Paying a 1% Advisor Fee: Worth It or Overpriced?
theideasmithy.com
00:00 Intro
00:26 Client’s with Advisors
02:51 Working with a Planner
05:03 Worth It?
06:08 Do Your Homework
06:56 Stories of Advisors
10:54 Fee Structures
11:54 Worth It
13:12 Bloopers
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Disclaimer: Please note that this video is made for entertainment purposes only and not to be taken as financial advice. Always make sure to do your own research.
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You say you prefer to work with a flat fee or fee only advisor, but you work with a company, ROOT, that is a AUM advisor. Why the double standards? Just curious.
If advisors were actually any good, they would charge a percent of gains. 1% AUM is too much to give up. They are shooting themselves in the foot with that fee structure. They need to combine CFP and CPA services and charge 10% of gains. If I lose money, they don't get paid and tax prep should be included.
Good discussion, I have this conversation with clients regularly. I think people get way too hung up on whether 1% is “too much.” But since the value can vary quite a bit between advisors/planners, clients should consider whether the value they get at advisor A is worth the 1% compared to what they could get at Advisor B. If someone is charging 1% to pick a few funds and rebalance them, that’s a tough sell. If they’re doing comprehensive retirement, tax, estate, insurance, income, and behavioral planning, that’s a very different value prop.
One small distinction: fee-only and flat-fee aren’t opposites. Fee-only refers to the source of compensation; flat fee is just a billing method. Otherwise, I think the bigger point is right on: compare the service to the price.
Uh-oh, I’m getting way overcharged. Time to do some shopping.
The fin industry is filled with parasitic (Claude says I should say extractive) individuals and the industry is tracking right along with the Real Estate industry. Crazy fees for very little value, and zero risk on their end. Few industries exist in that space....for a reason. The term vampire trading comes to mind. Fortunately for us, there are people like you who've decided to rethink their value prop and truly bring value to an audience and potential clients. I can probably speak for a few other viewers in saying that we are lucky to have you as a resource. Thank you.
When I gave my three-week retirement notice on April 29, 2022 just one day after turning 62 and after 25 years with the same company they asked me to stay on for another six months, working whatever hours I wanted, even offering a hybrid setup.
But I knew I had reached my limit. I told them I had hit the wall and couldn't go any further. I was ready for my next chapter, my freedom. Now I'm entering my fourth year of retirement. I retired with $600,000 and have been following a bucket strategy, staying very conservative with my spending. I relied on funds I had already set aside to cover my early retirement years, which gave me peace of mind.
As I get closer to Social Security and begin adding some annuity income, I'm now gradually increasing my stock exposure and starting to reverse the glide path.
Over priced PERIOD!!!!!! AI is going to knock this bs down eventually 1% is to much just look at what the big company with a V charges it’s much less than 1%
I like the idea of a flat-fee advisor, but anywhere from $1,500 to $10k, I would like to know what kind of services I could expect. I'm not paying 10k for a few hours of an advisor's time and certainly not every year.
I’ve been my own advisor for the past 35 years. When I think I may be better off with an advisor (other than myself) I ask who built the over 2.2M worth of retirement 401k, Roth, HSA, Brokerage and savings accounts is debt free with 800k home. It was my 58 yr old self that does the research and has my best interest in mind. And thanks to people like you ( Erin) that educates us on how the be our best advisors.
Much prefer the flat fee idea…
it all depends on many factors like experience managing money and how successful you are, how much you have to manage, your age, your goals, health etc etc. one who looks on it from the perspective "it is expensive" may loose a lot or gain some. evaluate your situation and check real % growth of your portfolio for 10 years and face the reality of your own performance. make a decision after.
Why would I pay 1% of my hard earned wealth to someone else when I can get answers to all my questions 24 hours a day for free. No thanks.
if i am paying a 1% fee and cant get a minimum 8 to 10% each year in returns then why bother,,
Always thought that advisors were wealthy because they knew what stocks to pick. But now I believe the wealth came from the fees they charged the investors.
Excellent and very important info. Thank you!
Use several as there's many good ones who retired or dead.
If they say don't spend something, there's usually more to it. You borrow and in my case, the intrest on other account paid for the buy. Basically, I gave up a tiny bit to basically have what I wanted for free because a month later , their team changed something to where I made more to more than cover the expensive item.
Under 200k, invest yourself at Charles Schwab is actually ZERO. 500k and they kiss you and more personal.
Use several. People like fidelity, I personally don't care for fin flags outside as I pass when in town.
Sadly, my 3 experiences with 'advisors/planners' was very bad !
In hind sight, all 3 were simply after commissions/fees and promoted trades accordingly.
I'm lucky to have learned from Dan C with AFR, before he died, and learned so much about investing and preparing for retirement income.
None of my 'advisors' ever did that.
I won't use an advisor again until I can't be trusted to do my own planning and/or my wife needs this service.
Do you have an idea how much usually is the Flat Fee for a financial advisor if you only want him/her to review your personal financial plan (hourly or per session)?
A good advisor does more than trade.
AI would answer all of financial questions that you have. you have to manage your financial advisor as well as your money...;-)
I have a private planner. Guess what I don’t have worry about anything. It’s his job to watch the market. And by the way we’ll over 20% last three years.
Erin - Great content, as always! A point I would add to this discussion is this: Retaining a Certified Financial Advisor (a Fiduciary, Independent of the Big Firms) is a good idea when one spouse does the financial management and the other doesn’t want to (too complicated, doesn’t love or want to understand the concepts and mechanics). This is a sort of “Backup” if the spouse who is the money manager passes away, leaving the other spouse at a total loss…. Having such as Financial Advisor or established firm with good continuity and knowledge of and connection with your financial story and family history is essential for long term protection
Mission before commission. If your advisor doesn't live that out.... Run!!
I CFP will charge you $24k/year. But that will come out of your portfolio so you have to pay taxes on that. and then you lose the compounding from that money, so a CFP is going to cost you $30-35k/year in retirement to save you $10k in taxes.... yeah... screw that. Fire the CFP. get some education and a decent retirement program and do it yourself.
I started at 22 and by 47 I had $1.5M. Not because of luck, not because of some “secret strategy,” but because I worked two jobs and maxed out a 401(k) on one and a 457(b) on the other. I put my money into index funds that track the S&P 500, Fidelity Contrafund, and a T. Rowe Price large‑cap fund. I stayed consistent, disciplined, and didn’t blow money on stupid stuff.
I told a financial advisor once that I’d done well for myself and asked what exactly I’d be paying him $15,000 a year for. His answer? “We’d keep you level‑headed during down markets.” I said, I’ve been doing that for 25 years — I don’t need you babysitting my emotions.
As for all the other “services” financial advisors claim you need, the internet, AI, and YouTube financial channels give you every tool you need if you have half a brain and the ability to read. You don’t need to pay someone thousands of dollars a year to tell you things you can learn yourself in an afternoon; you need time, discipline, dedication, and consistency.
People like Dave Ramsey are rich because financially illiterate, ignorant, and lazy people keep who don’t have the discipline, dedication, or basic self‑control to invest consistently, as opposed to burning their cash on useless depreciating junk society tells them they need. Ramsey didn’t get wealthy by being a financial genius — he got wealthy, in part, because millions of adults want to be spoon‑fed basic common sense. Based upon hearing about half of those idiots’ questions that call into his show, my guess is they could have been told what to do years ago, and they still wouldn’t have done it.
The loudest people who insist you “need” a financial advisor are financial advisors.
As JL Collins says, if you can choose a competent, trustworthy financial advisor, you already know enough to invest on your own.