No, if what you mean by “fee only” is per hour.
After exhaustive searching locally, I could not find a single Fee Only person or shop that would accept a per-hour consultation fee.
Also my experience. Because in reality this pricing scheme involves spending 80% of your time looking for clients and 10% of your time meeting with them and 10% doing pre-work and follow-up.
So you need a god-level hourly fee for the meetings themselves in order to make $150k per year. People are less willing to pay you $2000 for an hour of your time than they are to pay you $5000 a year in 1% fees.
I want to go back and address this. @Procrustus can certainly decise to stay with an advisor. But if he has the technical ability to post here he has the technical ability to open an online brokerage account. I suggest at either Fidelity, Charles Schwab, or Vanguard. They seem to be almost interchangeable, but Fidelity and Schwab do have physical locations in some cities, so if one is nearby go with that.
While you won’t get investment advisory services (telling you what to buy) unless you decide to sign up for one of their services, you will get technical assistance on on the mechanics on transferring funds, and how to buy or sell mutual funds, ETFs, stocks, bonds, etc.
Now then, if you have the intellectual ability to be a doper, then you have the ability to learn about what you should be investing in. This process takes some time, but there is no rush. Certainly there are smart people on the Dope, but this is more of a general interest message board and these types of threads pop up occasionally. A board like Bogleheads is investing specific, and has these types of threads constantly. A great place to learn.
Finally, if you do eventually decide to leave your advisor, read the many threads at Bogleheads on that topic before doing so.
Several reasons. One, the market goes down a lot as well. An advisor who is claiming to “beat the market” isn’t claiming to always make gains, they’re also trying to protect the downside. Secondly, this incentivizes risk adverse to the client’s risk tolerance. Third, the advisor is already incentivized for the account to perform well - they’re getting more when the account does well.
This is pretty close to why I chose to use a financial advisor. I consider myself somewhat financially savvy but I had an IRA balance that (to me) was larger than I felt comfortable making potentially expensive decisions about. Many people would feel comfortable managing that amount of money, but I did not. So I rolled it to a financial advisor that is a fiduciary, although he is paid a set percentage (I think less than 1%),
As part of his services, he also monitors and makes recommendations for my current 401k. He is essentially managing this for free as this balance is not subject to his set percentage. I’m sure he is hoping I’ll roll this into my IRA whenever I eventually change jobs, but I am not obligated to.
He does yearly retirement planning and modeling as part of all this. The peace of mind I get when he confirms that I’m saving enough for what I think I’ll need is huge to me - it’s another thing I don’t need to worry about.
For returns, there’s nothing more worth knowing. If you’re comfortable with getting market returns, then it’s very easy to do/you’re doing it (broad index funds). Lots of really smart people who know a lot more than most on the planet cannot beat the market. It’s hard.
If you’re needing to rebalance your stocks/bonds/cash/etc as you age to fund your lifestyle, then I’d probably find and pay someone a flat fee to help you with that. Once a year type thing - like going to the doctor for a yearly checkup.
For the OP, I agree with the “firewall” part and the rebalancing part. I know I’m paying a guy to buy a fund that pays another guy. I know I could do that myself. It sucks. But I also know it works for me and I sleep fine. That’s worth something and I don’t mind paying it.
Late add: The advisor also captures “good losses” so I can max deduct my taxes each year. It’s counterintuitive to me and I hate that phrase so I probably wouldn’t know how to do that without lots of effort and discipline, and it would just make me uncomfortable overall. So that’s 3 things outside of just picking investments: Firewall; rebalancing specific to me/my age, etc; and capturing deductible losses for tax purposes.
You and I agree on the premise that a regular person can do this. I’m right with you, not paying someone.
However, saying anyone can do it is like saying anyone can fix their car or their house. This is almost certainly true. Brake jobs are not Rocket Surgery. But assuming you have a day job, a family, etc., then we all have to make choices about what we’re willing to do.
An old VP of mine said that anyone can be a great manager during good times. The real mark of a good manager is during downturns. A good planner who keeps you from selling at the bottom is worth a lot more than one who gets you 1% more a year during a boom.
The most valuable thing I learned from screwing things up during the 2001 crash was to not screw things up during the great Recession - and my planner helped in this.
If we do run out of money, we could live off of free dinners from the 2.5% AUM financial planners that send us invitations every few weeks.
2.5%? That’s a lot to ask for. One relatively large firm that advertises extensively charges a lot less.
- The first $1 million: 1.25%
- The next $4 million: 1.125%
- Anything over $5 million: 1%
Let’s say, ferinstance, one had less than $1M in a portfolio. How much should they expect to be charged by a financial advisor doing the whole AUM thing if I have been with him and his firm for 10+ years?
Neither of those are the parts that I am concerned I don’t know about. And I don’t need someone to pick stocks and funds for me. (I do allow myself some minor portion of the equity share as self selected stocks, but that’s for fun.) I’m not prone to panic. Closest I came was decreasing how equity heavy I was in the start of 2017, feeling a bit more risk averse with Trump in office. But up to just about now pretty much all my worth has been untouched in the 401K or completely illiquid in a business investment. Managing the time ahead with money to live life as it may occur and impacts of approaches given foreseeable events and paths, RMDs, estate planning, so on? When RMDs hit is there a place for annuities if I won’t use the RMD to live off of? What should I be considering that I don’t know about?
I have confidence that I am more ignorant of options and tactics than I know. This year I look for someone to help us out. As soon as I get around to it … 
My brother has been trying to get me go with his guy for years. It’s complicated, but his guy gives him referrals for certain legal work, and my brother is in love with him, and so always giving me the hard sell. He’s a fairly small independent guy, and he’s 0.85%. In the Boston area, I can get you his name if you want (I don’t recall where you are). I have to be honest, though, I don’t know if that’s a friends and family rate or not.
I’m 100% confident that you could ignorantly stumble about re: all of these things, and not run the risk of dying destitute. And don’t think speaking with a/several financial advisors will give you complete certainty. I’m still not certain exactly what is the best for me re: Roth conversions, RMDs, etc. But I do derive some peace of mind knowing that I will have one guy who has more experience and expertise than I, offering me a specific plan, handling all necessary matters as they arise, and answering any of my questions.
Let’s look at some numbers. If my money guy manages $1 million, at 1% I pay him $10k/year. $2 mill - $20k. $3 mill - $30k.
If I have $3mill in assets (I don’t) - and don’t have a REALLY high standard of living - $30k/year really isn’t going to make much difference in my lifetime security. Yeah - if you consider the investment potential over the next 25-30 years, that will reduce the amount I leave my kids. But I’ll still be leaving my kids a good chunk of change. So for me, the question is, does it increase my comfort, can I afford it, and do I think it is worth it?
To a similar extent, I question how much each specific issue - Roth conversions, anticipation of tax implications, gifting currently, etc - will affect my big picture - being able to live comfortably through my life and leave SOMETHING to my kids. So, rather than trying to figure out each of these relatively minor things, I’m happy to have someone else do it.
I also have a guy do my taxes. You folk think that $ is wasted as well? Great. Enjoy yourselves.
Upthread, someone gave a good comparison - they don’t mind handling $, but they hate housework, so they pay for housekeeping. I might think that is a waste of money - but I can’t make that poster’s decision, and would never say they are wasting their money.
Comparisons to “the market” are challenging, because “the market” does not have the exact mix of investments I have. And some folk have posted challenges finding someone to work with them on an hourly basis. If you find such a person and they satisfy you - more power to you.
And, again, only you can place the value on how much you would enjoy however much time you would spend managing your money, and how much you value the peace of mind a money manager could give you. IMO, 1% is worth it. Having said that, I’m not entirely sure what I am going to do with my sizable IRA when I retire in 3 years. I might let a manager keep the chunk he currently has, and handle the IRA chunk myself. Not sure.
One final thing - personally, I’m confident I never will wish a protracted stay in assisted living. So that simplifies my personal planning.
They really aren’t. Say an advisor charges 1% and has a client with a $1M portfolio. If they do something boring like putting everything in an index fund and make a 5% return, the portfolio grows to $1,050,000 and next year their fee is $10,500. If they work really hard, actively manage things, and beat the market that year to return 8%, the portfolio goes to $1,080,000 and they get $10,800 - a whopping $300 extra (before their own taxes). Even a 10% return instead of 5% is only an extra $500.
Their only incentive is to do well enough that clients don’t get fed up and leave. Slightly better client returns are basically irrelevant to them.
It is a far better use of their time to attract additional clients, or if they have as many clients as they can handle in a year, fire small-portfolio clients in favor of bigger-portfolio clients. Landing one new $1M portfolio client is a guaranteed $10000.
This is much the same as what happens in the real-estate world. Listing agents are not incentivized by their commission to get the maximum price for the seller. They just want to close a deal now and get paid something, and focus on the next deal. The seller might prefer to wait a while for a offer 10% higher, but the agent has no interest in delaying the deal for a couple hundred extra bucks.
This is the deceptive thing about compound interest that people don’t understand. It might look like “only” 30K now but that $30K is money that can’t compound and grow.
If you assume the $3M grows at 7%, then 30 years later, the difference is $22.8M vs $17.2M for the 1% AUM advisor. In other words, you’ve paid $5.6M for someone to manage $3M of money for you. $22.8M sounds like a lot to have left after 30 years to leave to your kids but you can’t forget the impact of inflation and unexpected medical/retirement costs and that 33% difference can make a real material impact.
Nobody is disputing the value of a good FA for the right person, it’s just that the cost is absurdly high for what you’re getting. 1% AUM is a historical legacy that has stayed stubbornly high as a way to sucker people who don’t know how to shop better. If people really understood how compound interest worked, the fee would get negotiated down to somewhere closer to 0.2% or a fixed fee of about $1000 - $3000 a year.
Put another way, everyone has a financial goal they’d like to hit before retirement. If you’re the type who loves working for the sake of working and will accumulate more capital than you can spend regardless, then yeah, overpaying for something like an FA isn’t a big deal in the grand scheme of things. But if you’re a regular person who would like to hit a figure and then stop working, I built a very simple toy model in Google Sheets and the difference between hiring a 1% AUM FA or not is a 4 year earlier retirement.
Is there an FA you can think of that you love and provides enough value to you that you’d be willing to work an extra 4 years just to be with them? If not, then you’re overpaying for your 1% AUM advisor.
I’m now retired, so that line of reasoning of no direct concern to me.
But in the years leading up to my retirement there was simply no thought of retiring before being forced to by law, and/or by the nature of the employer’s pension system, and/or by the availability of affordable medical insurance post-work and pre-Medicare. The “tax” imposed by one less year of earnings, one more year of consumption from assets, super expensive medical insurance, and for many people a large or even brick wall pension hit, simply didn’t work. IMO even before this latest election, nobody can count on the ACA (“Obamacare”) being in existence for any long span of years when about half of Congress vows to destroy it every year.
Had my then net worth had another zero on the end then sure; I’d have been out early. But IMO the “hit a number then retire” logic assumes a remarkably unrealistic degree of concreteness about what number you intend to hit.
Or assumes a fairly low goal by your own personal standards to begin with. In my case, despite doing fairly well overall as a percentile of the general populace my earning career was an abject failure compared to my expectations and to most of my peers. As a result my “hit a number” goal was literally 3x the number I did hit. I’ll be fine, but I won’t be the kind of fine I grew up with and spent my early career realistically expecting.
Given the growing nature of income inequality and how the rubber band stretches differently at different levels in the economic pyramid I have no doubt lots of white collar types are experiencing something similar today, albeit perhaps not as severely as I did. A livable retirement is not in doubt, but the comfortable to luxurious one they expected is increasingly sliding out of reach.
For darn sure your larger point that any AUM fee (or fund load) is a huge drag on your end-out wealth is well taken. I seriously question the utility of the “hit a number and retire” concept for most folks who’re high-enough earners to even consider the idea.
I am currently looking for a financial advisor so have read this entire thread.
I may have to settle for the AUM route since strictly by fees looks to be unusual if not rare.
What does everyone think of this: I searched on the napfa.org website and signed up for a free consult with one based on their being a fiduciary.
how do I check them out ahead of time?
Here is one possible way to find an hourly fee advisor.
I’ll note that I have not used this service, so I can’t comment on how useful it is. I’ll also note that there appears to be a $200 fee to access the list for a year, but they do claim to refund this if you are unable to find an advisor.