Mark from MA
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- Jun 4, 2008
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This....I call them skimmers. Which is what most low cost money managers are. If you want good management, you have to pay for it, and if you are paying for it, you should not be getting losses.I concur. But people are penny-wise and pound-foolish. By building in the advisory as part of the asset management, you have an open line of communication to a skilled financial professional. You don't wonder, "what's this going to cost me?" before picking up that phone like you do with your attorney.
CPA's operate teh same way. They probably overcharge for what they do on an annual basis. But you've got a resource that knows your situation.
Most folks will NOT pay a subscription fee nor a by-the-hour fee. The truly rich will. Well, they already have the $. But I can't see your average 2-income, 1.9 child family shelling out $5,000 per year for financial advice. They'll rarely feel like they are getting their $'s worth.
And it isn't about time, it's about skill and knowledge. People don't pay you for your time, they pay you to know how to fix a problem.
Bob has a sore tooth. His best friend Bill is a dentist. So he goes in to talk to Bill.
"Bob, that tooth's gotta come out."
"What's that gonna cost me?"
"About $350."
"THREE-FIFTY! How long does it take???"
"Oh, I'll have you out of that chair in about 8 minutes flat and on your way home."
"EIGHT MINUTES!?!?!? I'm gonna pay you $350 for 8 minutes of your time? That's like $2500 per hour. Are you insane."
"Bob, Bob, calm down. If it's the hourly rate you're worried about, I can make it last as long as you want."
I have a guy now managing one of my wifes old 401k's about 100K in there. It gets managed like someone with no skills is managing it. Meaning........the market goes up, the fund goes up, the market tanks, the fund tanks. Yet he is collecting 1%. Which is a waste of our money. I can do that, actually, i can do better than that, and have in my 401K. I sold when I needed to sell at dow 36K, and rebought at dow 30K.....he did zilch for us to take profit when he should have, and buy back when he should have. In fact, a month ago, after 18 months using him, the fund was nearly back to what I gave it to him with. I should have called him and fired him.
He is biding his time keeping us on the hook, and hoping he will get all of my 401k and pension assets to manage, plus all of hers, which will be 7 figures when we retire. He will then collect a bigger 1%.
That's not going to happen, but by showing my wife this was the only way to prove how most of these guys operate.
Even my gun club, who has 7 figures in their account, is passively managed and the manager doesn't take profit when he should. The majority of these guys just want you to keep as much in the account as possible and skim their 1%. The more clients and money under "management" the more they make.
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