A lot of lawyers like being paid by the hour. It’s not bad, since they’re allowed to bill out 71 hours per day.

joedabrkr said:

Be careful what you wish for.  I have many lawyer friends, and they would all tell you that their system of compensation is what they hate most about being a lawyer. 

Reply:

I'm not wishing for this, just hoping to have a discussion on the various compensation models and what should be the most appropriate approach given the services provided.

As for your head hurting; at least this is a productive thread as compared to the Jones Rumble Royal next door.  That place gives me a migrane. 

[quote=dude]

Mike,

My concept of the retainer fee is that there would be a one time up front fee of say $1,000 (specifics not important here) for the initial planning work

[/quote]

I'm not sure about every wirehouse, but I know of two that do offer a topline, non-boilerplate paln in this price range. I doubt they sell many.

[quote=dude]

and an on going annual flat fee based on services provided (like on call financial advice, education, plan updating etc... ) and time expected to work on the project. 

[/quote]

This part, given the compliance issues involved, might not be something wirehouse would want to do.

[quote=skeedaddy]
....I do agree that diversification is important, it just doesn't exist amongst US equities. .82 correlation is not diversification to me.
[/quote]

Interestingly, this month's IA magazine has a story, "Boxes are not Classes" which is directly on point to this misconception regarding portfolio composition.   At the end, they say that stocks are stocks and is one asset class. 

Reasons:

1. US stocks are not compositionally unique. Wilshire, S&P, Russell categorize the same stocks differently.

2.  Unstable membership. At S&P, one in every nine stocks change categories. 

3. High correlations (avg. .80) equals low diversification. 

[quote=skeedaddy] [quote=skeedaddy]
....I do agree that diversification is important, it just doesn't exist amongst US equities. .82 correlation is not diversification to me.
[/quote] <?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

Interestingly, this month's IA magazine has a story, "Boxes are not Classes" which is directly on point to this misconception regarding portfolio composition.   At the end, they say that stocks are stocks and is one asset class. 

[/quote]

http://www.investmentadvisor.com/issues/2006_1/features/5853 -1.html

There's the link so others can review it for themselves. Note the author's agendas, more about their company below.

BTW, didn’t we dismiss the “.82” figure as irrelevant since you limited your comparison to LCV and LCG and over a 26 year time horizon?

[quote=skeedaddy2]

Reasons:

1. <?:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />US stocks are not compositionally unique. Wilshire, S&P, Russell categorize the same stocks differently.

[/quote]

Weak. Just because various agencies disagree about exactly definitions doesn't mean there's not a real difference between categories. That’s like saying there’s no real difference between EAFE/emerging markets and the US market since EAFE and emerging market indexes hold differing names.

[quote=skeedaddy2]

2.  Unstable membership. At S&P, one in every nine stocks change categories. 

[/quote]

Huh? Just because by one agency's definition 11% move from one category to another means there's no difference? That means 89% DON’T move. Personally I found it rather surprising that that number wasn't higher with SC moving to MC, MC to LC. The question isn't does some small percentage move, it's what do they act like while they're in a given category.

[quote=skeedaddy2]

3. High correlations (avg. .80) equals low diversification. 

[/quote]

The high correlations only appear on longer time horizons when the twist, turns and the variations disappear. Those correlations year to year are much, much lower (again, example, 1998 when LGV was +38.70% and SCV was at -6.43%) and it’s those disparities that rebalancing takes advantage of.

Furthermore, the correlation between small and large cap run in the .6 to .7 range and the authors managed to somehow completely exclude the examples of the correlations between emerging markets and EAFE from the US equities they discussed.

 http://www.athenainvest.com/index.cfm?action=home

More from the same authors. I remain unconvinced.

[quote=dude]

joedabrkr said:

Be careful what you wish for.  I have many lawyer friends, and they would all tell you that their system of compensation is what they hate most about being a lawyer. 

Reply:

I'm not wishing for this, just hoping to have a discussion on the various compensation models and what should be the most appropriate approach given the services provided.

As for your head hurting; at least this is a productive thread as compared to the Jones Rumble Royal next door.  That place gives me a migrane. 

[/quote]

I didn't say that.....