Good article on not using a FA that charges a high AUM %

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gtt561
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Good article on not using a FA that charges a high AUM %

Post by gtt561 »

Last edited by gtt561 on Tue Feb 25, 2014 6:52 pm, edited 1 time in total.
"Anything less than a 10-year horizon is just speculation." John Bogle
HouseStark
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Re: Good article on not using a CFP

Post by HouseStark »

This article is not about using the services of a CFP. It's about how financial advisers who charge a fee based on Assets Under Management are not worth what they charge and the author postulates how that fee model will change. Most such advisers are acting primarily as portfolio managers, not as general financial planners, even if they have CFP after their names. Financial planning is a lot more than managing a portfolio. It also addresses retirement planning, estate planning, risk planning and estate planning, in addition to actual investment management and planning. Those services are not what the so-called financial advisors at the big firms mentioned are usually doing. They're collecting those 1-2% annual fees for managing a portfolio, and often not achieving meaningful results in risk-based performance after the fees are considered.

I am neither a CFP, nor a financial planner, but I do do tax preparation and advising and related financial planning on an hourly fee basis.
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tfb
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Re: Good article on not using a CFP

Post by tfb »

Good article on not using a CFP
It's not about not using a CFP but about not paying 1.5% AUM when you use one.
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ndayev6
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Re: Good article on not using a CFP

Post by ndayev6 »

This article does a great job of illustrating the importance of plugging in the numbers. 1.5% is a small number when used in most other aspects of life. A while back my parents and I reviewed their investment fees with their financial adviser who was charging 1% AUM and had their inherited IRA invested in funds with an average ER of 1.2%. It was not until I plugged in the numbers did they realize that their adviser (and the ER of the funds that he had their IRA invested in) was pulling in more money on an annual basis than they were with their RMD. They meet once a year for less than one hour.
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serbeer
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Re: Good article on not using a CFP

Post by serbeer »

Good article about importance of watching investments' total costs.
But CFPs are not even mentioned, for god's sake.
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neurosphere
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Re: Good article on not using a CFP

Post by neurosphere »

I do think the public needs education about the difference between financial planning and investment management. They are obviously related, but very different aspects of personal finance. The problem I have with so-call "financial planners" charging AUM fees is that they are disincetivized from actually providing financial planning services. Once they have your assets, they'll get your fee no matter what they do. They only need to do enough "planning" in order to keep you from leaving, or perhaps the only planning was done on the front end as a lure to "trap" your assets.

Often, it's the financial planning part of the job which is the toughest one, and the most time consuming. It's likely that it's the biggest clients (with the biggest portfolios which generate the largest fees) which are going to get the advisors special attention. All of the others have to compete for time. Anyway, all of these concepts are well discussed elsewhere on Bogleheads.
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Re: Good article on not using a CFP

Post by gwrvmd »

I agree with tfb and seerbeer
CFPs are not even mentioned in the article
They are usually well trained and "act in the best interest of the client" not legally but per their certification.
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neurosphere
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Re: Good article on not using a CFP

Post by neurosphere »

gwrvmd wrote: Bad post.....Gordon
Let's cut the OP some slack, I think the OP simply does not realize that "CFP" is not the same as "financial planner".
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gtt561
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Re: Good article on not using a CFP

Post by gtt561 »

neurosphere wrote:
gwrvmd wrote: Bad post.....Gordon
Let's cut the OP some slack, I think the OP simply does not realize that "CFP" is not the same as "financial planner".
Thanks for defending me....lol. Sorry I just thought it was a good article that the majority of readers here would enjoy reading. The reason I put CFP in the title was because I always thought when you look for a financial advisor, they always recommend you look for a certified financial advisor. So I made an assumption, when the article stated that she had a financial adviser at one of the nation's largest banks, that person was a most likely a CFP. Thus, I assumed again that since the FA was charging 1.5% of AUM that the article was trying to tell the readers that it was not worth using a FA since picking index funds could be easily done by one self. Thus, it's not a good idea to use a FA or CFP that charges such a high AUM %. Sorry for the confusion. I changed the subject title.
"Anything less than a 10-year horizon is just speculation." John Bogle
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