Money/Investment Managers Questions

[KCCLONE712]

What is everyone's thoughts on the qualities and a net return calculation when they hiring an investment manager?

I have met a few people I like, but at the end of the day, it is hard to get around their fees. Let's say a 2% management fee plus X% (let's say 15%) profit fee. It becomes hard to see how they are going to net a better return than if I simply invest in the S&P.

The last 20 years has been pretty easy to be an investment manager, IMO. I think the market in the near future is going to be much difficult to find value, at least at the rate of return that has been experienced the last few years.

Also, the S&P is only an example. I personally think the S&P is currently overweight with Tesla, NVidia, and Apple. Making it less diverse than I would like. But I know little, which is evident by the questions above

 

[goody2012]

What is everyone's thoughts on the qualities and a net return calculation when they hiring an investment manager?

I have met a few people I like, but at the end of the day, it is hard to get around their fees. Let's say a 2% management fee plus X% (let's say 15%) profit fee. It becomes hard to see how they are going to net a better return than if I simply invest in the S&P.

The last 20 years has been pretty easy to be an investment manager, IMO. I think the market in the near future is going to be much difficult to find value, at least at the rate of return that has been experienced the last few years.

Also, the S&P is only an example. I personally think the S&P is currently overweight with Tesla, NVidia, and Apple. Making it less diverse than I would like.

Unless you're a hedge fund with deep insight and connections, investment managers aren't adding anything. Save the fees.

 

[CyGuy4Life]

You don't need one. Just do it yourself.

 

[SCNCY]

Unless you're a hedge fund with deep insight and connections, investment managers aren't adding anything. Save the fees.

I was thinking something along these lines. Unless an investment manager has access to investments that you cannot buy yourself, then I don’t see the value.

 

[Cyclonepride]

I was thinking something along these lines. Unless an investment manager has access to investments that you cannot buy yourself, then I don’t see the value.

I think the idea is that they have access to information that you don't have, or at least won't have until later than them.

 

[TXCyclones]

What is everyone's thoughts on the qualities and a net return calculation when they hiring an investment manager?

I have met a few people I like, but at the end of the day, it is hard to get around their fees. Let's say a 2% management fee plus X% (let's say 15%) profit fee. It becomes hard to see how they are going to net a better return than if I simply invest in the S&P.

The last 20 years has been pretty easy to be an investment manager, IMO. I think the market in the near future is going to be much difficult to find value, at least at the rate of return that has been experienced the last few years.

Also, the S&P is only an example. I personally think the S&P is currently overweight with Tesla, NVidia, and Apple. Making it less diverse than I would like. But I know little, which is evident by the questions above

I can tell you that Darrell Cronk, who is the Chief Investment Officer of Wells Fargo Investors, is native of Iowa and an alumni of Iowa State.

 

[4theCYcle]

I've had several financial guys tell me I'm on the right track and wouldn't do anything differently with how I explain my actions or ways I handle retirement. Obviously that's different for everyone and where they are at age wise and career wise.

I would say save the fees and invest in index funds at minimum.

I've taken an aggressive approach with the 401K (mostly index funds/funds low fees), conservative approach with a roth, and an aggressive approach on stocks under a roth umbrella.

Everyone's comfortability is different, but I feel that there is enough free information about retirement out there that if you find a youtuber or someone else you can trust, then they'll be helpful enough.

 

[CascadeClone]

I actually did a survey of abt a half dozen options here in CR of dofferent wealth advisors. Was looking for a "fee only" model, meaning a flat $ fee. Turned out that even tho they all said fee only, the fee was still a percentage of assets, except for one small place.

As far as costs, they were all 1% for the first X$, going down from there. Usually the min is 50 basis pts once you get up into 2 comma territory.

I would agree not much point in them, esp if just starting out and in accumulation phase. Plenty of basic info to help you invest in basic things (index funds, etc). You cant go too far wrong and youre just piling it up for like 25 years. No need to lose 0.75% for someone to tell you to put half in SP500 and half in bonds.

However, if you get to where its a scary big number, and closer to retirement, and need advise on how to draw it down more tax efficiently... then maybe it makes sense. Id say the more complex your situation (small biz ownership, kids, property, etc etc) the more it might be worth the cost.

 

[Gunnerclone]

Unless you're a hedge fund with deep insight and connections, investment managers aren't adding anything. Save the fees.

Totally agree with this. There’s nothing they have access to that we don’t. It’s not 1986.

 

[TitanClone]

Unless you're a hedge fund with deep insight and connections, investment managers aren't adding anything. Save the fees.

Agreed. The other thing with hedge funds is their ability to use your money as venture capital. Maybe I'll win the lottery someday and be able to get in on that action.

 

[aeroclone]

I actually did a survey of abt a half dozen options here in CR of dofferent wealth advisors. Was looking for a "fee only" model, meaning a flat $ fee. Turned out that even tho they all said fee only, the fee was still a percentage of assets, except for one small place.

As far as costs, they were all 1% for the first X$, going down from there. Usually the min is 50 basis pts once you get up into 2 comma territory.

I would agree not much point in them, esp if just starting out and in accumulation phase. Plenty of basic info to help you invest in basic things (index funds, etc). You cant go too far wrong and youre just piling it up for like 25 years. No need to lose 0.75% for someone to tell you to put half in SP500 and half in bonds.

However, if you get to where its a scary big number, and closer to retirement, and need advise on how to draw it down more tax efficiently... then maybe it makes sense. Id say the more complex your situation (small biz ownership, kids, property, etc etc) the more it might be worth the cost.

I would agree with this. Very unlikely somebody will be able to consistently outperform the market plus a fee, so I don't see value in paying someone to be a stock picker.

Where I do see value is planning around taxes and withdrawal strategies, as there are a lot of different options there, and having a sound strategy could save you enough money to offset their cost. So if you are getting further into the career and it is time to start putting together the details for your offramp, could be worth it.

 

[Sigmapolis]

Financial advisors are unnecessary for any middle class, upper-middle class, or even affluent person. You need to have some serious net worth before managing it becomes a job in itself.

Save what you can.

Keep what you might need to spend sometime semi-liquid (e.g., bank CDs) if you're planning on shelling some money out to make a capital purchase like a car or a home.

Put as much as you can into tax-advantaged retirement accounts. Use a target-date setting.

Put the rest in low-fee broad market index funds.

Nobody on this board is likely going to need a FA or needs to pay a hedge fund to somewhere between speculate and insider trade for them (the real "Wall Street Casino").

Keep a bit of "fun money" for yourself and day trade it if you want... just be prepared to lose 100% of it.

 

[Marcelason78]

I can tell you that Darrell Cronk, who is the Chief Investment Officer of Wells Fargo Investors, is native of Iowa and an alumni of Iowa State.

Darrell was our WF advisor way back when he was in Sioux Falls. He made us a lot of money and was a great guy to deal with.
The three guys that followed him were average, at best.

 

[4theCYcle]

I actually did a survey of abt a half dozen options here in CR of dofferent wealth advisors. Was looking for a "fee only" model, meaning a flat $ fee. Turned out that even tho they all said fee only, the fee was still a percentage of assets, except for one small place.

As far as costs, they were all 1% for the first X$, going down from there. Usually the min is 50 basis pts once you get up into 2 comma territory.

I would agree not much point in them, esp if just starting out and in accumulation phase. Plenty of basic info to help you invest in basic things (index funds, etc). You cant go too far wrong and youre just piling it up for like 25 years. No need to lose 0.75% for someone to tell you to put half in SP500 and half in bonds.

However, if you get to where its a scary big number, and closer to retirement, and need advise on how to draw it down more tax efficiently... then maybe it makes sense. Id say the more complex your situation (small biz ownership, kids, property, etc etc) the more it might be worth the cost.

Yeah agree, and I almost went into this point of where I think a CPA or tax advisor would be beneficial as your retirement nears so you know how to effectively pull from in the best way possible.

I've even thought down the line, if my investments ever truly pay off early and I am able to "retire" early that it could be beneficial to pull from a roth and pay the 10% withdrawal fee (earnings) rather than tap into the 401K too early. Or if I need funding somewhere, that is an option.

 

[cyfanbr]

They are not worth it.

Got to Meb Faber’s website and you can download most of his books as pdf for free. You can make a pretty well diversified portfolio yourself with ETFs. Think global allocation and the ivy portfolio are a couple good ones.

 

[throwittoblythe]

I almost hired a financial advisor way back in 2015, I think he was from NW Mutual. Nice guy. He went through everything with me and then got to the fees. I was basically going to have to give him 3-5% (can't remember) of my money just to transfer it to NW Mutual.

The guy was honest enough to tell me I didn't need his help. He didn't have access to anything proprietary. And if I was willing to consistently save and stay in the market, I'd be ahead of most people.

About this time a friend gave me Bogle's Little Book of Investing which changed my approach.

I can't say I'm perfect, but I'm consistently investing 15% of my income into a combo of 401k, roth, and ESOP. When my life insurance guy had their finance guy run the numbers, I had an extremely low probability of running out in retirement. Long story short: doing anything gets you ahead of most, if you can manage to hit that 15-20% savings every month, you'll be well on your way.

 

[bozclone]

Saving and investing is the easy part in my opinion. I think there is a need for someone who gives you fee based advice as you transition into retirement. I would think the process is pretty similar for most people, so it wouldn’t be that difficult to become an expert. After you have saved all your life, you don’t want to f it up as you retire. I think people would pay for the peace of mind.

 

[NodawayRiverClone]

I agree generally with the you can handle it yourself advice.
Invest in tax-advantaged vehicles to the maximum extent allowed (IRA/Roth IRA/deferred comp).
Put at least half in index funds - bonds and stocks. Have the rest managed. In a down market, index managers cannot take defensive positions, but they can with managed funds/stocks. If you know how, be sure your investments are diversified across industries, size of corporations. Consider real estate funds and precious metals.

If you really want an advisor, have your prospects show you how many of the last 10 years their advice has beaten the market. This is usually the knock on active managers - few consistently beat the market. If you are a Christian, look up a local Thrivent Financial group and ask what they can do for you.

 

[cyphoon]

Let's say a 2% management fee plus X% (let's say 15%) profit fee.

2% seems nuts to me. The dividend yield of the S&P is around 2%. So you are essentially saying "hey investment manager, why don't you keep all the dividends from my investments. I will try to get by with the returns from stock price gains."

I do admit that I have never shopped for such a manager, but I tend to avoid mutual funds that have expense ratios above 1%. Your potential investment manager has the equivalent of a 2% expense ratio, and then some, and that is on top of the expenses of whatever products they buy.

2% to the manager, plus the profit fee, plus 3% inflation, plus the expense ratios of the investments themselves. Hell, if your investments return anything less than 6%, you are losing ground.

H

 

[Lexclone]

Financial advisors are unnecessary for any middle class, upper-middle class, or even affluent person. You need to have some serious net worth before managing it becomes a job in itself.

Save what you can.

Keep what you might need to spend sometime semi-liquid (e.g., bank CDs) if you're planning on shelling some money out to make a capital purchase like a car or a home.

Put as much as you can into tax-advantaged retirement accounts. Use a target-date setting.

Put the rest in low-fee broad market index funds.

Nobody on this board is likely going to need a FA or needs to pay a hedge fund to somewhere between speculate and insider trade for them (the real "Wall Street Casino").

Keep a bit of "fun money" for yourself and day trade it if you want... just be prepared to lose 100% of it.

What would you say as the threshold as “serious net worth”?

1s, 10s, 100s of millions?