An easy way to avoid this is not give advisors discretionary access. IMO that’s a big red flag.
They’re gonna hate me, then. I bought five shares of stock when I was in high school and still have it. Somebody could starve to death trying to survive on commissions from my trades.
I have a Schwab advisor/CFP, and he makes money based on how much the accounts in his portfolio grow, either through his customer’s investments or by him rustling up more clients. There’s no loads or fees to me other than and individual fund’s overhead charge and the funds I use are all low fee. Also he’s made me a shit-ton of money.
Looks like my guy makes 2.25% on my balance per year. That’s good, I guess? The better I do, the better he does.
Do you pay him that 2.25%, or does Raymond James?
To me, paying that much every year seems like a lot. And that’s 2.25% of the balance, not the annual gain? So if your million-dollar balance makes no money this year, no gain and no loss, he still gets $22,500?
For him, yes. 2.25% is exorbitant. When I was an advisor, we tried to keep things under half that, all in (expense ratios + advisory fees + any other fees). Many of our accounts were less than 0.80%
Yeah, my guy is only about 1% (I want to say 1.1%).
I actually don’t know (but should!). I’d just gotten that number from a Raymond James website. I’m sure it’s on my statements, will follow up this week!
I don’t have a million-dollar balance, but I have enough that I think I’d notice a 2.25% cut.
I just looked up the statements online, and yeah, I was way off. We have six accounts with him - we each have an IRA, there’s a joint IRA, we each have a Roth IRA, and we have a college account. Fees are 0% for the college account, .07% for the Roths, to around 1% for the IRAs.
If I were you, I’d call him and ask explicitly, “How much are you paid for managing my accounts and how is the amount determined?” Most likely, the compensation was detailed in the paperwork when you signed up with the company.
Another thing to ask for is the average expense ratio for your accounts. If he’s loading you up on Raymond James (or affiliated) funds, the fees are hidden - they don’t appear on any line item other than in the prospectus (and some other places the average person is unlikely to look). I’d be less worried if he said his advisor fee was 1% than if he said it was .07%. That seems fishy.
Thanks, all, very good recommendations, and I’ll look into what fees I’m paying. I was really just recommending my general situation to the OP, who of course can find out how much his advisor is charging. Apologies if I’ve caused a hijack.
Root, first off, please note that there is no rush to do anything at all right now. Take your time to evaluate what and where you have now, and then you can decide where to go from there.
I suggest going to the Bogleheads forum and lurking there for a bit. Plenty of thing there will seem foreign to you, but with a bit of research you should be able to start to make some sense of it.
Once you know some of the basics like the types of accounts, asset allocation, etc. you may decide that the actual handling of your account is easy enough to do yourself. Then if you need advice, find a fiduciary advisor that charges by the hour and does not actually take control over your accounts. You may pay him or her $2000 or so one time, but that’s a bargain compared to paying a small percentage of your balance year after year.
I was in the same situation as you. Reading and understanding financial statements is not something I enjoyed, and I basically liked to hold things.
I met someone from a major house (which I won’t name) when I went to a pay for college for your kid seminar. I got along with him very well, and though I had very little money in the account to start with, having that contact was great when I got a fairly big buyout from my company.
I stayed with him even after I moved to the other side of the country, and only stopped when he got promoted well above my balance. I’ve now worked with someone else from the same company for over 10 years. It’s worked out very well. I’ve made a ton of money, and am now retired with no worries.
The benefit is being able to get advice you probably wouldn’t think of. This was especially helpful as I neared retirement and wanted to change my investment goals.
The main things to look for: do you get along with the person? Do they ask about what you want to do and what level of risk are you comfortable with, or are they trying to sell you something. Get references. Basically have a relationship.
I ran my father’s trust which was in the same company but small enough I basically used the 800 number. It was not the same experience. I had a one cent balance for several years because they were incapable of closing the account. Even after my money doubled.
Anyhow, consistency is good.
I’m not rushing or panicking, but I’ve put this off long enough already.
I’ve put out some feelers to friends, but don’t have any names, yet.
I just feel like if I tried to manage all this myself that I’d always be on the back foot. One of the accounts I inherited from my mom has reached a point where I might be required to take distributions from it. The one advisor I spoke to seemed confused that one of my accounts was “inherited” rather than “beneficiary”. I think I’d always be trying to figure out each new issue as it came up. If I can find someone who already knows this stuff, that’s worth something to me.
And it’s good to hear from you, Dag. I still kinda miss the old poker games. Hope you’re well.
The company where your beneficiary account is held should be able to assist you with mandatory distributions. Although I think the total amount of the mandatory distribution is across all accounts, even if they’re not at the same company. That’s a reason to have the accounts all with the same company. My mother is old enough that she’s required to take mandatory distributions from her IRA money and a couple of years ago, she didn’t do so, partly because she had money spread around different banks (in various CDs, looking for the best rates).
If you inherit an IRA from someone who was old enough to already be taking their required minimum distributions (RMD) you have to continue taking those RMDs regardless of your age. It used to be that you were allowed to take RMD distributions based on your age, but the Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act) modified that rule and inherited IRAs after that took effect have to be distributed and the taxes paid within ten years, unless the person inherited from a spouse.