am
Run! Don't even have the initial "consultation" - you'll be fed a word salad that will be delivered through a smiling self assured mouth piece that will mask the shark inside. Commissions mean front end loaded funds that will have high expenses ratios and 12b-1 fees.

12% current? What does that mean? My "current" IRA is 18.13% for the year ending 9/30/2017 and those are Fidelity funds I bought before I became a BH and most have not beat their indexes, so 12% is a rather POOR return currently.

The first thing you need to do is slow down and learn to be smarter than any so called "team of financial advisors" - it's not that hard, all they know how to do is earn commissions that come out of your pocket.

Start here: https://www.bogleheads.org/wiki/Getting_started

Read some books on the recommended list here: https://www.bogleheads.org/wiki/Books:_ ... nd_reviews
A good start would be "The Four Pillars of Investing" by William Bernstein - which for some reason isn't on the list - can someone fix that?

Once you educate yourself a little bit you'll know more of what questions to ask and, following the format suggested here: viewtopic.php?f=1&t=6212, get some answers from some smart, experienced people who DO NOT charge commissions.
+1 Run from these salesmen!

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David Jay
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Re: Commission only fiduciary planner

Post by David Jay » Sat Oct 21, 2017 10:58 am

ruralavalon wrote:
Sat Oct 21, 2017 9:13 am
I personally cannot imagine how a commission based fee arrangement can be free of a conflict of interest.
^^^ This
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

Pdub
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Re: Commission only fiduciary planner

Post by Pdub » Sat Oct 21, 2017 11:11 am

stan1 wrote:
Sat Oct 21, 2017 8:59 am
What mutual funds or stocks or bonds is this investment manager using? What are the expense ratios of the funds they use? What are the up front loads to purchase mutual funds?

If you can't get a clear answer to questions like this you do not want to invest with them.
Thank you,

I have a list of questions and will make sure to work these in. I will just need to tell myself to make sure to go in with a reasonable attitude and not guns blazing, so to speak.

Pdub
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Re: Commission only fiduciary planner

Post by Pdub » Sat Oct 21, 2017 11:26 am

ruralavalon wrote:
Sat Oct 21, 2017 9:13 am
Pdub wrote:
Sat Oct 21, 2017 8:42 am
Thank you for the reply

The first person did not know the answer to those questions when asked. I plan to ask for the returns of the last 5, 10, and 15 years on a similar portfolio as one I would need when we meet.

The second person was rendering to 12% currently, I did not ask about the history of her returns.
Also you need to know the asset allocation (stock/bond mix; domestic/international mix) associated with the claimed return. What commodities, futures, or high risk investments are used? In other words, what risks are they taking to get the rewards?



Pdub wrote:
Sat Oct 21, 2017 6:52 am
I will be having an initial free consultation with a team of financial advisors who are fiduciary and take no fees from me. They get paid by commission from the securities only, but offer additional securities for fees if wanted..not necessary though. They utilize the endowment model. They have a great reputation with many of the people I have talked to in the community. . . . .
I personally cannot imagine how a commission based fee arrangement can be free of a conflict of interest.

Also, what services do you get on the commission basis, and what additional services or securities do you get that you need to pay for on a fee basis?

Do you want someone to manage your portfolio of investments? Or do you just want someone to advise you on initial set up of an investment portfolio, which you will then manage yourself?

We had a fee-only planner advise us on setting up our investment portfolio, which I manage myself. A couple of years later we went back for a "check up" just to be assured we were still OK, and discuss a few "tweaks". This has worked very well for us.


Pdub wrote:How does everyone feel about a situation like this? Seems too good to be true? Active managers who do not charge and act in my best interest as fiduciaries? Does it even make sense to be fiduciary and work on commission, or just a giant conflict of interest?

It does sound too good to be true, so it probably isn't true. I see a conflict of interest in the commission model no matter how many promises they make of putting the client's interest first.

The promise of fiduciary conduct is not worthless, I think it would probably restrain some of the worst forms of self-dealing. But how could the conflict (impulse to sell a product that reimburses them well) not exist at least at a subconscious level?

My own personal preference is for a fee-only planner or advisor. Here are some resources for finding a fee-only planner or advisor:
www.napfa.org ;and
www.garrettplanningnetwork.com .


Pdub wrote:And how about the endowment model? From my understanding it is largely only successful for Yale because of Swenson and has failed or not returned elsewhere. I believe they partner with Kalos financial for endowment planning if that is worth mentioning.
I'm not exactly sure what they mean by endowment model, perhaps they are copying or mimicing the investing the strategy of Yale or Harvard, hoping it works well for individuals.

An endowment fund with an infinite life can reasonably take risks which a mortal human investor should not. I wonder if they dial the risk back accordingly, or not. Remember return and risk are related.
I do not know how to break the quotes up into smaller chunks..so sorry for the long post on this one...

Thanks for the great insight. I will make sure to add those questions to my list.

I also have a hard time understanding/believing someone can have my best interest in mind when they are getting paid by the securities they are pushing.

I was originally looking for someone to manage my assets and they were highly recommended. After doing my own research the last few weeks, I have become conflicted re: doing it myself through vanguard vs. Working with them.

Yes, you are correct when you defined the endowment model as the one Yale/Harvard uses..that is what they advertise on their website. I have read many reports over the last days stating how those models have largely underperformed..

NotWhoYouThink
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Re: Commission only fiduciary planner

Post by NotWhoYouThink » Sat Oct 21, 2017 11:31 am

I will be having an initial free consultation with a team of financial advisors who are fiduciary and take no fees from me. They get paid by commission from the securities only, but offer additional securities for fees if wanted..not necessary though.
A couple of red flags here. First, you will be meeting with a team. They are trained sales people. They sell all day long, every day, week, and year. They know how to sell better than you know how to resist, and they plan to outnumber you. You don't have a chance. If you have this meeting, they will sell you something.

Second, they have started by being dishonest if they gave you the impression they take no fees from you. They get paid, from your money, it's just that since you don't see them taking the money through the expense ration or transaction fees you don't think you are paying them. Again, They Are Getting Their Money From Your Money. If you didn't understand that up front, they have already misled you.

I recommend not going to this meeting, at least not for another 6 months. Spend that time doing some research on the wiki here, or by reading through the posts, or reading some of the recommended books. If you do that, you won't want to meet with them, or if you do you'll have a fighting chance of seeing through their rhetoric.

By the way, although it sounds counter-intuitive, it's better to pay people fees to advise you, because then everyone is clear on how much you are paying and what you are getting for your money.

Pdub
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Re: Commission only fiduciary planner

Post by Pdub » Sat Oct 21, 2017 11:34 am

afan wrote:
Sat Oct 21, 2017 9:19 am
The notion that they are fiduciaries who get paid by commission makes no sense. If you were getting good advice you would never buy anything that had a commission, which would mean your advisors would never get paid. So they would be out of business.

If they really claimed they were fiduciaries they had to be lying.

I would not waste any more time with them.

You don't need anyone to manage your investments for you.

Assembling and maintaining a portfolio is easy. You can do it yourself, pay no commissions and not have to listen to lies from so-called advisors.

The returns they report are meaningless. There is a huge literature establishing that returns on actively managed portfolios are determined by the performance of the underlying markets, fees charged by the managers and chance. The differences between one manager and another over the same time periods are therefore due to fees and luck. Your fees should be as close to zero as possible. With current low cost index funds the effective fees are single digits basis points with no commissions.

By holding the market portfolio you eliminate variance from the market returns due to chance.

You can do this with one to four funds. No commissions. No advisors.
Thank you,

I largely feel the same way about the idea of them being fiduciary and accept payment from the securities. My only rationale is perhaps they are able to be successful working in volume and taking less kick back payments on securities by still picking the most beneficial ones for the client? I don't know.

The other part of it is just the fear of making a mistake when doing it myself, considering I have no experience on doing this. I would not feel comfortable working on the engine of my car as I have very little mechanical skills, should I feel comfortavle managing my investments with only self educated internet financial information? I don't know about this either I guess.

Pdub
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Re: Commission only fiduciary planner

Post by Pdub » Sat Oct 21, 2017 11:37 am

dbr wrote:
Sat Oct 21, 2017 9:21 am
If you are paying commissions the service is not free. Sophistry about the difference between costs, fees, and commissions is just another way to take money out of your pocket that you would be better off keeping. You don't even know how much that cost is going to be. "Fiduciary" is a meaningless term that means nothing of benefit to you.

Quotes regarding performance are meaningless to establish future expectations and even worse than meaningless without consideration of the associated risk.

I doubt an "endowment model" would be of any particular advantage to you. It might benefit the advisors by drawing in customers who are impressed by fluff.
Thank you,

For some reason the idea of the money "disappearing" in a sense because of the commission instead of me directly paying it feels different, though I recognize it is not different and you are right. Also the idea of not knowing how much they make in that commission is also concerning and not something I had thought of. I will add that to the list.

Pdub
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Re: Commission only fiduciary planner

Post by Pdub » Sat Oct 21, 2017 11:42 am

EyeYield wrote:
Sat Oct 21, 2017 10:12 am
Run! Don't even have the initial "consultation" - you'll be fed a word salad that will be delivered through a smiling self assured mouth piece that will mask the shark inside. Commissions mean front end loaded funds that will have high expenses ratios and 12b-1 fees.

12% current? What does that mean? My "current" IRA is 18.13% for the year ending 9/30/2017 and those are Fidelity funds I bought before I became a BH and most have not beat their indexes, so 12% is a rather POOR return currently.

The first thing you need to do is slow down and learn to be smarter than any so called "team of financial advisors" - it's not that hard, all they know how to do is earn commissions that come out of your pocket.

Start here: https://www.bogleheads.org/wiki/Getting_started

Read some books on the recommended list here: https://www.bogleheads.org/wiki/Books:_ ... nd_reviews
A good start would be "The Four Pillars of Investing" by William Bernstein - which for some reason isn't on the list - can someone fix that?

Once you educate yourself a little bit you'll know more of what questions to ask and, following the format suggested here: viewtopic.php?f=1&t=6212, get some answers from some smart, experienced people who DO NOT charge commissions.
Thank you,

I have become obsessed about this over the last several weeks as I have prepared for the initial meeting. In doing my research I have learned how passive investing routinely outperforms active management.

The bogleheads wiki is great thank you, I will continue to review it. I will also research those books as well.

stan1
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Re: Commission only fiduciary planner

Post by stan1 » Sat Oct 21, 2017 11:48 am

Pdub wrote:
Sat Oct 21, 2017 11:42 am


Thank you,

I have become obsessed about this over the last several weeks as I have prepared for the initial meeting. In doing my research I have learned how passive investing routinely outperforms active management.

The bogleheads wiki is great thank you, I will continue to review it. I will also research those books as well.
If you are reading this website and are convinced that passive investing outperforms active management there's probably no point meeting with them. Does their website mention passive investing, index funds, and low fees? If it does not offer low fees as a selling point then its a pretty safe assumption they are not offering a service a Boglehead would endorse. If they offer active management, expense ratios are more than 0.15%, or charge a load (percentage of the amount invested) then I would cancel the meeting. Note the decimal point in that expense ratio: it's 0.15% or much lower at Vanguard not 1.5%!!!!!

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ruralavalon
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Re: Commission only fiduciary planner

Post by ruralavalon » Sat Oct 21, 2017 12:13 pm

Pdub wrote:
Sat Oct 21, 2017 11:26 am
I also have a hard time understanding/believing someone can have my best interest in mind when they are getting paid by the securities they are pushing.

I was originally looking for someone to manage my assets and they were highly recommended. After doing my own research the last few weeks, I have become conflicted re: doing it myself through vanguard vs. Working with them.
You can use these links to try to locate a fee-only planner in your area:
www.garrettplanningnetwork.com ; and
www.napfa.org .

I have forgotten which we used to find the fee-only planner that helped us get started, so that I could then manage the investment portfolio myself. Vanguard now offers portfolio management via their Personal Advisor Services (PAS) for a modest fee.

I think that most people can learn to manage their own investments. Either way I suggest that you read one or two books on investing, please see the wiki article "books: recommendations and reviews", in particular consider The Boglehead's Guide to Retirement Planning.

A good knowledge base will help you pick the right manager or planner for your needs, or help you manage this yourself, whichever way you choose.
Last edited by ruralavalon on Sat Oct 21, 2017 12:18 pm, edited 2 times in total.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

JW-Retired
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Re: Commission only fiduciary planner

Post by JW-Retired » Sat Oct 21, 2017 12:14 pm

Pdub wrote:
Sat Oct 21, 2017 6:52 am
I will be having an initial free consultation with a team of financial advisors who are fiduciary and take no fees from me. They get paid by commission from the securities only, but offer additional securities for fees if wanted..not necessary though.
Maybe no fees from you in that you don't actually write them a check, but you do pay every commission and fee and expense one way or another. Sounds like they get a sales commission (load) on the security sale and maybe a 12b-1 annual fee as well on a mutual fund. Close to a twin of the Edward Jones business model? A typical load is going to be 5.75% off the top of your investment. The FA will literally take e.g $10,000 from you to invest, and then only buy $9425 worth of the securities and keep the rest as their commission. The 12b-1 fee is probably 1% or less but that is paid out of your mutual fund accounts yearly.

With practice so as not to laugh out loud, they have learned how to make the claim that you don't pay them anything in fees because the investment fund company takes care of paying them. :P
JW
Retired at Last

Finridge
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Re: Commission only fiduciary planner

Post by Finridge » Sat Oct 21, 2017 1:26 pm

Just say no.

A commission-based compensation model creates an overwhelming incentive to "churn" your holdings. There are a lot of downsides to this, including the fact that (in a taxable account at least) you will be paying a lot of unnecessary taxes at the expense of capital growth.

Also, as a general rule of thumb, the more commissions are needed to sell a security, the worse the security is an investment. The best funds and ETFs out there don't provide any commissions.

Finridge
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Re: Commission only fiduciary planner

Post by Finridge » Sat Oct 21, 2017 1:37 pm

I wanted to add this: In my experience, most successful FA's (and I'm talking only about "typical" FA's - not fee-only FAs) are expert at only one thing: sales. And they are excellent at sales. They are usually "people persons" with the "gift of gab" and very, very persuasive.

Going to the free consultation is like going to one of those time-share presentations. You "know" in advance that it is a scam to sell you something that you don't need, and you go only for the free gift and for the free night. And, yet a lot of people end up finding themselves put under a spell and talked into making a bad investment. By the time the spell as worn off, it's often too late.

If you do go to the "free consultation" I'd encourage you to make two firm promises to yourself before you go:

1. Promise yourself you will *not* sign anything there, and that even if you find yourself convinced to go with them, you will give yourself a two week cooling off period to think things over.

2. Promise yourself that if you find yourself convinced, that before you sign with them, you will come back to this board and explain the logic behind why you decided that you should go with them. Give the good folk here (who have saved me thousands of dollars in free advice) at least a chance to respond...

afan
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Re: Commission only fiduciary planner

Post by afan » Sat Oct 21, 2017 2:41 pm

I would not waste my time going to the presentation. The notion of a fiduciary paid by commission tells you all you need to know.

DIY is easy. You do not need to pay anyone to do it for you. If you want to pay someone, Vanguard will do it legitimately without nonsense about fiduciary commissions.
We don't know how to beat the market on a risk-adjusted basis, and we don't know anyone that does know either | --Swedroe | We assume that markets are efficient, that prices are right | --Fama

Pdub
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Re: Commission only fiduciary planner

Post by Pdub » Sat Oct 21, 2017 3:28 pm

stan1 wrote:
Sat Oct 21, 2017 11:48 am
Pdub wrote:
Sat Oct 21, 2017 11:42 am


Thank you,

I have become obsessed about this over the last several weeks as I have prepared for the initial meeting. In doing my research I have learned how passive investing routinely outperforms active management.

The bogleheads wiki is great thank you, I will continue to review it. I will also research those books as well.
If you are reading this website and are convinced that passive investing outperforms active management there's probably no point meeting with them. Does their website mention passive investing, index funds, and low fees? If it does not offer low fees as a selling point then its a pretty safe assumption they are not offering a service a Boglehead would endorse. If they offer active management, expense ratios are more than 0.15%, or charge a load (percentage of the amount invested) then I would cancel the meeting. Note the decimal point in that expense ratio: it's 0.15% or much lower at Vanguard not 1.5%!!!!!

Thanks,

It does not mention anything about the fees or go into details on the website re: types of funding, only that they use the endowment model, which I understand to be a broadly diversified portfolio with "alternative assets" such as hedge funds, private sector securities, real estate etc..

When it comes to fees everything I know, and have said, are from word of mouth from their clients, and not listed on their site.

I will ask them about how much in commission they earn however when I see them.

Pdub
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Re: Commission only fiduciary planner

Post by Pdub » Sat Oct 21, 2017 3:32 pm

ruralavalon wrote:
Sat Oct 21, 2017 12:13 pm
Pdub wrote:
Sat Oct 21, 2017 11:26 am
I also have a hard time understanding/believing someone can have my best interest in mind when they are getting paid by the securities they are pushing.

I was originally looking for someone to manage my assets and they were highly recommended. After doing my own research the last few weeks, I have become conflicted re: doing it myself through vanguard vs. Working with them.
You can use these links to try to locate a fee-only planner in your area:
www.garrettplanningnetwork.com ; and
www.napfa.org .

I have forgotten which we used to find the fee-only planner that helped us get started, so that I could then manage the investment portfolio myself. Vanguard now offers portfolio management via their Personal Advisor Services (PAS) for a modest fee.

I think that most people can learn to manage their own investments. Either way I suggest that you read one or two books on investing, please see the wiki article "books: recommendations and reviews", in particular consider The Boglehead's Guide to Retirement Planning.

A good knowledge base will help you pick the right manager or planner for your needs, or help you manage this yourself, whichever way you choose.
Thank you,

Having those websites as a reference will certainly help if we decide to go down that route. Part of me feels like if I were to do it myself, then just doing a 3 fund portfolio would be enough and having a local flat fee resource around for those occasional consultations would do the trick.

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Re: Commission only fiduciary planner

Post by Pdub » Sat Oct 21, 2017 3:34 pm

JW-Retired wrote:
Sat Oct 21, 2017 12:14 pm
Pdub wrote:
Sat Oct 21, 2017 6:52 am
I will be having an initial free consultation with a team of financial advisors who are fiduciary and take no fees from me. They get paid by commission from the securities only, but offer additional securities for fees if wanted..not necessary though.
Maybe no fees from you in that you don't actually write them a check, but you do pay every commission and fee and expense one way or another. Sounds like they get a sales commission (load) on the security sale and maybe a 12b-1 annual fee as well on a mutual fund. Close to a twin of the Edward Jones business model? A typical load is going to be 5.75% off the top of your investment. The FA will literally take e.g $10,000 from you to invest, and then only buy $9425 worth of the securities and keep the rest as their commission. The 12b-1 fee is probably 1% or less but that is paid out of your mutual fund accounts yearly.

With practice so as not to laugh out loud, they have learned how to make the claim that you don't pay them anything in fees because the investment fund company takes care of paying them. :P
JW
Thank you,

Its funny you mention Edward Jones, because that is where I have my IRAs set up. After the fiduciary law was passed several months ago they had to redo my entire IRAs..that speaks volumes.

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Re: Commission only fiduciary planner

Post by Pdub » Sat Oct 21, 2017 3:41 pm

Finridge wrote:
Sat Oct 21, 2017 1:37 pm
I wanted to add this: In my experience, most successful FA's (and I'm talking only about "typical" FA's - not fee-only FAs) are expert at only one thing: sales. And they are excellent at sales. They are usually "people persons" with the "gift of gab" and very, very persuasive.

Going to the free consultation is like going to one of those time-share presentations. You "know" in advance that it is a scam to sell you something that you don't need, and you go only for the free gift and for the free night. And, yet a lot of people end up finding themselves put under a spell and talked into making a bad investment. By the time the spell as worn off, it's often too late.

If you do go to the "free consultation" I'd encourage you to make two firm promises to yourself before you go:

1. Promise yourself you will *not* sign anything there, and that even if you find yourself convinced to go with them, you will give yourself a two week cooling off period to think things over.

2. Promise yourself that if you find yourself convinced, that before you sign with them, you will come back to this board and explain the logic behind why you decided that you should go with them. Give the good folk here (who have saved me thousands of dollars in free advice) at least a chance to respond...
Thank you,

I fully feel that the FAs will be very charming, charismatic and personable people. I am sure their office will be set up to some how psychologically make people feel at ease. And I will certainly go into it knowing they are trying to make money off of me.

Too many people that have recommended them know that I will be seeing them, so its too late to back out. However they do their pre client program in 3 different meetings...each building on the others, so no paper work is signed until the second or third meeting. I am curious as to what they will say however and can guarantee no signatures from me. I will report back here either way and let you guys know.

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Re: Commission only fiduciary planner

Post by Pdub » Sat Oct 21, 2017 3:42 pm

afan wrote:
Sat Oct 21, 2017 2:41 pm
I would not waste my time going to the presentation. The notion of a fiduciary paid by commission tells you all you need to know.

DIY is easy. You do not need to pay anyone to do it for you. If you want to pay someone, Vanguard will do it legitimately without nonsense about fiduciary commissions.
Thank you,

The idea of a commission based fiduciary is hard for me to get around too.

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Re: Commission only fiduciary planner

Post by JW-Retired » Sat Oct 21, 2017 5:00 pm

Pdub wrote:
Sat Oct 21, 2017 3:34 pm
JW-Retired wrote:
Sat Oct 21, 2017 12:14 pm
.............snip..........
Close to a twin of the Edward Jones business model?
snip.....................
JW
Thank you,

Its funny you mention Edward Jones, because that is where I have my IRAs set up. After the fiduciary law was passed several months ago they had to redo my entire IRAs..that speaks volumes.
Yes, no more sales loads but as I understand it they changed to charging something like an annual 1.35% AUM fee instead. IMO, they will still keep on extracting similar money from your investment portfolios.

Also, this change is only for tax deferred accounts. They can keep the old model for the taxable accounts.
JW
Retired at Last

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Re: Commission only fiduciary planner

Post by Jack FFR1846 » Sat Oct 21, 2017 5:12 pm

Harvard's returns were "a disappointing" 8.1% for the fiscal 2017 year. Yale's was 11.3%. I picked Vanguard's target date 2050 as a set it and forget it fund. Return for the last year was just under 20%. I wouldn't want the "endowment" style. I'd call it the "underperform" style.
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Re: Commission only fiduciary planner

Post by EyeYield » Sat Oct 21, 2017 5:15 pm

H
However they do their pre client program in 3 different meetings...
I would be very interested in how these meetings are structured, but three "pre client program meetings" would raise a red flag to me. If you must go to the first one, get as much detailed information on what the next two will focus on and report back. I see a set up to get you to the closer for the final meeting. They will make a presentation to show you how complicated investing is and tell you how they will take care of everything for you. Expect charts, graphs and literature to take home with you.
Many Bogleheads have been through this process and some have taken the bait, only to experience the harsh reality of under performance, which led us here.

Don't be surprised if they suggest you trasfer your IRA's to them too.

There have been some brokers that have come forward after not being able to live with themselves when they learned the truth about what they were selling (many brokers just toe the company line without really knowing).
One such story can be found here: https://portfoliosolutions.com/latest-l ... -investing
It's enlightening!

Another former Smith Barney broker, Bill Schultheis, included his frustrations with the industry in his book "The Coffee House Investor", a very short book with lots of information.
https://www.amazon.com/Coffeehouse-Inve ... e+investor

The above can be read before the next market open.

Good luck and welcome to the forum.
"The stock market is a giant distraction from the business of investing." - Jack Bogle

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Re: Commission only fiduciary planner

Post by pkcrafter » Sat Oct 21, 2017 5:59 pm

Pdub, to begin with, you never want a commission-only advisor, you want a fee-only advisor. Do not believe any advisor that says you don't pay them. You do pay them whether it's directly or indirectly. They work to earn an income, and who's going to pay to manage your account other than you? They are taking fees from the commissions they get from the loaded funds they put you in. Don't waste your time with a meeting--it is a stage to set you up, and the fact that they are not up front about costs is the end of the deal.

Check them out, particularly Form ADV-II

Here's how

https://obliviousinvestor.com/checking- ... v-part-ii/

Let me guess, EJ has shifted you to Guided Solutions and is now charging you 1.3%. You've made one mistake already, don't make another one.

Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.

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Re: Commission only fiduciary planner

Post by Nate79 » Sat Oct 21, 2017 6:20 pm

Hopefully they at least have some free chocolate chip cookies as the salesman try to steal your money. Will make the experience much more pleasant.

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Re: Commission only fiduciary planner

Post by BL » Sat Oct 21, 2017 6:29 pm

I suggest you read this little 16-page pdf as a quick overview, especially the 5th part on advisers. This a good review of things a beginner investor needs to know, written by a recommended author, Dr. William Bernstein:
https://www.etf.com/docs/IfYouCan.pdf

EJ has now shown the cost so the public can understand that it costs money, where previously they used loads and 12b-1 fees which were nearly invisible to investors unless they really researched each fund and fee.

Are you an expert salesperson so you know what to expect from these expert salespersons? My bet is on them winning most of these sales!

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Re: Commission only fiduciary planner

Post by Grt2bOutdoors » Sat Oct 21, 2017 6:33 pm

Does 12% include return of capital? As in you are receiving both capital and appreciation in your payout?
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

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Re: Commission only fiduciary planner

Post by Majormajor78 » Sat Oct 21, 2017 7:21 pm

Here's a quick article interviewing Allan Roth a well respected fee only financial planner. The OP might find it a useful 5 minute read. Very on point for this discussion.

https://adviceonlyfinancial.com/advice- ... allan-roth
"Oh, M. le Comte, it is only a loss of money which I have sustained... nothing worth mentioning, I assure you."

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Re: Commission only fiduciary planner

Post by Pdub » Sat Oct 21, 2017 7:40 pm

Jack FFR1846 wrote:
Sat Oct 21, 2017 5:12 pm
Harvard's returns were "a disappointing" 8.1% for the fiscal 2017 year. Yale's was 11.3%. I picked Vanguard's target date 2050 as a set it and forget it fund. Return for the last year was just under 20%. I wouldn't want the "endowment" style. I'd call it the "underperform" style.
Thanks,

Wow, that is quite the descripency and eye opener. Perhaps they rationalize it by arguing that risk is better controlled with a greater diversity in alternative strategies? I don't know, however I do believe the Yale advisor Swenson has said that the endowment model type is not suitable for most.

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Re: Commission only fiduciary planner

Post by Pdub » Sat Oct 21, 2017 7:44 pm

EyeYield wrote:
Sat Oct 21, 2017 5:15 pm
H
However they do their pre client program in 3 different meetings...
I would be very interested in how these meetings are structured, but three "pre client program meetings" would raise a red flag to me. If you must go to the first one, get as much detailed information on what the next two will focus on and report back. I see a set up to get you to the closer for the final meeting. They will make a presentation to show you how complicated investing is and tell you how they will take care of everything for you. Expect charts, graphs and literature to take home with you.
Many Bogleheads have been through this process and some have taken the bait, only to experience the harsh reality of under performance, which led us here.

Don't be surprised if they suggest you trasfer your IRA's to them too.

There have been some brokers that have come forward after not being able to live with themselves when they learned the truth about what they were selling (many brokers just toe the company line without really knowing).
One such story can be found here: https://portfoliosolutions.com/latest-l ... -investing
It's enlightening!

Another former Smith Barney broker, Bill Schultheis, included his frustrations with the industry in his book "The Coffee House Investor", a very short book with lots of information.
https://www.amazon.com/Coffeehouse-Inve ... e+investor

The above can be read before the next market open.

Good luck and welcome to the forum.
I beleive the first one you discuss your goals, risks, and they look over your finances and discuss those with you. They also discuss in general how they would build a portfolio to help with your goals. The second meeting I think they go into greater detail re: your portfolio options. And the third one you sign up.

I will read those links you put in, thank you. Therw has been so much great information in this thread I am diligently trying to work my way through it.

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Re: Commission only fiduciary planner

Post by Pdub » Sat Oct 21, 2017 7:46 pm

Nate79 wrote:
Sat Oct 21, 2017 6:20 pm
Hopefully they at least have some free chocolate chip cookies as the salesman try to steal your money. Will make the experience much more pleasant.
Its funny you say that. Apparently the office is filled with bowels of chocolate treats everywhere..

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Re: Commission only fiduciary planner

Post by Pdub » Sat Oct 21, 2017 7:48 pm

BL wrote:
Sat Oct 21, 2017 6:29 pm
I suggest you read this little 16-page pdf as a quick overview, especially the 5th part on advisers. This a good review of things a beginner investor needs to know, written by a recommended author, Dr. William Bernstein:
https://www.etf.com/docs/IfYouCan.pdf

EJ has now shown the cost so the public can understand that it costs money, where previously they used loads and 12b-1 fees which were nearly invisible to investors unless they really researched each fund and fee.

Are you an expert salesperson so you know what to expect from these expert salespersons? My bet is on them winning most of these sales!
Thank you, I will read that. And you are right, prior to this I really did not know the costs of my investments with them. That is really me to blame however.

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Re: Commission only fiduciary planner

Post by BolderBoy » Sat Oct 21, 2017 7:50 pm

Pdub wrote:
Sat Oct 21, 2017 6:52 am
According to one person I spoke with who just joined they told her they estimate 6-10% return. Another person who has been with them for a few years told me they are at 12% return.
Considering the Vanguard S&P500 is up >16% (after fees) so far this year, does that mean they are keeping the difference for themselves?
"Never underestimate one's capacity to overestimate one's abilities" - The Dunning-Kruger Effect

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Re: Commission only fiduciary planner

Post by Pdub » Sat Oct 21, 2017 7:55 pm

pkcrafter wrote:
Sat Oct 21, 2017 5:59 pm
Pdub, to begin with, you never want a commission-only advisor, you want a fee-only advisor. Do not believe any advisor that says you don't pay them. You do pay them whether it's directly or indirectly. They work to earn an income, and who's going to pay to manage your account other than you? They are taking fees from the commissions they get from the loaded funds they put you in. Don't waste your time with a meeting--it is a stage to set you up, and the fact that they are not up front about costs is the end of the deal.

Check them out, particularly Form ADV-II

Here's how

https://obliviousinvestor.com/checking- ... v-part-ii/

Let me guess, EJ has shifted you to Guided Solutions and is now charging you 1.3%. You've made one mistake already, don't make another one.

Paul
Thank you, what a great resource. After putting in their information and looking at their fees....they state they charge 2k for setting up the plan and then charge 1.5-2% up to 1 million invested, 1-1.5% up to 5 million and .75-1% after that. This was a surprise as three seperate people have told me that they never pay anything...at all. One of those people just signed up this week. The disclosure is from February 2017. Is it possible they are just sneaking those fees in from the top and no one is noticing? I dont understand it, as all three of these people are very intelligent and knowledgeable with business.

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Re: Commission only fiduciary planner

Post by Grt2bOutdoors » Sat Oct 21, 2017 8:12 pm

^^^ You sure? In business, the general unspoken rule is "everything costs". There is no "free". Ignore that at your own peril.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

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Re: Commission only fiduciary planner

Post by BolderBoy » Sat Oct 21, 2017 8:13 pm

Pdub wrote:
Sat Oct 21, 2017 7:55 pm
Thank you, what a great resource. After putting in their information and looking at their fees....they state they charge 2k for setting up the plan and then charge 1.5-2% up to 1 million invested, 1-1.5% up to 5 million and .75-1% after that. This was a surprise as three seperate people have told me that they never pay anything...at all. One of those people just signed up this week. The disclosure is from February 2017. Is it possible they are just sneaking those fees in from the top and no one is noticing? I dont understand it, as all three of these people are very intelligent and knowledgeable with business.
Yes, they are definitely "sneaking those fees in".

I'd run from these folks, ASAP. The fact that you've come here is heavy weight that you can do it yourself, without leeches sitting in the middle.

1.5-2% is HORRIBLE and will eat up most of your returns over the long term. Don't do it.
"Never underestimate one's capacity to overestimate one's abilities" - The Dunning-Kruger Effect

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Re: Commission only fiduciary planner

Post by samsmith » Sat Oct 21, 2017 9:57 pm

Too many people that have recommended them know that I will be seeing them, so its too late to back out. However they do their pre client program in 3 different meetings...each building on the others, so no paper work is signed until the second or third meeting. I am curious as to what they will say however and can guarantee no signatures from me. I will report back here either way and let you guys know.
I am sorry, but I just think this is just plain wrong. From reading these threads, I would argue that this is your last chance to back out. You already feel beholden to these guys and are already setup for the three meeting plan. If you cant back out now - how are you going to back out after they spend time with you. Once you see them even once - the people that recommended them will know that you took their time and did not sign up? Each visit will make it harder for you to withdraw.

I always find it easiest to withdraw on these types of things earlier rather than later. Better to never start. I would suggest you withdraw politely now - stressing you realized that you would be wasting their time at this point, because you have changed your mind and are not ready to make a move (or some such nonsense - I used to just say my dad was a financial planner. Maybe you just realized that your best friend from college is a FA).

I would bet if you go to the first meeting, you will be talked into at least "giving them a shot with some of your money."
If you cant force yourself to back out now, I don't see you ever backing out. As others have suggested, say no politely. Its best for all. Don't waste their time. :happy My 2 cents. Good luck.

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Re: Commission only fiduciary planner

Post by EyeYield » Sat Oct 21, 2017 10:36 pm

This was a surprise as three seperate people have told me that they never pay anything...at all. One of those people just signed up this week. The disclosure is from February 2017. Is it possible they are just sneaking those fees in from the top and no one is noticing? I dont understand it, as all three of these people are very intelligent and knowledgeable with business.
I've heard the same from family members and friends. All highly intelligent.
They always said the same things, "our broker is doing very well for us" or "we love our broker, he took us out to dinner last month". Then they are shown how their investments compared to benchmarks. In some cases, even when they are shown that they could have done much better, they stay out of loyalty, because the personal bond has grown from the very first meeting and they would rather lose money than hurt the feelings of their "friend".

They never read the small print and never had a fee on their statements.
What was going on was that certain pieces of funds were being sold off during the year to pay the AUM (AssetsUnderManagement) fee. In a bull market, when not keeping count of the exact number of shares, this can go undetected. After all, why would you want to keep track of your investments when you have a team doing it for you?
This is further confused by selling a dozen or more funds to the client, which makes bookkeeping almost impossible.

This list of tricks used by these con men are too numerous to list - THEY ARE PROS and this is how they get paid. They are more than ready to answer any objection you come up with - you will be out matched, they are fined tuned machines who spend months in word labs to execute cleverly structured sentences. Three pre client meetings is pure jive and just part of the act.

Take a year if you need to to educate yourself. Financial literacy is your best investment and will benefit your long term wealth more than anything else. Then maybe you can educate your friends.

Your choice, good luck. :sharebeer
"The stock market is a giant distraction from the business of investing." - Jack Bogle

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The Three-Fund Portfolio

Post by Taylor Larimore » Sat Oct 21, 2017 10:37 pm

Pdub:

You might be interested to learn that the "Second Grader" Three-Fund Portfolio currently has a higher 1yr; 3yr; 5yr and 10yr return than the Yale Portfolio Model:

www.marketwatch.com/lazyportfolio

I would never buy commissioned-based mutual funds. The "advisor" has too much temptation to sell you the highest commission fund which is often the worst. In fact, why pay a commission at all when you can buy commission-free, no-load, mutual funds yourself.
In mutual funds you get what you don't pay for.--Jack Bogle
Best wishes
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

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Re: Commission only fiduciary planner

Post by pkcrafter » Sat Oct 21, 2017 10:49 pm

Thank you, I will read that. And you are right, prior to this I really did not know the costs of my investments with them. That is really me to blame however.
They have a great reputation with many of the people I have talked to in the community.
Too many people that have recommended them know that I will be seeing them, so its too late to back out.
Well, you are here and you are learning. That's good, but going to a meeting because a lot of friends have recommended them makes no sense. Have you not yet realized your friends know less about smart investing than you do, and you've only just started!

Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.

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Re: Commission only fiduciary planner

Post by alexkass » Sun Oct 22, 2017 12:06 am

It has been interesting but a bit stressful to me to read this thread. Even after the truth of the situation has largely unfolded,I'm still worried that the poster is going to be conned into signing up. In particular, I'm worried that you're gong to be taken in by the use of social pressure; they're going to subtly make you feel that you are insulting the friends who recommended them if you conclude that they are selling (very expensive) snake oil.

The suspense is very palpable.

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Re: Commission only fiduciary planner

Post by 2comma » Sun Oct 22, 2017 2:11 am

pkcrafter wrote:
Sat Oct 21, 2017 10:49 pm
Thank you, I will read that. And you are right, prior to this I really did not know the costs of my investments with them. That is really me to blame however.
They have a great reputation with many of the people I have talked to in the community.
Too many people that have recommended them know that I will be seeing them, so its too late to back out.
Well, you are here and you are learning. That's good, but going to a meeting because a lot of friends have recommended them makes no sense. Have you not yet realized your friends know less about smart investing than you do, and you've only just started!

Paul
Pdub,

The day you happened upon the Bogleheads is one of the luckiest days of your life.

Sad fact is most people are terrible investors - do you really discuss money, politics or religion with them? You mentioned the returns others told you about but ask them if they know what fees they are paying. I bet not one of them knows what the true cost of their investments are and you can bet your are paying that cost! Many investment sales people will tell you not to worry about the fees (after they try to hide what they are) their "special sauce" will will make you enough and more to cover those costs. Fact is studies have proven if you collect whatever the market brings and diversify your investments at the lowest cost you will consistently outperform. If you were able to figure out what % they are collecting in fees, which will be hard to do in this case, you can determine the amount you will eventually have by using an investment fee calculator. I'd assume that they will remove between 1% and 2% in fees per year. Although that sounds like not much, over many years it will amount to hundreds of thousands of dollars. Here is one investment fee calculator: http://buyupside.com/calculators/feesdec07.htm.

Take a look at the three fund portfolio. It's simple, anyone can do it. Investing doesn't need to be complicated.
If I am stupid I will pay.

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