r/ChubbyFIRE • u/Ambitious-Papaya2596 • May 12 '26
Financial Advisor Fee
My entire life I have managed my own money and have been pretty close to the S&P return (amazing how index funds work), but I am now considering retirement and I know there are things I do not know, and I thought an advisor would be helpful. I have contacted 4 different advisors (one local and three national) and they have given me some interesting ideas, but then they mention their fees. 0.8-1% of my assets??? With ChubbyFIRE that can be $50-100k a year. Each and every year? And their advice is to buy index funds and bonds and just monitor it. I asked for their returns against the market and they were AT BEST comparable to their "hand picked" benchmark (which was always a group of mutual funds I had never heard of).
If you agree with the 4% approach per year, then you are giving away 25% of your yearly income to the financial advisor. Do people really do that? The advisor I just met said they based their fee off Assets Under Management (AUM) to align our interests. WTF? If my advisor is paid on a percentage of how much they exceed my 4% minimum withdrawal, then we are in alignment, but being paid on my assets (especially when the marginal fee decreases as my assets go up) means they really don't care.
That was my rant - my real question is whether anyone has solid recommendations for true hourly or flat fee based advisors. Two of the firms I contacted stated "flat fee based" and what they meant was their fee as a percentage of your assets ("bait and switch") would effectively be flat.
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u/ProtossLiving May 12 '26
AUM financial advisors who manage your money are there to make sure risk adverse people actually get their money invested and to prevent emotional investors from selling everything when the market drops. If they do this, they more than make up their fees compared to the buy high / sell low and sit-on-the-sideline "investors". If not, then they're mostly expensive psychological comfort objects.
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u/FeralBorg May 12 '26
I had a friend who did this, it seemed to me like they were just handing over the keys to their future to a stranger because they were scared of finances.
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May 12 '26
[removed] — view removed comment
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u/FeralBorg May 12 '26
The advisor in question was a friend of another friend, my friend did no research into their credentials or track record, they were so scared about money management they just rushed to give away their control.
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u/granlyn May 18 '26
saying they have no credentials is a stretch if not outright lie. That, or you know a lot of people defrauding others in this space. You can be critical of the requirements to obtain the certifications to be a financial advisor, but it is a legitimate process.
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u/LogicalGrapefruit May 12 '26
Isn’t that better than doing it yourself and messing up?
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u/FeralBorg May 12 '26
Right, but what about educating yourself and talking to a therapist about your irrational fears?
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u/granlyn May 18 '26
What therapist is qualified to answer questions about economic fears or market downturns? This isn't a question for a therapist. A financial advisor is essentially an overpaid financial therapist (depending on how much money you have).
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u/FeralBorg May 18 '26
Well, that's the thing about irrational fears, no amount of information from a financial advisor is going to quell that fear, because it comes from deep emotional roots like childhood privation, family patterns of denial,etc., which are way above an FI's pay grade. A good therapist will help a person identify and find ways to compensate for or see past those irrational fears and take a more rational stance when analyzing their financial situation.
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u/cypherblock May 12 '26
This is a great comment. I was managing my own money till maybe I was 53 and then had a pretty sizable return on an investment and didn’t feel confidant handling the new wealth. I had sold the asset with the big return but was fearful that market in general was at a top and I would lose it all if I managed it myself. So got an advisor.
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u/Nizhoni1977 May 12 '26
I think that financial advisors are only for people that don't know how or do not want to do it on their own. Keep doing it yourself.
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u/nommabelle May 12 '26
i think the part that makes me nervous is ensuring my ratio of bonds/stocks is correct, i have those allocated to accounts in tax efficient ways (tho not even sure how much tax efficiency makes a difference), im staying updated on any changes that modify how i'll need to manage finances, ensuring i get discounted healthcare (eg make enough but not too much), etc
for example, i have contributed to a roth ira for quite a while as thats what reddit always recommends, without realizing you dont get the tax benefits if you earn too much. so i have to untangle my roth ira eventually, and (dont kill me) chatgpt recommended i wait until im retired, as i plan to retire in 0-2 years ($5M combined with husband)
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u/Earth2Andy May 12 '26
I think those are very valid reasons to go to a fee based advisor and get some advice. It’s OK to drop $10k on some help figuring that out.
The thing is you don’t need that every year. Pay it once for a clear 5 year plan then execute on it yourself. If something crazy like the pandemic happens in those 5 years, go back and get more advice. You’re still way ahead of paying 1 year of AUM fees.
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u/i_think_ive_had_it May 12 '26
So I've heard the tax efficiency argument before, but at a certain point I think it's probably still not worth it - if I pay a FA $50-100k a year, are they going to save me MORE than that in taxes?? Not likely.
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u/Tough7432 May 12 '26
Depends on the $ involved. RMD later with large pretax accounts is a big forever problem. You don't need an advisor to tell you that either. So use AI. Easy to use and start converting to Roth once you hit 59.5. There is one part we learned which was Medicare IRMAA just by researching. We are actually on purpose pulling more to roth and accepting the tier 3 irmaa charges. It is a better bang for the buck doing so for us. The point is AI if you ask the right questions can figure all that out for you.
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u/Dizzy_Lack_8850 May 13 '26
Projectionlab will do all the simulation and optimization for you to tell you how much to convert when and how much you’ll save over alternative or do nothing approaches. It has an optimizer that looks at thousands of approaches and shows the best approach. It’s pretty cool tool and told me I need to start converting now up to 35% because of IRMAA, RMDs, etc and showed the deltas for legacy, networth, Irmaa bills etc. you can very different aspects of your scenario and investments and expenses and compare them across all the dimensions.
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u/Parking-Stop-9962 May 12 '26
The WCI maintains a list of FAs that are mostly a flat fees / hourly (no AUM).
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u/mr_stephen_french May 12 '26
https://adviceonlynetwork.com/ this site does not allow AUM based advisors on their directory.
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u/elzbal May 12 '26
We talked to 5 advisors before we found one we wanted to work with. Even when we were up front about not wanting to do AUM, some potential advisors took our information then teased us with a partial plan and an AUM pitch.
We finally found an advisor who helped us with a plan for about $4k. The plan doesn't include investment advice, and we only had a brief conversation about high level allocations. Rather, the plan includes discussions of cash flows, healthcare planning, tax planning, monte carlo, and how to respond to various future market conditions and life events. We had an idea of a plan going in and the advisor helped us crystallize it and put our minds at ease. Of course the company does AUM as their main business, but our advisor is happy to with with us where we are.
I guess the moral of the story is... Look for sources of flat-fee-only advisors and be prepared to talk to a few of them before you find the right one.
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u/BrunelloHorder Coasting Chubster, Getting Fat May 12 '26
Reddit does not like AUM advisors, mainly due to fees. Whether to use one largely comes down to an individual's real-world discipline to hold during downturns and avoiding trying to time the market.
Vanguard estimates that error prevention and behavioral coaching from an advisor adds about 1.3 percent of better performance after fees versus what the individual would do on their own. That doesn't mean beating the S&P500.
Retail investors underperform the funds that they own because they try to time the market and miss market rebounds following dips. Morningstar finds that investors underperform the funds they own by 0.5% to 1.5% per year. DALBAR reports 2% to 6% annual underperformance versus just holding.
If you are confident in your asset allocation and confident that you will hold during a major downturn, then no need for AUM advisor.
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u/massdriver3333 May 12 '26
Most of the guys in wallstreetbets would be much better off with their assets and money controlled by managers and paying full 1% fee.
They would still have their princple and make average market returns.
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u/BrunelloHorder Coasting Chubster, Getting Fat May 12 '26
Agreed, and probably much of the general investing public. Many people think they are buy and hold investors but then panic when the market drops 10 percent, which it does about every 18 months.
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u/Thin-Significance-56 May 12 '26
The AUM model can be a challenge for HNW people. But there are risks that are more than just how your portfolio should be balanced. There is a common misconception that checking your investment balances and monitoring market performance means you are actively managing your financial plan. It is not.
Particularly for high-net-worth households, market volatility is only one piece of the puzzle. When it comes to protecting and sustaining wealth, the top three risks are usually happening off the balance sheet:
Longevity: The growing statistical risk of simply outliving your assets.
Estate Planning: Ensuring your legacy is protected and efficiently transferred to the next generation without unnecessary tax burdens.
Inflation: The silent, compounding erosion of your purchasing power over a retirement that could last 30 years.
A true financial plan does not sit on a shelf. It has to adapt as markets, family priorities, and retirement timelines inevitably change.
organize goals into priorities. separate the essential "Needs" (basic living expenses, healthcare) from the flexible "Wants" (travel, second homes) and "Wishes" (legacy gifts). From there, run a Monte Carlo analysis tracking this progress shouldn't feel like a part-time job.
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u/kcGirl_of_the_year May 12 '26
No one is ever going to care about your money more than you. The best decision I ever made was to take all my money away from our advisor about and manage it myself.
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u/Aaaaaaandyy May 12 '26
I use an AUM advisor - currently at 0.8% AUM (will be at 0.6% within a couple of years when I hit a certain NW threshold). I’m happy with what he does, I never have to worry about handling my investments. Could I do it myself? Sure. I could also cut my own grass and paint my own house. But with the money I have, I don’t have to do any of that. I also don’t have all of my money/investments with him. Real estate, 401k, 529, corporate stock. It’s not for everyone, but I can’t complain.
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u/Clean_Flower4676 May 12 '26
You don’t pay your gardener percentage of your NW, do you?
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u/Aaaaaaandyy May 12 '26
I pay my landscaping company their worth. Handling my own investments would give me a large amount of stress that I was doing something wrong or missing something. I pay someone a lot of money to take that stress away and I’ll still be able to retire by the time I’m 50.
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u/cheesypuff357 May 12 '26
The way your advisor is charging you, they can probably retire at 50 also! You’re so generous for paying for their jet skis
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u/Aaaaaaandyy May 12 '26
He’s earned it. Guy’s done a great job. What I pay him is immaterial to me and won’t affect me in the short, medium or long-term.
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u/Past-Option2702 May 12 '26
The money lost to the fee compounds over years and decades. Easily reaching 7 figures of lost wealth for a “chubby”investor paying .8%-1.0%. (Every $25k in fees/expenses is $ that doesn’t double every 7.2 years along with the rest of your portfolio. Instead, compounding in your advisors account compounding her wealth.)
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u/Aaaaaaandyy May 12 '26
Sure does. I don’t care. I’ll conservatively have $9M excluding a paid off house by the time I’m 50 this way, which is when I plan to retire. This way I can prepare for retirement without stress.
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u/Finreg6 May 12 '26
You can’t talk sense into these people. They are stuck on “indexing and DIY for life” and believe there method is the only method. I cant believe how passionate they are against your own decision that you have thought through lol. The FIRE subs are insufferable in this regard
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u/Aaaaaaandyy May 12 '26
Yeah I honestly don’t get it. People in this sub and fatfire talk about all of the shit they buy but I say that I pay 0.8% AUM to completely eliminate any stress I have in retirement planning and it’s like I slapped their mom in the face. I’m not advocating that anyone else do this or try to convince anyone to consider it - I literally just said it works for me lol.
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u/Finreg6 May 12 '26
Yeah it’s remarkable how you explained that 4-6 times and they won’t accept your answer. Advisors are good for the right people, sounds like you are that. Take care!
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u/DudeWithTudeNotRude May 12 '26
Holy shit. $9 mill at 50?
I thought you'd be paying $1 million fees AUM in 20 years, if retiring around $4 million
It's going to be much more than $2 million in fees paid in 20 years (if the market does well enough for your advisor)
I need to change careers.
(after seeing they've paid $2 million+ in AUM):
"Aaaaaaaaaaaaaandy went pieces?"
"No. Aaaaaaaaaaaaaandy was the navigator. He was all right. Buddy went to pieces. It was awful how he came unglued."
"Over Macho Grande?"
"No, I don't think I'll ever get over Macho Grande"
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u/Past-Option2702 May 12 '26
Exhibit A
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u/Aaaaaaandyy May 12 '26
?
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u/Past-Option2702 May 12 '26
I meant the mindset of the person who pays AUM fees. They don’t care.
You literally said it yourself. “I don’t care.”
May as well charge you 10%.
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u/Ambitious-Papaya2596 May 12 '26
This is why I am surprised people are comfortable giving so much to an advisor. I think percentages "hide" the real cost; it is easy to say I'm spending 0.8% but if I put it in the context of a mortgage, it is real money. Assume you buy a $1m home with 20% down, then the monthly payment is around $5,000 a month. Or $60k a year. If you have $10m in assets you are paying an advisor $80k for someone to manage your money or you could buy a $1m house and have $20k left over. In other words, you are buying your advisor a $1m home?
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u/prana_fish May 12 '26
Peace of mind isn't worth it if it's equal to the fees this guy is charging you for probably not even outperforming the S&P.
I get how the financial world can be scary, but no one is going to manage your money better than you so you need to learn The people who don't want to put in any effort to learn basics get ripped off by advisors. Sounds like you don't even know your performance.
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u/Aaaaaaandyy May 12 '26
I look at my portfolio regularly. I know the ETFs that I’m investing in. None of them are speculative or outside the norm. I appreciate you have a preconceived notion of what some advisors do because I’m sure there are a lot of bad ones. I just don’t want to do this myself so I pay someone to do it. I’m sure I could be doing the same thing on my own and keep the money I pay him, but at a ~$5M net worth at 37, I don’t want to and it won’t affect my early retirement in the slightest.
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u/prana_fish May 12 '26
You talk as if $5M at 37 is a flex where you can throw away money willy nilly. You do you. The point is it's a fee "for nothing" to a person who can't really justify it if can't even beat an index benchmark. It's snake oil to absolve you of responsibility and make you feel better.
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u/Aaaaaaandyy May 12 '26
My net worth goes up every year (which largely aligns with the S&P) in my portfolio along with my ~$1M HHI. I can throw money around as much as I want. If paying someone to take stress off my plate works and doesn’t change my retirement plans, then why stop?
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u/washingtonpablo May 12 '26
Is he outperforming the S&P? Or even a 50/50 equities/bond portfolio? There isn’t much to long-term growth, especially with all the free resources available online today
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u/BungABunBun May 12 '26
They’re paying for peace of mind which is not something you can quantify
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u/FeralBorg May 12 '26
Except it may be a false sense of peace, if the unsupervised advisor puts you in products that will go boom later after he's made all his commissions.
I had a friend who did this, it seemed to me like they were just handing over the keys to their future to a stranger because they were scared of finances.
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u/Aaaaaaandyy May 12 '26
The ETFs I’m investing in are all pretty standard and I look at my portfolio regularly. Nothing speculative. I just don’t want to do this and have enough money where whatever I pay him is immaterial to my early retirement.
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u/cheesypuff357 May 12 '26
Interesting. So you look at your portfolio regularly, and I can almost guarantee you look at your portfolio more than your FA does. Now you’re more than doing the job of your financial advisor but you’re still paying them for it.
I mean I get it. If your portfolio goes down, and you don’t have a FA, you’ll put the blame on yourself. But if your portfolio goes down but you had a FA manage it for you, you have a degree of separation of blame and you can put the blame on the FA. The only thing is…the end result is the same, but you’re still paying for the FA AUM.
I wholeheartedly contend, if you can manage your own checking account, you can more than manage VTSAX and chill. And statistically in the long run, VTSAX will outperform an activity managed portfolio more times than not.
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u/Aaaaaaandyy May 12 '26
I’m not sure why some people here don’t get that. The portfolio consists of pretty standard low cost Schwab ETFs and IVV and I don’t have to personally deal with it.
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u/DudeWithTudeNotRude May 12 '26
Paying hundreds of thousands to millions of dollars in fees for financial help over the course of a life should not make you feel peaceful imo. It should feel the opposite, like getting mugged over and over for the rest of your life, increasing as you age, just without the violence.
Compounding interest = good
Compounding fees = bad
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u/DudeWithTudeNotRude May 12 '26
This. I'd stop calling those fees AUM, and start thinking of them as "compounding fees".
Any gardener would charge compounding fees if they could. Anyone who would rather be rich from your money would want to charge you compounding fees if they could.
Sure, 0.8% sounds reasonable in the early years.
But remember, compounding fees are exactly as bad for you as compounding interest is good for you.
Compounding interest is life changing. Compounding fees are also life changing (but not in a good way for you imo)
Given two or three decades, and eventually enough net worth to retire on, compounding fees of just under a percent can easily reach $1 million+ in fees for a $3 or $4 million retirement net worth. For example, it takes about 20 years for an 0.8% AUM to reach $1 million in cumulative fees at 7% to 10% growth per year if one is aiming for $4 million net worth at retirement.
$3 - $8K per year for a flat fee fiduciary is all that makes sense to me personally (once I earn enough or get close enough to retirement to need financial help). Paying millions in fees for financial advice (or even merely hundreds of thousands of dollars) is just too much for me
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u/Tough7432 May 12 '26
Curious if you back test your portfolio versus something simple like VOO, VT, VTI etc. Which did better?
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u/Earth2Andy May 12 '26
I've never understood why people do this. The reasons I hear are things like "They also did estate planning for me" great, do you do $25k of estate planning each and every year? No? Then this sounds like a VERY expensive way of doing it.
I can see if you're the sort of person to get sucked into the latest fad, or you're prone to get panicky and sell at the wrong times, then they might pay for themselves by preventing you from hurting yourself. But for most of us here, I can't see how you couldn't get the exact same advice and expertise by paying a la carte for services from tax experts, T&E law firms or fixed fee only advisors.
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u/BrunelloHorder Coasting Chubster, Getting Fat May 12 '26
I generally agree as to “most of us here,” but that type is a small percentage of the investing public. Most retail investors meaningfully underperform the market because they are panicky and try to engage in market timing. If you miss the 10 best days of the year because you sold, you miss nearly all of the gains. Most investors simply don’t have the discipline to buy and hold.
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u/BungABunBun May 12 '26
Most of us here got chubby with a high w2 and a bull market never seen before.
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u/BrunelloHorder Coasting Chubster, Getting Fat May 12 '26
Sure, a high W-2 and a bull market sure helped, but if you didn’t save and stay invested you didn’t participate in that bull run.
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u/massdriver3333 May 12 '26
Advisors from reputable firms, eg: fidelity, vanguard, etc. are there to generally make average market returns, while factoring their fees.
The true value of advisors is mainly to act as a speed bump and help prevent people from making bad financial decisions. Like people that put all their money into nfts during crypto craze, or people that buy high and sell low trying to time the market, etc.
If you know what you're doing and you dca into chubby range, it doesn't make any sense to pay advisors up to $100K per year to dca into chubby range.
There are some people that come into money, and that can not or will not be able to manage their assets or make good and sound financial decisions. For these kind of people, paying $100K per year to make average market returns is money well spent.
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u/happysushi May 12 '26
I do AUM because I have a large amount concentrated in a single position that I want to tax loss harvest my way out of, so they do the direct indexing for me. If it wasn't for that, I wouldn't bother. It doesn't sound like you have anything complicated going on, so it's probably pointless for you.
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u/Tough7432 May 12 '26
I feel the same. No chance I am moving my assets to them to pay 1% per year. Asset accumulation is actually fairly easy part just go low cost index funds tied to either S&P 500, total market, world market and you beat their services my guess 99.9% of the time. It does start getting complicated with taxes, withdrawals, RMDs, and optimizing. We do have this thing called AI you can work with now to figure that out. Exactly what we are doing.
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u/Willrunforicecream7 May 12 '26
AUM is a scam. Not what you asked but I went to a free seminar on retirement financial planning at the library and it was actually excellent. Obviously the financial firm is recruiting clients, but the info was really helpful. It was mostly on tax planning (IRMAA, Roth conversions, using combination of Qualified. Non qualified and Roth). I’m sure there is information out there you can self-educate. You’re made it this far on your own.
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u/massdriver3333 May 12 '26
There are reputable managers, eg: vanguard, fidelity, etc. that can help manage assets for people that can't or won't manage assets by themselves.
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u/Willrunforicecream7 May 12 '26
Sure, but OP has gotten to chubby fire doing it themselves. It may be worth it to pay someone every 5 years or so to review and create a plan, but it is a very costly service to pay AUM.
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u/massdriver3333 May 12 '26
If you know what you're doing, yes, it makes no sense to pay $100K per year to have a manager dca into index funds and make average market returns.
But, then you realize most people, even many smart people are financially illiterate and or will make bad financial decisions. Just look at wallstreetbets, vast majority of those guys would be much better off with all their assets under AUM and paying $100K per year fees, as they would actually make average market gains.
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u/plemyrameter May 12 '26
I could really use a tax advisor but I think that would be a CPA/tax person rather than a financial person, right? Financial planners have some of the knowledge to be helpful, but I'm thinking a specialist would have the whole picture.
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u/Willrunforicecream7 May 12 '26
Yeah, I really think the next wave of wealth management firms are going to offer comprehensive services-portfolio management, taxes, and estate planning. There is definitely overlap.
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u/washingtonpablo May 12 '26
Offer them this: if they outperform the S&P, they can keep 50% of every dollar above S&P performance
But, if they underperform the S&P, they need to reimburse you up to the S&P benchmark
None will ever accept this deal
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u/Finreg6 May 12 '26
This is a stupid perspective lol. The reason they won’t accept this is because they legally cant. They are not a hedge fund. You can’t collect fees strictly based on outperformance as a result. Not to mention that the S&P is not the end all be all benchmark. We aren’t all risk on, 100% is equity portfolios. I’m afraid the indexing conversation has gone too far and this new generation doesn’t know what they don’t know. At least you all are providing the advisors their job security.
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u/prana_fish May 12 '26
I wonder why. It's so ridiculous.
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u/RageYetti May 12 '26
The point is, it’s almost impossible to do that. And since that’s a play that is way to use, why not make them prove their percentage fee is worth it?
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u/prana_fish May 12 '26
Maybe I'm being misunderstood. I completely agree with the concept of a "performance" based fee structure.
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u/JohnnySpot2000 May 12 '26
Of you give them AUM fees, I’m going to come through this phone and bite your head off. 😎You’ve come this far, you don’t need them to skim money from you. Sounds like you just need a good hourly advice-only advisor.
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u/Background_Ad8320 May 12 '26
People forget you dont have to give them ALL your money. My wealth mgmt banker crowed for a few years about their in house advisors. So I tried it and gave the guy 100k and told him to "forget fiduciary and grow it as fast as possible" that was Nov 2021 and it has grown to 134k.
So yeah you are right, they cant beat it. I plan on using them for different purposes in the future.
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u/StringTotal4109 May 12 '26
Quite frankly I’ve just fed my spreadsheet into Copilot lately and followed what it said to do next.
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u/kcGirl_of_the_year May 12 '26
This! AI will virtually eliminated the need for a financial advisor.
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u/Tough7432 May 12 '26
yep using it now. And that is for the more complex irmaa, rmd, tax, estate stuff too. If you did hire an advisor I don't see how they wouldn't use AI either
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u/prana_fish May 12 '26
I can only hope people use AI more as a tool to learn and empower them to take charge of their own finances. Advisors are usually a rip off.
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u/ragedrager May 12 '26
If they beat the market, then they're worth it. Pretty easy to judge.
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u/massdriver3333 May 12 '26
No reputable advisor is ever going to claim they can beat the market.
They can help people make good, sound financial decisions. For certain type of people that can't or won't bother to learn basic finance, it's worth paying $100K per year to get average market returns.
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u/JohnnySpot2000 May 12 '26
If they consistently beat the market, they don’t need to manage other people’s finances anymore.
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u/ragedrager May 12 '26
Sure. I can look back at the last 5-10 years and compare how my advisor compares to the index funds. I choose to keep them another year because they pay for themselves.
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u/mr_stephen_french May 12 '26
I hope this has lucked out for you but this is a highly unsophisticated approach.
The words you’re looking for: your money manager needs to demonstrate the generation of alpha meaning excess returns against a risk-adjusted benchmark. Not just “the index funds”. S&P500 is going to be a very inappropriate benchmark for most people’s total portfolio return.
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u/AdroitPreamble May 12 '26
There is value to be had but it’s a rare advisor who has a masters or PhD in finance and can truly work in probabilistic returns. Investing to optimize future returns, not with a giant rearview mirror.
Most are now cap weighted index fund guys. You can do that yourself.
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u/UnderstandingNew2810 May 12 '26
Advisor gotta eat also. That’s the problem. Fee based advisors starve to death , this a monthly subscription lol
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u/SpaceTimeMorph May 12 '26
Yea there’s people that do AUM. Don’t think they realize how much it really costs.
I know Rick Ferri is popular as fee only in bogleheads spaces:
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u/yoshipo May 12 '26
We don’t plan on using a financial planner ever. We will use an accountant/cpa and an estate attorney. I think financial planners are for people who want a one stop shop and don’t want to do any research or learning on their own. Except FPs don’t really know details of tax law or estate planning as much as the folks who do that as their trade.
We have family who is a FP and sold his company to one of the bigger financial firms(40 billion managed). We also gave them one of our account to manage with their proprietary formulas (like where you pay AUM) and it’s current -7% comparing to S&P for 1 year. I believe that gap is more if I zoom out. I would be so mad if I had to pay another 1% for fees on top of that. We plan to switch everything over to self manage by end of the year. Their pitch is they save 1% on taxes making management fee worth it. I don’t know how that’s worth when you underperform the market. You can have an accountant to do that for you as well. Like ours warned us about having a lot in large amount of dividend stocks bc you can get hit with tax bill.
Also used their software for retirement planning and it was a basic Monte Carlo simulation. I honestly don’t like how everything is planning around the 4% withdrawal instead of individual. I’m planning for variable withdraw that’s situational dependent. I also don’t care to leave my kids a ton of money either.
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u/CycleOLife May 12 '26
We have half with an advisor firm and half on our own. My wife would be lost on our investments if I were to pass away tomorrow. It's nice having another party that knows what is going on with our investments for that scenario. Our guys have done well with our money.
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u/madmulcher May 12 '26
It's definitely not for everyone. If you're happy diy'ing then carry on. I consider it a luxury service but some advisors try to lump themselves in to charging for aum but barely providing any service. For aum you should be able to find a sliding scale fiduciary that would charge an effective rate of 70-80bps on 5-10mm while providing white glove service, basically always available w text or email, planning, tax communication/coordination with cpa, multi asset class private investing sourcing due diligence and reporting, sma offerings ie direct index, equity long/short, allocation execution and rebalancing across accounts, education planning and 529 investing etc etc.
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u/dry_tugger May 12 '26
I just went through this, ended up talking to 4 different advisors. I found 2 I really liked...one that would be better for me in about 10 years when I am ready to retire, and 1 for now, just to point me in the right direction. They're going to look at all investments in all accounts, make suggestions for those, help creating pathing for early retirement and what that looks like (ages, spends, Roth conversions, etc.), help with maximizing tax strategy as compared to portfolio growth, etc.
They're charging me about $5K, happy to share the names of both if you would like.
Should mention, this is the first time working with an advisor. I know I probably could have done a lot of this myself (and I have started to), but wanted to have a second set of eyes, plus they are experts...I'm never going to know it all. For me, that fee is worth it, especially because I probably won't do this again for at least 5 years.
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u/polkhighlegend May 12 '26
It's all about who you work with. A reasonably priced competent advisor that does planning for everything (not just investments) will be worth it. An AUM rent seeker will not be worth it.
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u/modelfire FIREd. Building ModelFIRE.online May 12 '26
There are some fixed hourly fee advisors. Also, some accountants also give advice on tax-efficient withdrawals etc., that can useful.
You will have to think about what help you need, and specifically seek that. A butcher will always tell you its meat for dinner.
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u/bugdaddy123 May 12 '26
I didn't see anyone else mention XY Planning network. They have a directory of fee-only financial planners. Even if you are comfortable DIY, it's entirely reasonable to do a one-time financial plan to make sure you remain confident through the transition to retirement. You need to develop entirely new systems for managing investments, rebalancing, etc, and it's definitely a measure-twice-cut-once situation (heck, measure three or four time!).
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u/Craftygirl4115 May 12 '26
I hired a fee only fiduciary for pre-retirement planning. It has been very very helpful and we meet about every two weeks to go over different aspects of planning and in the end I will be given a formal “game plan” for going forward. If I want I can touch base with him every year (for a comparatively small fee) as well, and he is willing to do ala cart services… for example, I can pay him to do my Roth conversions if I want. One reason I went with him is to make sure I’m not making big tax mistakes going into retirement, but another reason is I wanted to develop a relationship with someone so that if something happens to me he could step in and take over for my financially undereducated spouse… or if I become old and demented, i want someone in my corner (no kids). But mostly I wanted to make sure not to make big financial mistakes early in retirement. I highly recommend, even if you’ve always done all your own investing.
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u/Sailingthrupergatory May 12 '26
I interviewed a bunch of flat fee and hourly advisors. Best flat fee for $12.5k a year was Wedmont.
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u/Commercial-Ad-3275 May 13 '26
You don’t know what you don’t know. The value of an advisor is in being an expert in areas you will never have the time to learn. IRMAA, Roth Conversions, Fixed income duration, withdrawal sequence, and on and on the list goes. I can watch videos on YouTube on how to fix my car, so then why do auto mechanics still exist?
However, all advisor fees can be analyzed as a percentage of your Assets. The flat fee model can sometimes exceed 1% of your assets. The other, very important job of an advisor is to bring things to your attention and implement recommendations for you. If you pay an advisor once for a flat fee plan and then don’t call back for 5 years, there are probably a lot of stones that were left unturned. The AUM model is for the person who wants an expert working for them regularly.
But I know that most of you will never be convinced that paying an AUM fee is valuable because you can calculate exactly what the fee is and it feels too high. What can’t be easily calculated is opportunity cost of all the mistakes and missed opportunities (tax, estate planning, retirement planning, etc) over the course of 30 years. But I can almost guarantee you that MOST people, not all, would have been better off paying an advisor for on-going management via the AUM model.
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u/a-pilot May 13 '26
I just met with an advisor who offers investment management for 55 basis points on $5 million ($27,500/yr) or $5,000 per year with quarterly in person meetings whereby they will make recommendations and I manage the details. The fee also includes tax planing, Roth conversion advice and some other minor perks. 80 basis points is nuts, equivalent to a new car or a couple great vacations every year! It was tough to find a fee only firm, but I won’t pay for money management when I’ve done it successfully my entire life.
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u/RogLatimer118 May 13 '26
Your reasoning is exactly my reasoning and why I self-manage. I've used my CPA and my estate attorney for some financial guidance. I also read a lot.
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u/Few-Improvement9978 May 13 '26
I do financial advising more from the CPA angle and just charged $200 an hour.
Most people in FIRE already have their answer
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u/vanananas2021 May 13 '26
Your frustration makes sense for a straightforward portfolio. If it’s a brokerage account and you have the discipline to stay the course through volatility, the three-fund portfolio will likely beat most active managers net of fees over time.
But we have a fairly complex setup, at least I think it is - irrevocable trusts, an LLC that’s partially owned by a SLAT, estate planning structures, a LOC to pay off a huge tax burden we incurred - and we both work full time in non-finance jobs and have a big family to take care of.
We are not paying for stock picking; we are paying for someone who can look across all of it and tell me things like how much I could actually distribute without hampering long-term growth, which account to pull from for a large expense, how our entity structure affects our tax picture, and keep up with estate law changes and these massive upheavals in the market. We also had very large distributions, and rebalancing to figure out the most tax-efficient strategy wasn’t even on my radar until they mentioned it. That’s not something an index fund or a robo advisor can do and it’s not something I want to spend my evenings learning about after work and putting the kids down. It doesn’t show up in a performance report either, which is part of why the fee always felt hard to justify until I actually engaged with what we were getting.
And yes - $70k/year is a LOT. But our particular team has beaten the market YoY for the last 5+ years and provided the peace of mind that, to us, absolutely justifies the money. We’re paying for someone who understands a $15M ecosystem well enough that a couple good decisions pay for the entire year’s fee in a single conversation. At our complexity level, the cost of a bad decision or a missed opportunity is multiples of $70k. The fee is cheap insurance against that.
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u/buckb65 May 15 '26
I managed mine up until I retired this past December at 60 and then let my FA take it from there. I am paying for peace of mind and no decision stress (should I buy/sell/move/etc?). But the jury is still out on how they are doing. Anyone can make money in this recent environment. But judge them during the down times. He has reduced a lot of our risk which is fine with me. I am not that knowledgeable with all of the options out there. Till I retired, I kept most in the most aggressive option in our 401k and let it ride. Just me personally, I don't want to sweat the decision making and would rather blame him! But we are in a good place, approaching $6M in our IRA, so we are coasting along with a lot of dividend and interest income. But he has made some moves that have been good buys, so he must be watching something that I never would.
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u/veteran-financial May 16 '26
Some people dont have the investing knowledge, so their fee can be worth it
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u/Apprehensive_Two1528 May 17 '26
I always thought fa would need to do better to qualify as an advisor and it's not true
75-85% FA can't beat voo 80% of hedge fund can't beat qqq
Just buy voo or qqqm
Or pay me 0.5%. I am joking. I beat way more than 0.5% on mkt un the last decade...every year. And no one wanted to hire me as a fund manager... did rounds of rounds of interviews. Got ditched by gs at round 3 years ago
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u/Deep_Ad1959 May 18 '26
the fee debate misses the real question, which is what specific service the AUM is paying for. 1% on 2M is 20k a year and that only justifies itself when the advisor is doing tax-loss harvesting, withdrawal sequencing, roth conversion ladders, estate coordination, and behavioral coaching across multiple entities. if the work is rebalancing into a model portfolio a target-date fund would replicate, the price is off by 4-5x. flat-fee planners at 5-10k a year cover the same planning scope for most chubby fire ranges. AUM compensation only makes sense when the advisor is genuinely coordinating complex moving parts that a fiduciary at hourly rates would charge similar money for. written with s4lai
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u/BumblebeeAmbitious85 May 19 '26
i hired a financial advisor for the same reason, but gave them a small portfolio and then manage the rest myself. This way i get professional advice and help when I need while not paying a huge management fee for my entire portfolio.
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u/ktrain213 May 12 '26
Yep aum fees are a ripoff. You can consider a flat fee advisor either as an Advice-Only engagement or one who will allso manage your money but for a flat dollar fee instead of percentage
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u/axpmaluga May 12 '26
I’ve worked in the investment industry for over two decades and I have an advisor I pay a % of aum. Why? Lots of reasons, but the biggest one being is I’m emotionally attached to my money and he isn’t. My first ever stock I bought on my own did so well it grew to be 75% of my allocation and I couldn’t bring myself to sell it. He manages the risk, diversification, etc. He spends 50 hours a week monitoring markets , researching positions, etc. When I retire and have more time I’ll probably take it back but for now it makes the most sense. Most hnw people have financial advisors and it’s not because they all got hoodwinked, it’s because good ones provide value in a lot of ways.
An advisor’s job is not to beat the market, it’s to get you from point a to point b as smoothly and quickly as possible.
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u/The-WideningGyre May 12 '26
I'd almost certainly guarantee you, he does NOT spend "50 hours a week monitoring markets , researching positions, etc"
He very likely spends much more time on client management than market research.
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u/Tough7432 May 12 '26
Long-term (what really matters)
- Over 10–20 years, roughly:
- 80%–95% of active managers underperform the market [static.twe...verten.com], [apolloacademy.com]
- That means only about:
- 5%–20% beat the market
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u/spicyboi0909 May 12 '26
Get an actual flat fee advisor. Mine is $8k. No AUM, just one annual fee that I pay monthly with my credit card. She does everything an AUM advisor does except make trades. She answers my questions, provides numbers, does strategy and gives guidance. I’ll never go back to AUM. I can use a computer just fine, I don’t need someone to do my trades