WHY YOU SHOULD FIRE YOUR BROKER/FINANCIAL ADVISOR OR SIMPLY JUST DONT HIRE ONE... Let me state up front that if your advisor is doing a better job than you can, or if having someone else manage your money helps you sleep better at night, then by all means, stick with that person. But you likely can do better and save money at the same time. Most of us are aware of the conflicts of interest that some brokers/advisors look past in order to generate a commission. There are times when a broker recommends a trade or an expensive mutual fund that is not in the client’s best interest but generates a nice payout for the advisor. Those brokers should be dumped immediately because they’re more concerned with their money instead of yours. Even the good ones—the advisors and certified financial planners that really are trying to manage your money in a cost-effective way, still most likely underperform the market. Chances are those advisors have clients in mutual funds, which charge expenses. The average expense ratio for an equity mutual fund in 2011 was 0.79 percent. That means whatever the gross returns you’d subtract nearly 1 percent for expenses. On top of that, you’re likely paying either steep commissions or 1 percent of your assets to the advisor to manage your money. Even if they have you in index funds, which are typically very inexpensive, your total fees and expense will likely be at least 1.25 percent. It will be even more if the advisor is using anything but the least expensive funds. If you manage your own money, you instantly save that 1 percent fee you’re paying to your advisor. That can add up over the years. If you have a $500,000 account, you need to seriously think about whether it’s worth paying someone $5,000 per year to manage your money for you. And if that account grows over time, you’ll be paying even more. But if you take care of it yourself, you will save thousands of dollars a year that can be put back into your investments and compound over time. How much will you save? Let’s assume that your advisor does a terrific job and grows your $500,000 account by 10 percent per year. After ten years, you’ll have paid the advisor $83,000 in fees and your account will be worth $1,172,867. However, if you handled it yourself, without paying the 1 percent, you’d have $1,296,871, over $124,000 more than with the advisor. So it’s not just the $83,000 in fees that you’re paying. That $83,000, when put to work, turns into an extra $41,000. Something to really think about people, so get educated and learn how to manage your own money!
Posted on: Tue, 15 Apr 2014 19:42:03 +0000
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