Macca, this is for you.  Since you insist on infesting these boards with your stupid one-sided fantasies, try refuting these studies…straight from my continuing education last night…

The study covered the period between January of 1990 and March of 2000. It found that 52 percent of U.S. households owned mutual funds. Most felt that they were long-term investors and over 80 percent said they did not care about short-term market fluctuations. The majority of investors, even though he or she considered themselves long-term investors, held their funds for an average of only three years.

The study further showed that investors put over $90 billion into funds in the quarter after they peaked and only about $6.5 billion after their worst quarter. Instead of buying low and selling high they were doing the opposite. The average return on funds during all rolling three year periods from January 1990 to March 2000 was just short of 11 percent, but because of the behavior mentioned above the average fund investor made only a little over 8.5 percent. They would have realized as much as 5 percent more return if they would have used dollar cost averaging and stuck with the funds. The study results confirmed that the average investor consistently under performed because of the tendency to jump in and out of the market, or to switch funds from one family to another.

DALBAR another Boston research firm in their 1994 study entitled a “Quantitative Analysis of Investor Behavior” came up with essentially the same results. In a recent update of the study they concluded that between January 1, 1984, and December 31, 2000, the average fund investor by getting in and out of the market at the wrong time posted annualized returns of approximately 5.5 percent while the S&P 500 had an average index of 16.3 percent over the same period. The average bond fund investor had returns of approximately 2.3 percent per year and Treasury Bills brought 5.8 percent over the same period.

The Quill study found that investors who worked with financial planners did better than those without because the planner helped them stay for the long term."

Hey kids…don’t waste your time and energy responding to Macca.  Help Borker out, but ignore the troll.

Macca has no idea how things work in the real world, how ignorant most investors are, and how badly they need our help.  A one percent annual fee is a BARGAIN  for what I do for my clients, and I’m sure most of you feel the same way.

Ironic how things happen.  Today I had a longtime client stop in.  He lost his wife on Nov 17th and at the funeral I told him to come in when he was ready.  Today, he was ready.  He said “I came here for some advice.  I’m not sure what I need to do with what has happened.”  My client’s wife has 2 IRA’s, Life insurance and an annuity.  I called and got all the forms faxed to me, I filled out, we discussed his options, he signed a couple of forms, I had my assistant mail out.  The other 1hr we discussed his wife and his life.  Borker, most people want to have trustworthy, local individuals in which to do business with.  As with anything in life, they want a fair return on investment, which includes what we have to offer, and not just the rate of return on the acct.  Reconsider your thoughts.

“BUT, as long as the wrap fees are properly disclosed, I don’t see anything wrong with Min or any other financial advisor using them.”
 
Lad, the problem is that they are never properly disclosed. Keeping in mind that the broker is representing himself as a financial advisor, consider the impact of that 1% (or more) over time on the client’s investments:
 
http://www.retireearlyhomepage.com/advise.html
 
I can promise you that no broker is showing this chart to his clients. The client is losing, literally, well over $200,000 in that wrap…in addition to the fund costs.  
 
THAT is what the client needs to know. 1% seems like nothing until you look at the impact over time. Which is what the client never sees. Shouldn’t a financial advisor be disclosing this impact? It amounts to YEARS of retirement. Dreams delayed or lost.  
 
“If the client is dissatisfied with the advisor’s performance, they can cash out and go somewhere else.”
 
Sadly, the client doesn’t know the performance. He’s told how great he’s doing and never taught how to compare his returns to the appropriate benchmark. The client is manipulated into trusting his financial advisor who is, in reality, a salesman with little or no training. I meet people all the time that think their investments are doing fantastic - until I show the the truth.  
 
“It’s not like they’ve paid high loads that will take years to recover or are locked into annuities that take 10 years to get out of. "
 
Annuities are sold by brokers using wrap accounts. And you should run the numbers to find out if a wrap or load funds will be cheaper. There’s plenty to consider - underlying fund expenses (including turnover) for one. Breakpoints. How long you intend to hold the fund. How much the load is. How much you will be adding.
 
Luckily, I don’t have to worry about any of that. I pay less than 0.2% for my investing costs. No loads, no 12b-1 fees, no wrap fee.
 
“Yes, those who enter into wrap fee agreements are losing 1+% of their assets per year. and need to be very, very careful about selecting an advisor.”
 
They don’t have time to learn or do their own investing. What should they do to select a good advisor?    
 
"  But I think it’s definitely possible that some people would choose to enter into this agreement with full disclosure.”
 
They will never get full disclosure.  
 
"  Not everyone is cut out for managing their own finances, and a wrap account is a far better option than most of what Ameriprise is selling!"
 
Many brokers at Ameriprise use wraps. Many. Possibly a majority.  
 
“As for the amount of the expense, customers of financial advisors should expect to pay for things not directly related to the time the advisor spends managing their portfolio.  For instance, a portion of the time the advisor spends researching the market, keeping up on the latest trends, etc., etc. "
 
Actually, those things hurt investors even more.  
 
" And certainly a portion of the overhead cost – health insurance, computer, office supplies, secretary (if applicable), etc.  With a good advisor, this might be worth it!”
 
Again, how does one find a ‘good’ advisor? What is a ‘good’ advisor? Good by what standard? As it stands now, using a ‘financial advisor’ will get you someone that talks a good game and gets you returns that are way under market returns and way under what we DIY’ers get. Consider:
 
“The study measured the results of literally trillions of dollars of mutual fund purchases and included participation by the best-known and most-trusted names in the industry. It concluded that brokers do not find better-performing funds than individuals, do not allocate assets among different asset classes better than individuals, and do not display fewer biases toward the “hot” stock than individuals.
 
This is true even if you don’t count the fees of the brokers in the performance. In 2002 alone, investors lost about $40 billion to mutual fund sales and management fees.”
 
http://www.fool.com/investing/international/2007/04/17/todays-strong-buys-intern
ational-edition.aspx
 
“In theory, the amount of time an advisor spends managing your money should be correlated to the amount you have in the account.”
 
Why?  
 
“As scarred as I am from my experience with Ameriprise, I don’t think it makes sense to paint all advisors with the same brush.”
 
Sadly, I do. Fee ONLY is a probable exception.
 
“I would caution consumers about the fees that are associated with wrap accounts but wouldn’t recommend against them as a hard and fast rule.”
 
Give them the chart I showed you.  
 
"  I think this industry is full of sleazebags but also probably has some good advisors who can manage their clients’ money more effectively even with a wrap fee. "
 
How do you find them?
 
1. No one can predict the future.
2. Index funds outperform the vast number of actively managed funds.
3. Stay the course.
4. It’s easy to set up a low-cost, diversified portfolio of index funds.
5. Costs matter - a lot.
 
I spend less than 8 hours a year on my portfolio.

OK, who do you keep quoting?  I’ve not seen that discussion on this board.  Not to say it didn’t happen in your head, but you can’t really quote yourself and then answer your own question as if you are an expert. 

Space-e-man Spiff, even as an ex-Jones guy, I agree with you…Borker, you need to find your passion again!  Take a vacation, a break, if it doesn’t come back it might be time to look for new opportunities…Spiff, come in to the light (Indy), we want you!

OK, who do you keep quoting?  I’ve not seen that discussion on this board.  Not to say it didn’t happen in your head, but you can’t really quote yourself and then answer your own question as if you are an expert. 

Apparently the head injury also keeps Willimacca from refuting the studies I posted earlier.  Isn’t it interesting how it just ignores everything that refutes it’s version of the truth?

Uh… you’re feeding the troll.

Hey kids…don’t waste your time and energy responding to Macca.  Help Borker out, but ignore the troll.

Macca has no idea how things work in the real world, how ignorant most investors are, and how badly they need our help.  A one percent annual fee is a BARGAIN  for what I do for my clients, and I’m sure most of you feel the same way.

Hey Macca, I could use a drink and you need to drink the rest of the bottle to kill that bug that crawed up…

Bondguy, I sure would like that lady's number, I want to call her up and Say "YOUR A DUMBASS"......

I worked at an electronics retailer about  20 years ago, but  I still remember a lady who bought a car stereo from me and told me her husband would install it.  2  hours later she 's back with her dashboard torn apart, wires hanging out and the stereo sitting on the floor.  She asked me how much we would charge to install it and I told her $40. She looks at me and says “$40?!?!!?  Any idiot can install a car stereo”, and storms out the door.

That same lady is somewhere today talking to a financial advisor about how much it will cost her to sell her Citigroup stock.  I think I just heard the door hit her in the butt on the way out. 

Spiff, if your at Hooters its 30%…

I read this from businesswire. This is Harvey Goldstein speaking and here’s what he ahd to say:

Goldstein continues, “You can only manage the future. The more you know about what lies ahead, the more effective you can be. Need cash? How much? When? The most powerful tool in the world,” Goldstein asserts, “is the ability to see and manage the future. The most powerful people in the world are the financial professionals that can literally give their clients a glimpse of their future. But the biggest problem,” Goldstein laments, “is that there simply are not enough people who care to do it.”

Spiff, if your at Hooters its 30%…

[quote=Spaceman Spiff] 

This discussion reminds me of the old fashioned “odd lot” theory which, in my opinion, has substantially more pull than the “efficient market” theory.  The way I take a look at overbought sectors is by looking at Fidelity’s inflows, and making sure I’m not owning too much of the “hot” sectors.   Energy, commodities, utilities, alternative energy, currency, and emerging markets make me nervous right now.  Time will tell…

That analogy at least gets people thinking.  I’ve taken it a step farther when I’ve had to.  Cosider a 50 year man old who wants to eat out with his wife once a week at a nice restaurant.  A nice dinner on the Hill (the Italian section of STL) can run close to $100 if you have appetizers, drinks, and dessert.  So, that’s $5200 a year.  Figure 30 years of this practice and that’s $156,000 without any inflation or any extra times eating out.  That couple will tip a waitress $31,200 for that food @ 20%.  But they will balk at paying me $5460 to invest that money in American Funds.