Fee-only advisor fee

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Submariner1980
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Fee-only advisor fee

Post by Submariner1980 » Mon Apr 26, 2010 4:18 pm

What is a reasonable fee I can expect to pay for advice from a fee-only advisor? Do they usually charge by the hour, by complexity of portfolio? What are your experiences?

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johncgay
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Post by johncgay » Mon Apr 26, 2010 5:03 pm

To say there's a range is an understatement. Rick Ferri charges 25 bps and is on the very low end of the asset-based advisors. Several fairly well-known advisors charge as high as 2.5% on smaller accounts (ie, <100k). Everything in between exists, with 1% being somewhat of a common norm (although even that varies dramatically based on account size, fee breakpoints, etc).

Although less common, there are advisers that charge either hourly or on a flat-fee arrangement as well. Most have trading authority/power of attorney, although some can advise you without trading authority (ie, they give you advice, you pull the trigger).

Look around on this forum (Taylor Larimore could probably point you in the right direction... you might PM him.), also NAPFA is a good resource.

Be prepared for some frustration as you sort through those that charge high fees, those with active strategies, etc.

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BruceM
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Re: Fee-only advisor fee

Post by BruceM » Mon Apr 26, 2010 5:06 pm

Submariner1980 wrote:What is a reasonable fee I can expect to pay for advice from a fee-only advisor? Do they usually charge by the hour, by complexity of portfolio? What are your experiences?
It varies and depends on the advisor, where they are located and what you'd like them to do for you.

Assets Under Management (AUM) is the most common method. This usually runs 1% of assets each year, but could be higher with investable assets under a certain amount (say, under $250,000), but is also usually a sliding scale, reducing the AUM % for investables over $1MM. If the advisor using only low cost index MFs or ETFs, the AUM % could drop to .75 or even .5%.

Hourly rates generally depend on where you are. Large cities tend to run $200 - $250/hr. Smaller areas in the $150 range.

Some advisors charge as a % of total (not just investable) assets.

Some may charge a fixed $$ amount for a given project, such as how much to transfer to an IRA to then begin substantially equal payments over some period...say 10 years.

Do you have a specific example of what a local fee-only advisor charges?

BruceM

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Taylor Larimore
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Low fee advisors

Post by Taylor Larimore » Mon Apr 26, 2010 7:05 pm

Hi Bogleheads:
Look around on this forum (Taylor Larimore could probably point you in the right direction.)
It is notable that John Gay, who mentioned Rick Ferri's low fees, is also a low-fee advisor.
"Simplicity is the master key to financial success." -- Jack Bogle

rocket
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advice about insurance, estate planning, may be taxes ???

Post by rocket » Tue Apr 27, 2010 8:29 am

Did you want advice about insurance, estate planning, may be taxes ???
Investment management fee frequently is around 1% of assets under management (AUM). Alan, CFP(r)

integrity
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Post by integrity » Tue Apr 27, 2010 9:09 am

I think the OP is asking about fee-only advisors, not those who charge based on AUM.

Similar to the OP, I would also be interested to hear about the fee-only fees.

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johncgay
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Post by johncgay » Tue Apr 27, 2010 9:24 am

Often, though not always, non-portfolio advice is wrapped into an AUM fee. There are advisors who work strictly on an hourly basis-- Garrett Planning Network is a good resource for these. BruceM's mention on hourly fees is pretty accurate although they vary dramatically as well.
Last edited by johncgay on Tue Apr 27, 2010 10:52 am, edited 1 time in total.

dorokhin
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Post by dorokhin » Tue Apr 27, 2010 10:50 am

integrity wrote:I think the OP is asking about fee-only advisors, not those who charge based on AUM.

Similar to the OP, I would also be interested to hear about the fee-only fees.
Fee only financial advisors actually typically charge based off of AUM. In addition to up-front work, they will typically monitor and rebalance your portfolio as well as monitor and update your estate & insurance planning.

However, the cost of all of this is typically prohibitive for a small investor, so they go with advisors who charge by the hour/plan. It's not clear from the OP what situation he is in.

Fees can vary across widely and it's obviously much easier to negotiate fees down if the AUM is large. I think it's pretty atypical for any investor with $10m+ to pay more than 1% for comprehensive financial planning unless they're getting suckered by a big bank. I think the range for 0-$10m is much wider though, depending on how much work and attention the advisor needs to devote.

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Re: Low fee advisors

Post by ddb » Tue Apr 27, 2010 11:16 am

Taylor Larimore wrote:Hi Bogleheads:
Look around on this forum (Taylor Larimore could probably point you in the right direction.)
It is notable that John Gay, who mentioned Rick Ferri's low fees, is also a low-fee advisor.
FWIW, according to Mr. Gay's Forms ADV Part I filed with the states of Texas and Louisiana, his firm does not "provide continuous and regular supervisory or management services to securities portfolios". As such, I'm not sure that a comparison to Rick Ferri's firm is appropriate.

- DDB
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Post by Submariner1980 » Tue Apr 27, 2010 11:24 am

dorokhin wrote:
It's not clear from the OP what situation he is in.
Sorry, allow me to give a little background. I'm asking because several years ago, I used my credit union's in-house financial advisor to get me started on some investments. I was thrilled when after about 2 hours together setting up a Roth IRA and taxable account, I didn't have to write him a check for anything. I had no clue about high expense ratios, sales charges, front-end loads, etc. See my very first post to this forum, the advice I received, and an update based on the advice here: http://www.bogleheads.org/forum/viewtop ... highlight=

Now, I am curious because I have started managing my own portfolio, but wouldn't mind seeing a professional every so often when I get the inkling. Just curious as to how much I could expect to pay for an hour or two review every year or so. Also, I work with a lot of recent college grads who make the same mistake I did a few years ago, so I'd like to point them in the right direction.

So what I'm asking is what is typical, hourly or AUM, and what are the respective rates. It seems like an hourly rate may be something that I'm looking for, but someone with a more complex portfolio with higher value may need more comprehensive advice/planning, so would probably pay as an AUM structure.

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ruralavalon
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Post by ruralavalon » Tue Apr 27, 2010 11:33 am

BruceM wrote:Hourly rates generally depend on where you are. Large cities tend to run $200 - $250/hr. Smaller areas in the $150 range.
I agree, we have paid about $150/hr in downstate Illinois. But I think AUM is more typical, you have to search harder for an adviser on an hourly rate.
Submariner 1980 wrote:Now, I am curious because I have started managing my own portfolio, but wouldn't mind seeing a professional every so often when I get the inkling.

This is what we do every few years, and find it helpful and reassuring.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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Re: Low fee advisors

Post by johncgay » Tue Apr 27, 2010 11:45 am

ddb wrote:
Taylor Larimore wrote:Hi Bogleheads:
Look around on this forum (Taylor Larimore could probably point you in the right direction.)
It is notable that John Gay, who mentioned Rick Ferri's low fees, is also a low-fee advisor.
FWIW, according to Mr. Gay's Forms ADV Part I filed with the states of Texas and Louisiana, his firm does not "provide continuous and regular supervisory or management services to securities portfolios". As such, I'm not sure that a comparison to Rick Ferri's firm is appropriate.

- DDB
True. Rick's firm provides discretionary investment management. In other words, his clients turn over the execution and trading to his firm. I have a handful of such clients but the majority do not delegate trading authority or power of attorney to me. I create an investment plan that clients implement on their own. I advise them periodically on recommended changes. I help them self-execute their plan.

And Rick's hair is better than mine.

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ddb
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Re: Low fee advisors

Post by ddb » Tue Apr 27, 2010 11:54 am

johncgay wrote:
ddb wrote:FWIW, according to Mr. Gay's Forms ADV Part I filed with the states of Texas and Louisiana, his firm does not "provide continuous and regular supervisory or management services to securities portfolios". As such, I'm not sure that a comparison to Rick Ferri's firm is appropriate.
True. Rick's firm provides discretionary investment management. In other words, his clients turn over the execution and trading to his firm. I have a handful of such clients but the majority do not delegate trading authority or power of attorney to me.
Okay. Your ADV Part I does not disclose that you have any such clients, so an update may be in order.

- DDB
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rocket
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Post by rocket » Tue Apr 27, 2010 6:28 pm

[/quote]
.... wouldn't mind seeing a professional every so often when I get the inkling. Just curious as to how much I could expect to pay for an hour or two review every year or so. So what I'm asking is what is typical, hourly or AUM, and what are the respective rates.[/quote]
Some, maybe a lot, of advisors would say they cannot make a living doing business your way. That is, telling how to manage a portfolio for say $250-$500 every year or so. You would be seeing advisors living in homeless shelters.

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johncgay
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Post by johncgay » Tue Apr 27, 2010 7:16 pm

rocket wrote: Some, maybe a lot, of advisors would say they cannot make a living doing business your way. That is, telling how to manage a portfolio for say $250-$500 every year or so. You would be seeing advisors living in homeless shelters.
The challenge is volume. Everybody needs a doctor and most people know they do. Some people genuinely don't need financial advisers (a lot on this forum, for example). Of those who do, many are in denial. Many "don't know what they don't know" and are heading down a bad road on their own with the encouragement of e-trade commercials. Finally, those who need help and know they need it are faced with some pretty bad, expensive alternatives... of those, some get duped, others know they don't like what they see but don't know where to turn.

I'm certainly not asking you to play your violin, though. I can't think of many occupations in which you can work 2 miles from home, not be an employee and not have any employees, wear blue jeans, have shockingly low overhead, genuinely help people, and make a good living while charging at the very low end of the going rate. :D

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Post by hpygolky » Tue Apr 27, 2010 10:18 pm

As others have stated, the cost is going to depend on the type of advice you want/need. If you want some general thoughts on your asset allocation and maybe some specific recommendations on your 401k (like creating a couple of model portfolios of varying risk/return attributes), many Garret or NAPFA advisors would probably charge you for 3 to 5 hours of advice (depending on the number of choices in your 401k). That would include meeting and prep time.

If you want an advisor to also review every investment you own, it may be hard for you to find someone who is willing to do that, or it may be cost prohibitive. It can take a significant amount of time to properly go through the due diligence process on an investment.

Fees of $150 to $250 an hour is the average. As an aside, paying for investment advice can be helpful, but you are going to get the most bang for your buck paying for financial planning advice from a fee-only advisor.

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Fbone
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Post by Fbone » Wed Apr 28, 2010 2:59 am

For new clients, I was quoted $300/hr minimum three hours billed. The process would take three visits to complete. Advice only no executions.

Follow-up visits not needed except following major life change. Buy and hold.

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BruceM
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Post by BruceM » Wed Apr 28, 2010 1:25 pm

Fbone wrote:For new clients, I was quoted $300/hr minimum three hours billed. The process would take three visits to complete. Advice only no executions.
Do you mean there is an initial visit with hours billed up to the second visit with added hours billed up until the 3rd visit? And are the meeting session times also included?

Was there a maximum # of hours given for your need?

Where do you live?

BruceM

shashi
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tried Vanguard advice?

Post by shashi » Wed Apr 28, 2010 1:28 pm

Has anyone tried Vanguard? Their initial planning is around $500 I think.

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Fbone
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Post by Fbone » Wed Apr 28, 2010 9:40 pm

BruceM wrote:
Fbone wrote:For new clients, I was quoted $300/hr minimum three hours billed. The process would take three visits to complete. Advice only no executions.
Do you mean there is an initial visit with hours billed up to the second visit with added hours billed up until the 3rd visit? And are the meeting session times also included?

Was there a maximum # of hours given for your need?

Where do you live?

BruceM
My short run-on sentence can be multi-interpreted :)

His minimum charge was $900. This included the initial visit then the confirmation visit then finally his suggested game plan on the third visit. Each visit doesnt necessarily last an hour.

This was the cost even if you had a $5k portfolio. He probably charged more for complex situations but it sounded like he only dealt with investments not insurance or estate planning. Just basic AA and specific funds. Very casual.
I assumed mine would only require the "three hour" price plan. Since that would have been 3% of my total assets I didnt use him. Instead I went to a Fidelity retail center for free.
I live in New Jersey.

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Post by Gigi » Wed May 05, 2010 1:46 pm

I pay a few thousand a year but I also get superb advice. The firm helped me thru an extremely difficult and confusing time a couple years ago and now I am in a totally different place.

But it covers everything from soup to nuts as they say... :)

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BruceM
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Post by BruceM » Wed May 05, 2010 3:21 pm

Gigi wrote:I pay a few thousand a year but I also get superb advice. The firm helped me thru an extremely difficult and confusing time a couple years ago and now I am in a totally different place.

But it covers everything from soup to nuts as they say... :)
Gipi

If you don't mind sharing...

Who provides your advice and what are their credentials?
Where do you live (approximately)
And what kind of advice do they provide?

Just being curious :-)

BruceM

Gigi
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Post by Gigi » Wed May 05, 2010 3:39 pm

BruceM wrote: Gipi

If you don't mind sharing...

Who provides your advice and what are their credentials?
Where do you live (approximately)
And what kind of advice do they provide?

Just being curious :-)

BruceM
What I will share is this...

They do my taxes
Handle the investments
Created a financial plan for me and my children
Updated our estate plan
Get me the best deals on insurance


From the website it says: CFP, PhD; CFA; CLU; MBA; JD; CRA (Please dont ask what they all mean... :) )There's a few folks I work with there depending on what I need done. Not sure who has what letters.

Hope that helps.

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Rick Ferri
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Post by Rick Ferri » Wed May 05, 2010 4:40 pm

It depends what your looking for.

If you are strictly looking for as needed hourly advice, then $250 per hour is reasonable from a qualified advisor. If you are looking to have ongoing 'on-call' services that include tax preparation, estate planning, and other services then an annual retainer between $5,000 and $10,000 is in the ball part. If you are looking for someone to manage a portfolio for you and provide investment planning advice, a reasonable fee is based on assets under management depending on how much you have. As others have said, the AUM fee can range from 0.25% to 1.0%. typically an advisor has an annual minimum fee in lieu of AUM. Ours is $2,000 per household.

If a person want asset management plus full financial planning, IMO, those are separate services and should be two separate fees. There should be an AUM fee for managing the portfolio and a retainer or hourly fee for all other services. Services should be line-item on a bill so a client knows what they are paying for each service. Many advisors want to lump all services under a high 1% per year fee. This leads to overcharges, IMO.

Rick Ferri

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Zook13
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Post by Zook13 » Wed May 05, 2010 5:25 pm

Gigi wrote:
BruceM wrote: CFP, PhD; CFA; CLU; MBA; JD; CRA
That is about every professional designation related to financial planning there is...
Taxable Account Holdings: 100% Vanguard Tot'l Stock (VTI)

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Post by Gigi » Wed May 05, 2010 5:30 pm

Zook13 wrote:
Gigi wrote:
BruceM wrote: CFP, PhD; CFA; CLU; MBA; JD; CRA
That is about every professional designation related to financial planning there is...

It's a pretty good sized firm. So I would guess that diff people have diff letters. But I never asked. Maybe next time I'm there I will.

Gigi

Toolbert
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Post by Toolbert » Wed May 05, 2010 5:56 pm

The AUM industry has done a terrific job of new-speak'ing the term "fee only advisor".


And aaargh, I am so glad I stopped listening to everyone who had any stake in my asset allocation or any other aspect of investment strategy! Anyone who asks my advice hears ... visit the Bogleheads and educate yourself, don't pay anyone for anything unless you understand exactly what their stake is and why they do what they do.

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BruceM
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Post by BruceM » Wed May 05, 2010 6:59 pm

Gigi wrote: From the website it says: CFP, PhD; CFA; CLU; MBA; JD; CRA (Please dont ask what they all mean... :) )There's a few folks I work with there depending on what I need done. Not sure who has what letters.
Hope that helps.
Yes, thanks.
From the looks of those credentials, I'd say they've got you covered.
What's good about this list is it doesn't look like they have any of the self-bestowed and utterly worthless credentials most 'advisors' use. All of those credentials are hard-earned and suggest that the staff has the right fundamental education.
Rick Ferri wrote:It depends what your looking for.

If a person want asset management plus full financial planning, IMO, those are separate services and should be two separate fees. There should be an AUM fee for managing the portfolio and a retainer or hourly fee for all other services. Services should be line-item on a bill so a client knows what they are paying for each service. Many advisors want to lump all services under a high 1% per year fee. This leads to overcharges, IMO.

Rick Ferri
There are NAPFA advisors who charge the full 1% of AUM using indexed investing, and simply use the remainder of the AUM not used for their investing time, and provide all...or most....of the other household financial planning services, beginning with a comprehensive plan.

I agree that these two services would probably best be listed separately....but I suspect for many clients, its just easier to administer and easier for the client to understand.

Oh....and I just picked up your "The ETF Book" at Powells. I'm looking forward to reading it!

BruceM

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Post by Beagler » Wed May 05, 2010 7:08 pm

As you're doing your due diligence, have you considered any of these? http://tinyurl.com/6xcg7r
“The only place where success come before work is in the dictionary.” Abraham Lincoln. This post does not provide advice for specific individual situations and should not be construed as doing so.

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