We are considering taking our IRAs and some savings, which are invested with a discount broker (so we do all of the managing of it), and transferring it to a money manager who works for one of the large investment companies. This manager charges a fee to manage the money, which is 1 to 1.5% of the balance.
One of the reasons we are considering this is that this manager will help a family member with some financial planning at no cost if we have our money invested with him. (Our family member does not have money to invest with him, so he would be doing this as a courtesy to us. He does come well-recommended.) But perhaps he can also achieve better returns than we could on our own, minus his fee of course.
Since we have always managed our money on our own, I’m wondering is anyone can share their experiences using a money manager, and particularly if you have experience self-managing as well, and give me some of the pros and cons? Also, is this type of fee in line with what most charge?
We used Dean Witter back in the day and LOST money doing the biggest bull market in history. We are now self-managing and making modest gains instead. I’d strongly suggest self managing. Bogleheads.org is a great place to start. The wiki has lots of good info.
If this person doesn’t have money, I’m puzzled as to his the person plans to invest
My family member needs advice with regard to debt and budgeting, which is advice that this money manager can give her. It is offered complimentary to people who invest with him, but he would offer it to her if we invest with him.
That sounds like some needlessly expensive debt counseling.
The conventional wisdom is that by the time you do a little research to be able to tell whether a money manager is doing a good job with your investments, you find that you can do it yourself for less money.
My recommendation is to check out the bogleheads forum to figure out what to do with your own money, and use the money you save on advisers fees to pay for the relative’s debt counseling.
Good luck. It is tough to see a relative sinking into a debt hole, and there is seldom much you can do to stop it.
I am struggling with the same issue, minus needing to help someone else. There is a thread about how much you need to retire here on CC, and many people are against anything but self management, I have a couple of people who come highly recommended, and am still considering using them. There are some ways you can check to make sure there are no black marks on a particular person’s record, but I don’t have the sites in front of me. If the only reason you are doing this is to get help for someone else, I will say that’s a BAD reason to change your investment strategy.
If your friend (?) or relative (??) needs financial counseling, s/he should buy it and pay for it. You can purchase it as a gift, if you wish.
IMO, people who are professional money managers and investors know more about managing and investing money than I do.
1% to 1.5% (I assume that's per year) is an extremely high fee. Of course, it depends how much you have in assets to invest. I invest with Schwab, and this is how they charge:
I’m lazy and nervous, so I let fidelity manage my accounts. I meet regularly with my adviser. They also reviewed my Vanguard accounts, and those changes I made thru a phone call. Many costs of shifting funds are discounted.
(1) Do not be penny wise and pound foolish. The 1-1.5% fee, calculated over the balance of your assets under management is an ongoing expense. How would that compare with hourly fees paid for consultations and advice from a fee-only financial adviser.
If you want to help out your family member, identify his/her problem and pay for some hours with such a fee-only financial adviser. If you transfer all of your accounts to this new manager, you will pay the management fee and could risk being put into poor-performing investments (that may end up throwing off more fees and expenses to the manager) by said manager.
(2) Then, what happens should you end up unhappy with the performance of your assets with this new manager? You’ll have to extricate yourself from this new relationship.
(3) If you want to help your family member with financial counseling, approach that directly rather than circuitously. IME, no one is in business to provide anyone with a “favor.” Any representation to that effect should be viewed with some skepticism.
Financial managers/advisors often charge one fee payable every year based in assets under management. They also often direct clients to invest in funds that have high expense ratios and sometimes loads (fees you pay when you buy or sell) and sometimes commissions on top of all that.
I’d say a good credit counselor that is certified and works for a nonprofit might be much better for your relative and you continue managing your own investments. The counselor often have a sliding fee schedule and you can pay it for your relative as a gift.
The main thing is the relative has to OWN the problem and solutions or it will be fruitless, no matter what you do.
Warren Buffett is the worlds greatest investor of all time, as far as anyone can tell.
His advice to people who aren’t him is to put about 90% of their assets into a low cost equity index fund (S&P500) e.g., vanguard, and the other 10% in cash, and to not obsess over fluctuations.
1.5% of your assets is likely to be a rather large percentage of the income/gains produced by your investments. I’d also guess that its not possible to get a sense of what the advisor’s track record is, because each portfolio he manages is somewhat different.
Its up to you, but you’ll probably be better off on your own at fidelity or vanguard. IMHO. There are exceptions to this, but not as many as people would believe.
If the relative is having difficulty managing debt, and keeping within a budget, I believe there are free services which help folks manage this…especially if it is credit card debt.
There is not any magic…spend far less. Get rid of ALL credit cards except perhaps a very low limit one for emergencies only. Do not accumulate more debt, and pay off what you currently have. Look at all expenditures. Reduce where you can (e.g. Can you live in a smaller home, or share a place?). Significantly reduce discretionary spending…but have an allowance for some things. For example, you may have to cut out Broadway shows, but can go to the movies once a month.
“You Need a Budget” is an app that many have found helpful. I’ve never tried it. Some folks swear by Dave Ramsey and his suggestions on how to get out of debt. There are others out there. There are free books one can borrow at the library. Living below one’s means is the cornerstone for many to grow savings and wealth.
There is really no easy magic for folks in debt who don’t know how (or like) living below their means, no matter how much an advisor is paid to explain this.
I agree with Himom on this one. If the OP’s relative continues to spend spend spend…and not on paying down the debt…and not reducing spending where they are able…any “free counseling” at the OP’s expense is wasted money.
And I do believe there are free or very low cost services for debt issues.
The thing is it may be more feasible to have a third party to talk to this relative. When family memebers bring it up, it may just turn into a squabble.
About the fees, 1.5% doesn’t seem unreasonable to me.
I’m a strong advocate of do-it-yourself. Read http://www.etf.com/docs/IfYouCan.pdf – the best free retirement investing advice I’ve seen. And find a fee-only financial planner to assist the family member if that seems appropriate. If you want a check-up on how you’re doing with your own investing, hire a fee-only planner to do a one-time plan. I did this 13 years ago because I wanted to make sure I was saving appropriately for both college and retirement. The financial planner claimed she had a difficult finding anything to suggest to improve what I was already doing, but she did make a couple of suggestions which I followed. One of them wasn’t exactly financial: she told me to take advantage of travel with my D while she still actually wanted to vacation with me. I was/am kind of a super-saver and I know I would not have taken some truly memorable vacations (digging for dinosaur bones in CO, a week in Scotland, 2 in Australia) without this gentle nudge.
If you really want professional financial management, consider Vanguard – they offer this at rock-bottom prices.
Be really careful, it may not be the fees. Someone I know at one lost half of his retirement savings using money manager. He told everyone, he specific told them told them not to invest in Europe but they did it anyway. He is lucky he can find retirement job at his age, he is in his 70s. He still has a pension too. But not too many people can count on that.
Years ago, I decided that I cared way more about our money than any financial planner. I looked at how financial planners make their money: by moving your money around and taking a commission. Or just by taking a cut. I read Buffett’s writings about “buy-and-hold” excellent companies (and others’ writings as well). I checked out the math on what a “mere 1%” a year adds up to over time. (This article, for example: https://www.betterment.com/resources/investment-strategy/portfolio-management/true-cost-1-percent-expense-ratio/ )
I looked at mutual funds over time–was anyone beating the market consistently? I looked at what hedge funds do to make money, and it requires huge risk and a LOT of knowledge, and access to investments I don’t have access to.
And I started buying the broadest stock index funds I could find. I don’t sell, because taxes eat up your money when you sell.