Author Topic: Ric Edelman - High-Fee Passive Advisor Hypocrisy  (Read 19256 times)

brewer12345

  • Handlebar Stache
  • *****
  • Posts: 1386
Re: Ric Edelman - High-Fee Passive Advisor Hypocrisy
« Reply #50 on: July 13, 2014, 08:02:26 PM »
Then also pass portability,  and establish the post office as a 401k provider of last resort at the maximum fee level. And then buy a basket of index funds at Vanguard et al, subsidising the post office with the delta in fees.

Write your Congresscritter.  I am sure they will listen...

ProfWinkie

  • 5 O'Clock Shadow
  • *
  • Posts: 88
  • Location: Midwest and around the world for work
  • What just happened?
    • CACI International
Re: Ric Edelman - High-Fee Passive Advisor Hypocrisy
« Reply #51 on: July 14, 2014, 06:46:15 AM »
+1 milesdividendmd

Well Said

smalllife

  • Pencil Stache
  • ****
  • Posts: 983
Re: Ric Edelman - High-Fee Passive Advisor Hypocrisy
« Reply #52 on: July 14, 2014, 07:34:07 AM »

I think this is a product labelling issue. Just like loan sharks are legally required to include the annualised interest rate in their adverts, we could legally require financial advisors to state the long-term impact of their fees, over reasonable periods such as 10, 20, 30, and 40 years.

The "true" fees are what proportion of your wealth ends up in the hands of the advisor. For example, Dave Ramsey's ELPs' 30-year equivalent fee comes to ~36% (and the 40-year equivalent is ~45%); Vanguard's 30-year equivalent fee comes to ~5.5%. (To their credit, Vanguard do quote 10, 20 and 30-year equivalent fees.)

Using Vanguard's methodology (assuming a constant return of 6%), Ric Edelman's 1.3%/year fee comes to ~31% over 30 years.

This is a good point, although when you talk about percentages lost over long time frames I believe it goes over the head of the majority of the public.

What I would like to see even more would be for it to be mandated for advisers to write in dollar figures exactly how much money they took from your account each statement.

Something along the lines of:

Money under management: $40,000
Income  this statement: $20
Management fees deducted this statement: $25

That law went into effect July 2012, although they still try and make it hard to see (mine comes out as included with investment losses, with a little asterisk).

brewer12345

  • Handlebar Stache
  • *****
  • Posts: 1386
Re: Ric Edelman - High-Fee Passive Advisor Hypocrisy
« Reply #53 on: July 14, 2014, 08:19:54 AM »

I think this is a product labelling issue. Just like loan sharks are legally required to include the annualised interest rate in their adverts, we could legally require financial advisors to state the long-term impact of their fees, over reasonable periods such as 10, 20, 30, and 40 years.

The "true" fees are what proportion of your wealth ends up in the hands of the advisor. For example, Dave Ramsey's ELPs' 30-year equivalent fee comes to ~36% (and the 40-year equivalent is ~45%); Vanguard's 30-year equivalent fee comes to ~5.5%. (To their credit, Vanguard do quote 10, 20 and 30-year equivalent fees.)

Using Vanguard's methodology (assuming a constant return of 6%), Ric Edelman's 1.3%/year fee comes to ~31% over 30 years.

This is a good point, although when you talk about percentages lost over long time frames I believe it goes over the head of the majority of the public.

What I would like to see even more would be for it to be mandated for advisers to write in dollar figures exactly how much money they took from your account each statement.

Something along the lines of:

Money under management: $40,000
Income  this statement: $20
Management fees deducted this statement: $25

That law went into effect July 2012, although they still try and make it hard to see (mine comes out as included with investment losses, with a little asterisk).

No doubt they could have put a "Schumer box" on the statements like Congress required for credit cards, but the legi$lative process worked its usual magic and they did not.

Midwest

  • Handlebar Stache
  • *****
  • Posts: 1326
Re: Ric Edelman - High-Fee Passive Advisor Hypocrisy
« Reply #54 on: July 14, 2014, 08:21:38 AM »
And yet vanguard is happy to take all comers fee free with no minimums for their IRA plans.

Again your argument fails to define why 401k plans require extra money to cover administrative costs relative to IRA's.

A solo 401k from vanguard only costs $20, and I am quite sure that if the market were opened up with true portability there would be a multitude of fee free options.

401(k) plans (excluding solo 401(k) plans), typically involve discrimination testing, an audit (depending on size), and a tax return.  A solo 401(k)* and/or an IRA typically requires none of these.  401(k)'s are expensive because of govt requirements.

* Solo 401(k)'s require a 5500 if assets exceed a certain level but it is a very basic return and is not included in the $20 fee quoted.
« Last Edit: July 14, 2014, 08:24:48 AM by Midwest »

ProfWinkie

  • 5 O'Clock Shadow
  • *
  • Posts: 88
  • Location: Midwest and around the world for work
  • What just happened?
    • CACI International
Re: Ric Edelman - High-Fee Passive Advisor Hypocrisy
« Reply #55 on: July 16, 2014, 07:30:05 AM »
Consumption based tax would eliminate need for all qualified plans (and related high fees) as what you save would not be taxed until you spent it.

Idea is, much too simple to ever be adopted and eliminates the needs for 90% of CPAs. Also, Congress would lose its ability to offer tax breaks to those industries which pay off  Congress the most.

All you need would be a simple brokerage account.

brewer12345

  • Handlebar Stache
  • *****
  • Posts: 1386
Re: Ric Edelman - High-Fee Passive Advisor Hypocrisy
« Reply #56 on: July 16, 2014, 07:42:00 AM »
I think I prefer the perpetual motion machine (powered by unicorns) solution.