[rsmurano]

1% is huge! You might look at it in the short term and say not a big deal. But you look at the amount over 10 years, it’s huge. When I talked to the company referenced in this post, I would be paying them over $500k over a 10 year span. That’s crazy, and they couldn’t guarantee that they would do better than what I have been doing (35% in some index funds, a couple stocks over 100% gain, and other index funds making 12-23%, all with expense costs of .02-.2%). And, if the market tanks like it did in 2008, and in 2022, you still have to pay your broker the fee on top of your 35% loss (paper loss), that would be a kick in the pants.
Learn how to become a boglehead and you will retain your investments instead of giving a large chunk away.

To successfully invest, you can use any number of brokerage houses to buy most index funds out there. For example, you can use fidelity, or Schwab and buy vanguard index funds.

A lot of the time, when you use a broker, they will sell you managed funds with high expense costs and sometimes with front end or rear end load costs. Also, when you look at a managed fund, you can’t just look at the expense that they state, it can be 2-3x more than that. Also, managed funds have much more turnover so your taxes at the end of the year will be higher.

Getting an annuity is like giving your money away to a stranger. High fees, low profit, and you are not getting most of the profits that the market will have most of the time. Don’t let people scare you about losing your money in the market, because the worst thing you can do is get spooked and sell low and then wait too long to get back in. Recessions only last a couple years and the recovery is usually really good. Look at 2008 and 2020 downturns. Never sold a share and after each downturn was over, I had much more money than before the event happened.

I did sell everything after I heard that inflation will be transitory. Everybody knew that wasn’t going to be the case and it wasn’t. I went straight into a money market paying over 5%, and it’s safe with no fees. But since late last year, I have been getting back to my index funds and a couple stocks to get the earnings stated above.

[biker1]

If you require some hand holding, Vanguard has a personal advisor service for 0.3%. They will put you in Vanguard stock and bond products (that is a good thing, BTW). They also have a digital (robo-advisor) service for 0.15%. I have used neither so can't comment on any experiences but you can certainly call them up and see if either is something you might be interested in. I use Vanguard exclusively. Several years ago I spoke with several local investment firms, all with 1% costs, and the only one I would have considered was Ruggie Wealth Management. They were the only one who did not push annuities. I wound up staying with Vanguard and making my own decisions.

Originally Posted by Bobnfl

Who do you have to manage your money if you do. We have Fidelity and am wondering if it is worth it or is there a better way. Are local investment companies better? What is the normal charge at other companies? I know Fidelity charges over 1%, is that too much. They have started pushing annuities more & more. Which I try to stay away from. Please give me some insight into what other people do.

[retiredguy123]

Originally Posted by Bobnfl

Who do you have to manage your money if you do. We have Fidelity and am wondering if it is worth it or is there a better way. Are local investment companies better? What is the normal charge at other companies? I know Fidelity charges over 1%, is that too much. They have started pushing annuities more & more. Which I try to stay away from. Please give me some insight into what other people do.

Many people do not know the difference between a stock mutual fund and an annuity. The owners of Fidelity mutual fund shares have actually ownership in the stocks that make up the fund. But, if you buy an annuity, you are buying a life insurance contract from an insurance company that may or may not have any underlying stocks. Theoretically, the insurance company can do whatever they want with your money as long as they pay you back in accordance with the terms of the contract. But, unlike a mutual fund, you have no actual stock ownership with an annuity. But, the most important thing to know about annuities is that they are often "pushed" by advisors because they pay the highest commission to the advisor than almost any other product.

[Robbb]

Originally Posted by JWGifford

I’ll probably be ridiculed for my answer, lol, but I use an Ameriprise advisor and have used one for 25 years. I’m paying much more than 1%, but he has helped me make some very good, measured, reasonable, decisions over the years that I probably would not have made on my own. Life changes, job changes, inheritances, long term planning, etc. Sometimes it’s more than just what you invest in but what you don't. I think everyone is different. Some enjoy money management. I do not. I value my relationship with my advisor and don't think I’d be where I am without his good advice and steady hand. Different strokes.

Thats all fine, however sometime add up what this relationship is costing you and I think you will find that over a 20 to 25 year period it is costing you 50% of your portofilio.

[Plinker]

Originally Posted by Robbb

Thats all fine, however sometime add up what this relationship is costing you and I think you will find that over a 20 to 25 year period it is costing you 50% of your portofilio.

You are correct. I posted this example last year and came up with a 40% reduction.

There have been many posts on TOTV concerning the AUM (assets under management) fee schedules that many financial advisors are charging. Personally, I have never paid such a fee.

The following example shows just how much money the advisor is pocketing over a 25 year period.
We need to make several assumptions.
1. $100,000 invested for 25 years.
2. 6% annual return.
3. NO AUM fees or other costs. OR
4. 1.25% AUM fee plus 0.75% other fees such as expense ratios and trades for a total annual cost to the consumer of 2%.

Now, get ready to gasp. Here are the results:
1. With zero fees: Account balance after 25 years - $460,000
2. With 2% total fees: Account balance after 25 years - $266,000

You have lost a whopping 40% of your account balance. Granted, there are costs with any investment but index funds at Vanguard, Fidelity and others are minimal. Obviously, your individual numbers will produce different results. Try running the numbers with a $1,000,000 portfolio.

There are people that should seek the help of an advisor but at least you now know how much it is costing you. Also, now you know how they can offer “free” dinners and polo tickets.

This is the rationale why so many people are suggesting very low-cost firms such as Vanguard, Fidelity, Schwab, etc. While not for everybody, it is a great way to build a substantial retirement portfolio.
Fees matter!