High-fee Passive Advisors Gave Me the Boot!

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legio XX
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Re: High-fee Passive Advisors Gave Me the Boot!

Post by legio XX » Mon Aug 30, 2010 8:22 am

Rick Ferri wrote:I'm not saying what we do is right for everyone who wants to hire an advisor. There are people who shouldn't hire us. Our fee is fair for investors who wish to delegate and have $1 million or more. But we're too expensive for people who have $300,000 or even $600,000 because our minimum is $2,000 per year household. That makes the fee to high, IMO. These folks might look at an advisor such as Derek Tinninwho also charges 0.25% and has a $1,000 minimum fee. Or, they might go toAllan Roth, who charges by the hour. Or, they could manage their own account with the help of MarketRiders.com for $99 per year.
Rick,

Thanks for addressing this. There have been a number of threads on brokers/advisors/managers/planners, but the links provided led to firms that were not geared toward smaller portfolios. This may be one place where those guys earn their fees as dealing with uninformed or small investors can be labor intensive and taking an up-front fee is probably better than churning or pushing high-commission "opportunities" (wrap annuities in a retirement account come to mind). That said, I am probably going to set up a VG brokerage acc't soon and lose the inherited brokers.

You have several times mentioned "fair price." Do you know the history of this concept? It was part of the economic theory of the Middle Ages, a feature of popular saints' lives, etc. Had some interesting consequences.

Vic

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Re: High-fee Passive Advisors Gave Me the Boot!

Post by Rick Ferri » Mon Aug 30, 2010 8:29 am

nolo wrote:Rick:

Are you familiar with the practices of all the firms that charge 1%? Don't some of them do things differently than your firm-- for instance offer portfolios customized to each client rather than using the exact same funds and ETFs for all portfolios as does your firm?
There are taxable portfolios and non-taxable portfolios. Within each account type, there is an equity allocation and a fixed income allocation. Each client has a specific asset allocation to equity and fixed income based on their needs. So, for example, the mix of stock funds used to represent equities in the non-taxable portfolio are the same mix of equity funds for all non-taxable investors; however, the allocation to stocks will be different for each investor based on their needs.

The mix in the equity and fixed income portions of all portfolios is based on several years of asset allocation and fund selection work that I have done over the years (and continue to do). The basis for these selections can be found in All About Asset Allocation, All About Index Funds, and The ETF Book.

In a nutshell, we use very low cost, widely diversified funds in each asset class. This search typically leads to one fund the represents the total US stock market, one for fund the total US bond market, etc. The weighed average total expense ratio for funds in a portfolio are 0.18%.
legio XX wrote:Rick,

Thanks for addressing this. There have been a number of threads on brokers/advisors/managers/planners, but the links provided led to firms that were not geared toward smaller portfolios. This may be one place where those guys earn their fees as dealing with uninformed or small investors can be labor intensive and taking an up-front fee is probably better than churning or pushing high-commission "opportunities" (wrap annuities in a retirement account come to mind). Vic
It would be fine if an investor with a smaller portfolio went to a stockbroker, and that stockbroker had the low-fee index religion and recommended a basked of ETFs in a diversified portfolio using a buy, hold and rebalance method, then the broker personally deserves to be paid for his or her advice and council. How much is fair? About $250 per hour, however that's charged, i.e. commission, AUM, retainer.

My question is this, how many stockbrokers that you know have the low fee religion. Not many. But then, many advisors who preach the low-fee religion are wolves in sheep's clothing, which is the point of this conversation.

Rick Ferri

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Post by afan » Mon Aug 30, 2010 9:11 am

I wonder whether taking the concept of fiduciary duty seriously will address the question of appropriate fees. If one leaves it at "within industry standards" then these high fee investors are safe. If one approaches as "value added" or "hourly compensation for work performed", then they are in for a tough time.

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Post by speedbump101 » Mon Aug 30, 2010 10:20 am

Does anyone else see the similarity?

Jack Bogle in the 70s... With a mixture of integrity and tenacity he stated Vanguard, a guiding light in the greedy and expensive investment world of today. Jack was scorned by the mainstream back then; however in the end he outshone them all.

Rick Ferri today... integrity, and tenacity for sure. He's written books and donated the proceeds of at least one to charity (Jack's charity), and he goes against the flow of his peer group when it comes to fees. He is a champion of fiduciary standards in the advisor industry. He unselfishly spends countless hours here helping investors learn how to do it themselves.

Where will this lead? Who knows; perhaps there will be a 'Ferrihead's' forum down the road for the next generation of DIYers to gather at. :-)

Thanks Rick... Hope to see you at BH9 and also the Phoenix Super Bowl. You are planning to attend, right? I don’t see Phoenix on your speaking calendar.

SB...
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Post by Rick Ferri » Mon Aug 30, 2010 10:55 am

speedbump101 wrote: Thanks Rick... Hope to see you at BH9 and also the Phoenix Super Bowl. You are planning to attend, right? I don’t see Phoenix on your speaking calendar.
SB...
Thanks SB. I'll be in Phoenix for the Super Bowl of Indexing, but I'm disappointed with the agenda. If you didn't know the name of this conference was the Super Bowl of Indexing, you'd never have guessed it was a conference on indexing. The active side have all but taken over with sessions on quant strategies, sector rotation strategies, alternative indexing, etc. This year could be my last year at the Super Bowl of ???.

Rick Ferri

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Re: High-fee Passive Advisors Gave Me the Boot!

Post by 3CT_Paddler » Mon Aug 30, 2010 11:02 am

Rick Ferri wrote: It would be fine if an investor with a smaller portfolio went to a stockbroker, and that stockbroker had the low-fee index religion and recommended a basked of ETFs in a diversified portfolio using a buy, hold and rebalance method, then the broker personally deserves to be paid for his or her advice and council. How much is fair? About $250 per hour, however that's charged, i.e. commission, AUM, retainer.

My question is this, how many stockbrokers that you know have the low fee religion. Not many. But then, many advisors who preach the low-fee religion are wolves in sheep's clothing, which is the point of this conversation.

Rick Ferri
I think in the financial services industry there is often this overblown entitlement mentality when it comes to compensation. It is nice to see that there are advisors out there who actually believe in delivering value to their clients. Keep up the good work!

Sadly in my 401k plan, I would be thankful if they only charged 1%. :( That area of investment is in dire need of reform.

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Re: High-fee Passive Advisors Gave Me the Boot!

Post by Derek Tinnin » Mon Aug 30, 2010 2:15 pm

Rick Ferri wrote:I have aLinked-in.com profile, which is a site for business connections. It seems I've been a bad boy on the site lately and have been banned from one of the index fund groups.

"Passive Investment Professional" is a group that's composed of advisors who supposedly believe in low-cost passive investing. Yet, many of these advisors charge 1% or more to construct and maintain a portfolio of index funds, ETFs, and DFA funds. So, I asked this group in a forum, why, if they believe in low-costs, would an advisor charge high fees? It was a hypocritical.

Granted, I wasn't the most courteous when asking these questions (in fact, some would say I was rude). I said it was insane for an advisor to preach about low-cost passive investing and then charge their clients excessive fees. I was direct because I wanted these advisors to feel threatened, and as such, give me an emotional response rather than their boring sales pitch about how much 'value' they added to the client relationship.

I did get some interesting answers. Such as, "I charge what the market will pay" and "I provide a unique life planning experience". I believe the first answer is the most honest, i.e. advisors charge what they think people will pay, not what's fair. The second answer, "a life planning experience" was week because how often does a person need "life" planning? I mean, how often is there something in life that occurs that needs new life planning, and why do clients have to pay for it each year whether they need it or not?

Well, to make a long story short, I was kicked off the "Passive Investment Professionals" group yesterday without any notification. I'm guessing the person who started the group and controls membership is a low-fee passive fund high-fee advisor hypocrite.

What do you think?

Rick Ferri

PS. I'd like to thank Derek Tinnin for taking my side in the discussion before I got the boot.
Thanks Rick...I was a little shocked myself when I saw that not only were you booted from the group, they also removed all posts related to the topic. Their loss IMO, as you provided a lot of great info on that site which was always thought provoking, worthy of excellent discussion. The fact that they are unwilling to take on the topic of fees is certainly ignoring the elephant in the room lol.

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Post by Alex Frakt » Mon Aug 30, 2010 2:31 pm

dbr wrote:I think if a person is in a business that competes in a market where there are alternatives, then that person should be charging what the market will bear.
That's not what members of professions are supposed to do. Doctors, lawyers, engineers, investment advisors, etc. have a moral and in most cases a legal duty to put their client's interests first. It is in the client's best interest that you make a reasonable living so there will be no impediments to serving them properly, but it is not in their interest to be charged anything more and certainly not "what the market will bear."

This is part and parcel of being a professional. When someone engages the services of a professional, they hand over information or powers that would normally never be given to a stranger. The only way this relationship can comfortably exist is if the client has a great deal of trust in the profession - a trust that is grounded in this basic requirement of putting the client's interests first.

If a "profession" decides it's OK to break this covenant, then they should expect their interactions with clients to be as filled with suspicion and distrust as that of any potential buyer to a used-car salesman.

You ought to take a look at Bogle's book Enough: True Measures of Money, Business, and Life.

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Post by nisiprius » Mon Aug 30, 2010 2:59 pm

Alex Frakt wrote:
dbr wrote:I think if a person is in a business that competes in a market where there are alternatives, then that person should be charging what the market will bear.
That's not what members of professions are supposed to do. Doctors, lawyers, engineers, investment advisors, etc. have a moral and in most cases a legal duty to put their client's interests first.
I'd add that one of the distinguishing features of a profession is adherence to a code of ethics, and a concept of a duty to the profession itself.
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Post by 3CT_Paddler » Mon Aug 30, 2010 3:10 pm

Alex Frakt wrote: If a "profession" decides it's OK to break this covenant, then they should expect their interactions with clients to be as filled with suspicion and distrust as that of any potential buyer to a used-car salesman.
I am a little skeptical when it comes to elevating those in a "profession"... as a professional engineer I can say that there is a bit of used-car salesman in many unscrupulous professionals when money is involved. It's just human nature, and no code of ethics will change that. But it doesn't mean we shouldn't all strive as human beings to be ethical and honest in all of our dealings. That is usually taught before college though.

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Post by Adrian Nenu » Mon Aug 30, 2010 4:02 pm

That's not what members of professions are supposed to do. Doctors, lawyers, engineers, investment advisors, etc. have a moral and in most cases a legal duty to put their client's interests first. It is in the client's best interest that you make a reasonable living so there will be no impediments to serving them properly, but it is not in their interest to be charged anything more and certainly not "what the market will bear."

This is part and parcel of being a professional. When someone engages the services of a professional, they hand over information or powers that would normally never be given to a stranger. The only way this relationship can comfortably exist is if the client has a great deal of trust in the profession - a trust that is grounded in this basic requirement of putting the client's interests first.

If a "profession" decides it's OK to break this covenant, then they should expect their interactions with clients to be as filled with suspicion and distrust as that of any potential buyer to a used-car salesman.

You ought to take a look at Bogle's book Enough: True Measures of Money, Business, and Life .
I was going to post something similar but you said it better than I could. Rick Ferri is carrying on the Jack Bogle tradition and investing phylosophy in the fiduciary treatment of his clients and also in being an all-around ethical and moral person. Rick has my total respect and admiration.

Adrian
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Re: High-fee Passive Advisors Gave Me the Boot!

Post by Rick Ferri » Mon Aug 30, 2010 4:25 pm

Derek Tinnin wrote:
Rick Ferri wrote:PS. I'd like to thank Derek Tinnin for taking my side in the discussion before I got the boot.
Thanks Rick...I was a little shocked myself when I saw that not only were you booted from the group, they also removed all posts related to the topic. Their loss IMO, as you provided a lot of great info on that site which was always thought provoking, worthy of excellent discussion. The fact that they are unwilling to take on the topic of fees is certainly ignoring the elephant in the room lol.
Wow! That's almost scary. So much for freedom of speech.

:shock:

Rick Ferri

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Post by kenbrumy » Mon Aug 30, 2010 5:56 pm

Alex Frakt wrote:
dbr wrote:I think if a person is in a business that competes in a market where there are alternatives, then that person should be charging what the market will bear.
That's not what members of professions are supposed to do. Doctors, lawyers, engineers, investment advisors, etc. have a moral and in most cases a legal duty to put their client's interests first. It is in the client's best interest that you make a reasonable living so there will be no impediments to serving them properly, but it is not in their interest to be charged anything more and certainly not "what the market will bear."
As a professional engineer, I'll disagree with you. There is a market rate for engineering services that varies widely between disciplines. This also varies considerably based on economic cycles. Clients have no problems pushing the rates to the mat when business in slack. If the industry is busy, I expect to be well compensated to bring on a new project.

Charging someone's definition of what constitutes a "living wage" is too fluffy. My rate has nothing to do with putting the client's interests first as long as I'm upfront with my fees and conduct my activities from that point on in their best interest. There are lots of disciplinary cases to provide guidance.

If I'm on a project with a critical deadline, it would not be ethical to suddenly confront the client with a demand for a much higher hourly rate knowing they would incur substantial penalties by me leaving the project.

As far as Rick's fees are concerned, he has decided that 0.25% (with $2,000 minimum) provides a good marketing position. He's probably pretty busy and gets a good inflow of clients that are savvy enough to understand the pricing of the service but not inclined to do it themselves. He obviously has a good FA business. In some respects, he may be surprised what his business would look like if he started charging 1% both in client expectations and turnover.

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Post by rustymutt » Mon Aug 30, 2010 6:15 pm

They're booting themselves now days. In fighting and distrust has the adviser market searching for itself. When big bucks are up for grabs, you get mixed results in your opinions. I'm shocked at what adviser's charge.
1% of a million dollars is $10,000. For the passive investor, that's a rip off.
If an adviser works full time for a week on your passive investments, they are making $250 an hour. Do you guys believe that is a fair price? I don't believe they spend 24 hours on your investments. At 24 hours, or three days that's the same as $416 an hour. I worked for 26 years and was making $30 an hour when I retired. I think someone is trying to rip off people.
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Post by EvelynTroy » Mon Aug 30, 2010 9:00 pm

Rick Ferri asked: "What do you think" related to his original post.

What do I think? Let me preface by saying I am a client of one of those high-fee advisors you are speaking about, Buckingham Asset Management. I was really quite surprised that you would in effect bait the professionals that you evidently chose to establish a working relationship with – perhaps to share ideas, experiences and so on. The idea I’d think in such a group to support and help one another – maybe I’m wrong on the purpose. You wanted them to feel threatened and bait them into emotional responses. Goodness, it just doesn’t “seem” professional to me.

Then to air your feelings on a public message board – trying to convey you are somehow better than other fee advisors because your fees are less – again just not professional in my opinion.

Airing your negative feelings toward other fee-only advisors on a message board where potential clients might be visiting – well, just doesn’t seem like its quite right.

The reason I say potential clients might be visiting is because I was one of those potential clients about a year ago. I needed help with my portfolio – wished to minimize mistakes, establish a passive investing approach, and had other financial needs not directly related to the portfolio. I contacted your firm – it took days to receive a response, as well as another lengthy delay in responding (I can’t remember exactly the number of days any longer) after I returned the questionnaire.

At which point I was referred to Garret Financial Planning Network for my planning needs. I didn’t know that your firm wasn’t a more full-service financial firm. My thought was, “maybe those low fees are for a reason?” So, yes I chose another firm in spite of higher fees for any number of reasons.

Establishing a relationship with any fee-only adviser is a very individual choice. I’ll leave it at that.
Evelyn

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Post by kenbrumy » Tue Aug 31, 2010 7:13 am

EvelynTroy wrote:Establishing a relationship with any fee-only adviser is a very individual choice. I’ll leave it at that.
Evelyn
I think she made my point above. The high fee advisers may suck $10,000 per year out of a $1MM portfolio (robbery in my opinion) but with that comes expectations. She wanted instant replies to new client inquiries and probably wants a bit more handholding than Rick's typical client.

In my years of counseling people to leave their rip-off advisers, I get people to first actually see how much they have paid in fees to their advisers and mutual funds. Then I try to get them to look at a multi-year return of a balanced portfolio against their adviser's performance. In times of economic distress people are more open to saving those fees. When the return is good, they seem happy to make a little less knowing that their adviser is taking care of them.

I'm always interested in the perks some people are overwhelmed with. One guy bragged about the two baseball tickets he gets sent once per year (worth about $75). One woman thought it was wonderful that once per year she had dinner with her adviser to discuss the performance of her couple of million portfolio (and he picked up the check! :D ). I'll bet Rick doesn't do that sort of juicing the clients.

I have wondered whether it would be worth DW getting a low fee adviser should I drop dead. She's not very focused on investing. Despite my efforts she's too happy to ignore it and let me do it all. It will all come down to whether I can adequately train one of our kids.

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Post by Rick Ferri » Tue Aug 31, 2010 8:02 am

EvelynTroy,

Concerning my company, we have a policy to contact all inquiries within 24 hours. I'm sorry that you didn't have that experience a few years ago. There have been times in the past when a piece of national media exposure cause our response time to slow, so we thank you for being patient.

We speak with several people a day who contact our company, and although we try, we cannot help everyone. There are occasions when a person has greater needs than the investment planning and asset management services we provide. In those cases, we do try to help by recommending they first go to an hourly fee financial planner to get the specific help they need. When they're back on track, we do invite them to revisit our firm for detailed investment planning and account management.

I believe that detailed financial planning, estate planning, and tax issues are special pay-as-you-go services that should be done by a separate company than the people managing your money. This prevents conflicts of interest. In addition, the fee for these special services should be billed hourly or by the project. Fees for special services should NOT be paid for over and over again as part of an annual portfolio management fee. That leads to overcharging.

Concerning my post about advisor fees; this isn't the first time I've made an issue about high advisor fees in the public domain, and it won't be the last. More than 11 years ago, I wrote article that ran on another website entitled The Price of Advice. That article was much more critical of advisors than the information I posted here and on Linked-in.

John Bogle's approach to conflicts of interest and high fees in the mutual fund industry is very direct. He tells it like it is, and takes not prisoners. I choose the same approach as Bogle about the same issues in the advisor industry, and I make not apologies.

I disagree my Linked-in post was 'baiting' these so-called passive advisors because I stated exactly why I was asking these questions and exactly what I was going to do with there answers if they chose to respond. I stated very clearly that I wasn't going to name any names. There was nothing hidden, there was no ulterior motive. I was very direct in my purpose for pushing this issue. Rather than discuss it, the deleted the conversation and kicked me out.

Rick Ferri

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Post by Alex Frakt » Tue Aug 31, 2010 9:20 am

kenbrumy wrote:
Alex Frakt wrote:
dbr wrote:I think if a person is in a business that competes in a market where there are alternatives, then that person should be charging what the market will bear.
That's not what members of professions are supposed to do. Doctors, lawyers, engineers, investment advisors, etc. have a moral and in most cases a legal duty to put their client's interests first. It is in the client's best interest that you make a reasonable living so there will be no impediments to serving them properly, but it is not in their interest to be charged anything more and certainly not "what the market will bear."
As a professional engineer, I'll disagree with you. There is a market rate for engineering services that varies widely between disciplines. This also varies considerably based on economic cycles. Clients have no problems pushing the rates to the mat when business in slack. If the industry is busy, I expect to be well compensated to bring on a new project.
OK, I'll stipulate that my comments do not necessarily apply to engineers as far as setting rates. But that is only because those hiring engineers are normally organizations who are sophisticated enough to avoid being taken advantage of. The same would apply to certain classes of corporate attorneys and I'm sure physicians have their own analogs. In the investment world, presumably pension fund managers would fall into the same class.

But putting the client first still applies in the performance of their duties. For example, unlike many self-styled investment professional, you are unlikely to find engineers defending those who spec materials that cut the margin of safety or reliability to nothing because the supplier pays them a commission. And IMO an engineer hired by an individual without any special knowledge of the pricing of engineering services still has a duty to charge only a reasonable amount, not the maximum he or she could extract.
Last edited by Alex Frakt on Tue Aug 31, 2010 9:21 am, edited 1 time in total.

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Post by BenAiken » Tue Aug 31, 2010 9:21 am

If you are in the position to need to pay someone for advice better have them investing in low cost index funds then high cost managed funds in addition to their management fee.

In addition, posters on this blog are the exception to rule. Most people are not financially savvy and need help. Better to pay a good actual adviser then blinding investing and paying more then 1% a year in stupidity fees.

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Post by dbr » Tue Aug 31, 2010 9:43 am

Alex Frakt wrote:[
But putting the client first still applies in the performance of their duties.
Performance of duties and not fee is the heart of the matter that distinguishes the "financial advisor" community from the other professions.

However, there ARE true professional financial advisors.

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Post by kdmusic » Tue Aug 31, 2010 9:57 am

Your integrity is admirable, Rick.

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Investing is not difficult

Post by Taylor Larimore » Tue Aug 31, 2010 10:01 am

Bogleheads:

Many investors will benefit from engaging a reputable low-cost advisor. However, I am reminded of this statement by Bill Bernstein:
"If over the past 10 or 20 years, you had simply held a portfolio consisting of one quarter each of indexes of large U.S. stocks; small U.S. stocks; foreign stocks; and high quality U.S. bonds, you would have beaten over 90% of all professional money managers and with considerably less risk."
"Simplicity is the master key to financial success." -- Jack Bogle

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Post by Dan999 » Tue Aug 31, 2010 10:05 am

I called Rick's office and was contacted wihtin hours. Their response was excellent and I received a questionaire by overnight mail.

I have managed my funds and am doing ok on my returns and asset allocation.

But my wife is totally not into finances/investing and my worry is that she would be lost and may be a sheep in wolf's territory.

So that is why I looked into Rick's firm . I do not expect estate planning and tax work for this 1/4%.

But the thing that is holding me back more than anything is my concern of turning over my life's savings to an office somewhere in the midwest to people who I do not know and who have not been in business as long as Vanguard. I have 90% of my investments with Vanguard. Vanguard is across town from me, although I never go there. I just learned of Rick on this website a few weeks ago.

I am very careful and somewhat skeptical. I do not use Vanguard on line because of an attmepted login to my account a couple of years ago.

So the question applies to Rick and other advisors out there, how do I avoid getting into a Bernie Madoff situation. Vanguard is safe, but I think I need to set up a system so my wife would have someone help her with her investmentswhen the time came . Also, maybe the 1/4% would not buy the type of advice a neophyte widow needs.

Sorry to ramble, but comments on the security issue appreciated.
No offense meant to Rick's firm, just a "middle of the night fear question".

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Concern about an unknown advisor

Post by Taylor Larimore » Tue Aug 31, 2010 10:33 am

Hi Danny:
But the thing that is holding me back more than anything is my concern of turning over my life's savings to an office somewhere in the midwest to people who I do not know and who have not been in business as long as Vanguard.
If you want a financial advisor, don't hold back because you are concerned about Rick Ferri and his "office somewhere in the midwest."

Rick is a former Marine fighter pilot with 10 years experience in a Wall Street brokerage firm (until he couldn't take it anymore), a CFA (a premier financial designation), and author of many excellent financial books.

I have known Rick and his parents personally for nearly 10 years. Rick is a co-author of our book The Bogleheads Guide to Retirement Planning with all royalties going to charity.

Your investments could not be in better hands.
"Simplicity is the master key to financial success." -- Jack Bogle

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Post by Rick Ferri » Tue Aug 31, 2010 10:55 am

the question applies to Rick and other advisors out there, how do I avoid getting into a Bernie Madoff situation
This is a good question because it comes up often. There's so much confusion in the marketplace.

Bernard L. Madoff Investment Securities was a custodian of assets and held assets in pooled accounts at his firm. Thus, they were able to steal money and then cover it up by creating phony brokerage statements.

My company isn't a custodian. We don''t hold assets and don't produce brokerage statements. We have no access to your money.

Like many investment advisors, our clients hold their assets in their own name directly at Charles Schwab. We are give limited power of attorney to make trades in those accounts. We have no control over the money in the accounts other than making trades. At any time, any client can de-link an advisor from their account with a simple phone call to Schwab. This is a very different model that has much more control and redundant oversight than Madoff.

Rick Ferri
Last edited by Rick Ferri on Tue Aug 31, 2010 11:17 am, edited 1 time in total.

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Post by Dan999 » Tue Aug 31, 2010 11:16 am

Thanks Taylor for the personal reference. I really did not have any question on his ethics or honesty.

Rick, you answered the question head on and I appreciate it. That is what I wanted to hear. I do not remember seeing this stated in the package you sent out, so if it is not there maybe you should explain these facts to new inquiries.

So I am fully protected from a future rogue employee you could have down the road?

Is there anyway funds could be sent to someone other than me or my wife's address or wired to an account other than what we have on file.

Maybe these are questions I need to discuss with your team..

Anyway thanks for clearing this up.

I will think about this some more and may return the package after I have another discussion with your team.

PS, the only time I lost money in the market was when I transferred my investments to an advisor at a well know mutual fund company right befoe the tech bust in 2000. So you might see what I am nervous.
There was no fraud, but the advice was very costly.

Dan

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Rick Ferri
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Post by Rick Ferri » Tue Aug 31, 2010 11:29 am

So I am fully protected from a future rogue employee you could have down the road?

Is there anyway funds could be sent to someone other than me or my wife's address or wired to an account other than what we have on file.
Your protected from fraud by an employee in many ways, not the least that we pay a small fortune for insurance to cover this unlikely but possible contingency.

The only way money goes to another account other than you or your wife was if you requested this and signed Schwab paperwork that made it happen. If someone was trying to steal from you, i.e. someone stole your identity and tried to move money, Schwab is liable because they're the custodian a they shouldn't have let then happen.

Great questions. Thanks for bringing them up!

Rick Ferri

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Re: Investing is not difficult

Post by yobria » Tue Aug 31, 2010 11:42 am

Taylor Larimore wrote:Bogleheads:

Many investors will benefit from engaging a reputable low-cost advisor. However, I am reminded of this statement by Bill Bernstein:
"If over the past 10 or 20 years, you had simply held a portfolio consisting of one quarter each of indexes of large U.S. stocks; small U.S. stocks; foreign stocks; and high quality U.S. bonds, you would have beaten over 90% of all professional money managers and with considerably less risk."
Or even more simply, put everything in a Vanguard target retirement fund.

Traditionally, if you had significant assets in a taxable account, the asset location issue made things a bit more complex. This becomes less significant, however, with cap gains rates rising, and bond yields so low.

Nick

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Post by Lbill » Tue Aug 31, 2010 11:50 am

My Investment Advisor: Bogleheads
Annual Fee: 0%.
There are some things money can't buy.
For everything else, there are paid financial advisors charging 1% or more.
"Life can only be understood backward; but it must be lived forward." ~ Søren Kierkegaard | | "You can't connect the dots looking forward; but only by looking backwards." ~ Steve Jobs

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Post by dcd » Tue Aug 31, 2010 11:59 am

Rick: I think you should be proud that you got kicked out.
Denny

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Post by Value_Investor » Tue Aug 31, 2010 1:59 pm

Alex Frakt wrote:
dbr wrote:I think if a person is in a business that competes in a market where there are alternatives, then that person should be charging what the market will bear.
That's not what members of professions are supposed to do. Doctors, lawyers, engineers, investment advisors, etc. have a moral and in most cases a legal duty to put their client's interests first. It is in the client's best interest that you make a reasonable living so there will be no impediments to serving them properly, but it is not in their interest to be charged anything more and certainly not "what the market will bear."

This is part and parcel of being a professional. When someone engages the services of a professional, they hand over information or powers that would normally never be given to a stranger. The only way this relationship can comfortably exist is if the client has a great deal of trust in the profession - a trust that is grounded in this basic requirement of putting the client's interests first.

If a "profession" decides it's OK to break this covenant, then they should expect their interactions with clients to be as filled with suspicion and distrust as that of any potential buyer to a used-car salesman.

You ought to take a look at Bogle's book Enough: True Measures of Money, Business, and Life.

While I get your concept, your analogy is patently false. Doctors' clients are the insurance companies. The insurance client is the patient. A doctor charges EXACTLY what the market will bear for their services. That market is defined in one of three ways. The private payee, the insurer or the government. All three markets pay a different price. The private payee pays the highest rate while the insurer pays the highest NEGOTIATED rate that the insurance company will pay. The government payee pays the lowest rate. All the rates are different for the same services and for the same patients based PRECISELY on what the market will bear.

Anyone that thinks that doctors and lawyers do not charge what the market will bear is in serious need of some economics lessons.

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Post by kenbrumy » Tue Aug 31, 2010 3:50 pm

Value_Investor wrote:Anyone that thinks that doctors and lawyers do not charge what the market will bear is in serious need of some economics lessons.
Add engineers, plumbers, electrians.....

I could go on and on. Haven't most of us quit a wage-slave job at one time or another for more money?

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Post by Mike Damone » Tue Aug 31, 2010 4:26 pm

Being a retail business owner, I don't see what's wrong / unprofessional with asking a market price.

I'm not a charity.

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Post by GaryPantaloukas » Tue Aug 31, 2010 4:51 pm

Rick is overcharging. Why pay him?

Btw - what is a CFA? I've heard of CFA charterholders before, but not CFA's.

Also, this thread has turned into a marketing thread for Rick peddling his services. Surprised this is allowed.

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Post by kenbrumy » Tue Aug 31, 2010 5:11 pm

GaryPantaloukas wrote:Rick is overcharging. Why pay him?

Btw - what is a CFA? I've heard of CFA charterholders before, but not CFA's.

Also, this thread has turned into a marketing thread for Rick peddling his services. Surprised this is allowed.
Probably because 90+% of the people on this forum know what Rick does and 90+% of the people don't use financial advisers. Of course, I could be wrong with both of those estimates.

Just as a check.... Anyone need the services of a professional engineer? :D

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Post by Value_Investor » Tue Aug 31, 2010 5:17 pm

kenbrumy wrote:
GaryPantaloukas wrote:Rick is overcharging. Why pay him?

Btw - what is a CFA? I've heard of CFA charterholders before, but not CFA's.

Also, this thread has turned into a marketing thread for Rick peddling his services. Surprised this is allowed.
Probably because 90+% of the people on this forum know what Rick does and 90+% of the people don't use financial advisers. Of course, I could be wrong with both of those estimates.

Just as a check.... Anyone need the services of a professional engineer? :D
Possibly.

Another possibility, one that I consider more likely, is that because he espouses the 'bogle mantra' he's allowed to advertise. Had he been an FA espousing High Fees and Active Management he'd have been shown the door. It's more a commentary on the accepted groupthink rather than the lack of demand for his services on this board.

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Post by Rick Ferri » Tue Aug 31, 2010 5:24 pm

GaryPantaloukas wrote:this thread has turned into a marketing thread for Rick peddling his services. Surprised this is allowed.
Oh no! :shock:

This could be the second website I get booted from in one week!

Gary, I'm not going to disagree with you. Although a large majority of Bogleheads run their own portfolios, there are some people who have contacted my firm because of this site.

I've discussed this issue at length with Mel and Alex. It's my opinion that we 'professionals' should have a icon under our names so that people know when a member may have a conflict of interest on this forum. That hasn't happened yet, but, IMO, there should be something. That very fact that advisors post here creates potential for conflict of interest. I don't know what the answer is, and it won't be me who decides.

Rick Ferri

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Locked

Post by Taylor Larimore » Tue Aug 31, 2010 7:37 pm

Forum policy:
Moderators or site admins may lock a topic when a violation of posting policy has occurred. Occasionally, even if there are no overt violations of posting policy, a topic (or thread) will reach a point where the information content of the discussion has been essentially exhausted and further replies are much more likely to cause distress to the community than add anything of value.
"Simplicity is the master key to financial success." -- Jack Bogle

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