Yes the fee is 25% of your "income".
Maybe the fee should be based the performance of the account.

Actually the fee does vary with performance.
If the account value goes up..the fee goes up.
If the account goes down...so does the fee.

Yes the fee paid an advisor goes up and down based on a % of your portfolio when your total value goes up and down. And this is exactly why most advisors try to sell you "things" you shouldn't buy so they get high commissions. And why they put you in investments that have higher risks then you should be taking so the potential returns may be higher. Think of it like this. You could put all your money in 20 different banks using CD ladders and have almost zero risk. You would also have VERY low returns. So you take 20% of your money and put it in stocks to improve your return.

You have also just increased your risk. And so you take 80% and put it in stocks and your risk goes much higher. Then you decide to put that 80% all in twitter stock and your risk of failure is now through the roof. You may get lucky and get a very high return, but your risk is still extremely high. So how do you balance risk and return? You set an asset allocation that you are comfortable with and then make sure your fixed income and your stock portion are both highly diversified. You have lots of different bonds and stocks. So if one should fail your returns have limited impact.

Lower your risk by having many different stocks and bonds by using index funds. Total stock market, total bond market and total international stock and bond funds accomplish that objective. Then get your expenses as low as possible so you keep a very high % of your returns. You can use a tool from Morningstar called Portfolio Xray to determine your total expenses. Mine are .011% for everything. That is for every $1000 invested, I pay $1.10 a year. All in mutual fund expense ratios. If your paying 1.5% a year then your paying $15.00 for every $1000 invested. Over time that adds up to very expensive advice. If you have a 1 million dollar portfolio you would pay just in advisor fees $15000 plus your also paying the expense ratios and loads for what ever investments your in. In this example I would pay $1100.00 a year. That means I would have a minimum of $15000 savings to invest even if the advisor also used very low cost funds. Most don't. Over ten years that's a huge advantage of $150,000 to re-invest. And I can almost guarantee that my downside risk is significantly lower.

One Word, VANGUARD they are the most reputable in my opinion. If you want to do it yourself go with their low cost targeted funds. If you feel more comfortable using an advisor they also offer that service. If I recall its .03% is the advisor fee. You will be assigned a personal advisor if your assets exceed 500k. I]

Me personally, I have been moving my personal portfolio from Fidelity to a Targeted Mutual Fund VanGuard account. I don't really think we need more then that at the moment.

My instructions to my wife are simple. If I die, since our holdings far exceed the $500K mark. I instructed her to contact Vanguard and have them manage her portfolio. She has no interested learning how to invest and I feel very confident in their ability to manage her assets in the event of my death.

John

New York Times article
 

The NYT has posted several articles on "Robo" investing. It a new trend where computer programs are used to help select and re-balance portfolios. Vanguard has a new service that's listed. One of these might be worth a look if you choose not to go it alone or hire an investment advisor. The internet based reporting provided by these services is usually excellent for tracking your investments. Please see the attached file and also "Financial Advice for People Who Aren’t Rich", [http://www.nytimes.com/2014/04/12/yo...ent-rich.html].

John agree on Vanguard but I want to point out a slight mistake. Vanguard charges .3% on its advisory services not .03%. Still this is a very low cost advisory service.

Jeff

I just put too many zeros. All I remember is its a 3rd of a percent and thats pretty much the cheapest around. They basically are going to put you into their index funds. Depending on your tolerance for risk will dictate the mix of funds they will suggest.

But for most investors thats good enough.

We saved a lot over our lifetime so we are fortunate enough where we don't need to take much risk to stretch our assets to 100. If I can earn around 3% every year thats more then enough for us to live good.

Yea I know inflation will erode our assets at 3% but the math works...

John

John, same boat here.... as long as we can keep up with inflation, we should be good. Don't have the stomach for too much risk. Vanguard indexes and other fixed price investments work. Stopped using financial advisors years ago due to fees.

There are some interesting analyses, I think I read in John Bogle's first? book (Vanguard founder), that shows you can actually DECREASE an all bond portfolio risk while increasing returns, by including 10 or 20% equities. An interesting read.

You're probably right "outlaw" I was just trying to show an example of the way folks should be thinking about stocks and bonds. There was also a recent article on lazy portfolio's that showed how very simple it was to manage your own with low risk and decent returns. I like Bernsteins or Yale University and their are billions invested that way. Last I read, Yales endowment fund was something like 15.9 billion? And they use a very simple low risk way to manage it for the past 50 years.

The very most important thing people miss when deciding to go with any advisor is that higher returns ALWAYS equals higher risk. And it's not their money they are going to lose, it's yours.

Yes. I agree with you regarding simplicity. I still don't know why people don't just buy Vanguard target retirement funds based on risk tolerance, which V also offers on their website. I think if people took their risk tolerance survey, they would invest much more conservatively. the target retirement funds do all the rebalancing for you, daily I think, via the underlying index funds. there is no additional fees other than the extremely low fees associated with the individual funds. So simple; so cheap. V is the only company that is owned by the owners of the fund shares, which are the investors/customers/us. There is no other Vanguard "company" that must show a profit for their "company" shareholders, as in all other mutual fund companies, as far as I know. There are no brick and mortar branch offices with overheads. There is minimal marketing expenses. It truly is about the only game in town that has these characteristics.

I'm agreeing with the comments on Vanguard. I have four model portfolios that I've followed over the past year. Two were based on my experience with two different advisors (one on Barron's top 100 list for several years). The other two based on vanguard recommendations using their portfolio modeling on the website. Best YTD one of the Vanguard model portfolios. Worst the advisor on Barron's top 100 list.
Past performance is no indication of future results.
Another thing to consider. If your advisor has a 1% management fee for your 500K portfolio and you withdraw 4% per year. You get 20K and he gets 5K. In other words 20% of the $$$ coming out each year goes to your advisor. Not counting other fees and commissions.