WE DO BETTER WHEN YOU DO BETTER!
Typically, advisory fees are set as a percentage of
assets under management. Although a
midpoint would probably be about 1% annually, as assets to be managed reach
higher levels, fees are reduced.
Yet, this commercial seems clearly aimed at convincing
less knowledgeable investors that by some minor miracle the firm behind it is
giving you a better deal. That’s hardly
the case.
Though fee arrangements usually follow a common path,
they may reflect the asset allocation if the split varies markedly from the
norm. One example would be accounts that
are heavily biased toward fixed income.
For those, the fees would be lower.
Another might be private equity or other atypical asset classes. Those might be higher.
For people interested in even lower fees, two readily
accessible options are do-it-yourself or robo advisors. The former possibility may appear to be a bit
ambitious, but the reality is anything but. The effort requires little more than
opening an online account with one of the major brokerage houses, transferring
the funds to be invested, setting the asset allocation, and then buying a
series of index funds (domestic equity, international equity, domestic fixed
income) that will make up the portfolio.
With all due respect to folks who believe that there’s
special magic performed only by professional money managers, the reality is
that the returns from a small group of low-cost mutual funds or exchange-traded
funds will more than hold their own, if not exceed, those of Wall Street
veterans.
Option Two is robo advisors, which are little more
than computers that do the investing for you, following paths that will be
largely similar to those you would use on your own. The fees will be higher than those when doing
it yourself. And when the market
occasionally hits speed bumps, robos won’t be available to calm you down.
DIY is the better choice.
N. Russell Wayne
Weston, CT
Any questions: please contact me at nrwayne@soundasset.com
203-895-8877
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