Since my portfolio pretty much sits there going up and (mostly)down with the market, I have been content just paying yearly fees, which amount to about $160 or so. Today, my broker convinces me to shake up the risk allocation ratio, and to do that would cost me about $1400 in transaction fees. He says I would be better off going with their per annum 1% of the value of the account charge; when he buys and sells, I am not charged the transaction fee. So for this re-vamping of my account, I guess that’s okay, as I would save some. But to have 1% deducted every year–isn’t that a bit harsh, or no, especially as I don’t plan to do any wheeling and dealing? Is the 1% in the ballpark for brokerage functions that amount to little more than custodial?
If you’re not going to be doing much trading, why not just move the whole account to someplace like Schwab, and pay nothing? (You’d only pay for actually making trades.)
Yes, I have considered that. Am I a chump for going along with this guy (I sort of inherited him from my parents)? How do those outfits get away with those per annum fees when, as you say, Early Out, there are outfits that charge only for transactions? What might be the fees–as I am sure there will be–for transferring out of one brokerage to another?
Well, I have no idea what your current broker will try to charge you, but a discount broker like Schwab, unless I’m sorely mistaken, won’t charge you a dime for transferring your securities to them - heck, they want your business!
The only thing a regular broker can provide is advice; with someone like Schwab, you’re pretty much on your own. A lot of folks, over the last couple of years, have discovered just how much their brokers’ advice is worth: a few of the gems have probably kept their clients out of trouble, but most people, I suspect, would have done just as well by consulting chicken entrails.
Oh, and if you stick to mutual funds, there’s a whole raft of funds you can buy through Schwab without even paying any transaction fees (over 1100 funds, so-called Schwab OneSource funds).
If you want advice, of course, you can get it, even from a discount broker, but usually for a set fee.
I think you’d be crazy to stick with this guy.
Hey! Financial managers, if you are using their services intelligently, are well worth the 1% management fee. If you place frequent orders, solicit advice, and generally make him work for the money, it’ll cost you a lot less than traditional brokerage fees.
If his advice is no good, however, and you stick to no-load mutual funds, then discount brokers like Schwab will certainly save you money on fees, and you can’t do any worse on performance.
I use a financial management firm that charges something like 1% (about average, I think). This is NOT a brokerage–they are managing your account. They submit trades through my broker, who does not tack on commissions for the trades. They make all the decisions without the need for me to approve individual transactions. Their objective is to beat the S&P 500. My point is that for that fee they need to really be doing something for you, not just holding your assets for you. I am not sure that is exactly what this guy is proposing.
Thanks for the comments. I will have to pin my broker down as to just what I am getting for the 1% that I was not getting before. It’s PaineWebberUBS by the way; he is probably under pressure to work his accounts, as PW was recently acquired by UBS, and so probably under some sort of “new management.”
Would anyone know what an outfit like that would charge to leave them–you know, stuff like “closing out” fees, or “transfer fees,”–who knows what they might come up with.
I guess my problem with this broker is that he has made me feel like the victim of a hard sell. It’s his job to persuade and convince, I know, but for the moment, anyway, it seems that he has the knowledge and experience on how these things are done, and mine is only rudimentary. Thus, I feel I have little leverage, even though it’s my goddam money!
Just get a Vanguard Index fund. It’s basically just a S&P 500 fund and they charge like .25% or .3% or something like that.
It’s one of the biggest, if not THE biggest mutual funds out there.