Low Fee Advisors

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Sep 14, 2010 10:22 am

Greetings!  I have never been on this site before, but it got rave reviews from www.bogleheads.com.  I've been asking a question over there, but it either gets locked down or completely ignored, so I figured you guys and gals maybe able to shed some light on it.  I don't know if they just don't have the answer, or they just don't like the answer.

Some background:  I recently read this article (http://www.forbes.com/2010/09/09/high-fee-index-fund-advisor-hypocrisy-personal-finance-indexer-ferri.html?goback=%2Egde_71774_member_29416573) posted on the boglehead website, and it got me thinking.

Why do certain "Low Cost" advisors choose Schwab as a custodian?  I used to have an account with Schwab, but moved because I could get cheaper trade costs and accounts fees elsewhere.  So why would they choose a higher cost custodian over cheaper alternatives if "costs" are such a big deal?

Thanks,

GR

Sep 14, 2010 11:36 am

Because you usually get what you pay for.  You can go some places and get $6 trades, but your fund lineup might be limited, or you might be limited by number of trades, or some other measure.  Also, the technology or timing or pricing might not be as good (IOW, because of volume, Schwab might get better spreads than, say, "Trades-for-a-buck.com" - so although you might "pay" less in commissions, you might actually get better executed prices at Schwab).  Then there is technology, phone support, internet support, tools, etc.

One thing you will find in this business, despite what some of the "mainstream" media (and Congress) like to spout, is that you generally get what you pay for, be it execution, services, or advice. 

Sep 14, 2010 12:15 pm

Gano - this is a standard industry practice.  In exchange for having a custodial relationship with their clients, the adviser gets tools, research, customer service, etc.  They do have a fiduciary responsiblitity to determine that what their clients pay for is worth what they get.

B24 - I think Gano, based on his boglehead posts, is comparing Schwab to TD Ameritrade (which is cheaper).  How much of these services provided by Schwab really apply to a low-cost index buy and hold advisor?

Overall, I think it is glass houses.  You should temper calling out other advisors when you use a more expensive custodian.

Sep 14, 2010 7:01 pm

Schwab's targeted RIA's longer than most so it's well established.  I wouldn't change custodians over low transaction costs only, but I might add another lower cost custodian if it became a barrier to attracting or retaining clients.  As a newer RIA, I needed to choose among custodians that have low AUM limits and they are generally lower cost, like Scottrade and TD Ameritrade. You might sacrifice a bit on infrastructure and services, but most of those benefit the advisor and not the client anyway, and wouldn't be that important until you were larger. 

As for trade execution and pricing, I would consider that if there were any objective evidence that one broker was better than another.  This has long been a claim to fame for wirehouses, only now we find out what we have long suspected, that many of the in house trading desks are front-running trades, negating the benefits of this supposed advantage.  Crooks.

Sep 15, 2010 8:16 pm

[quote=Gano_Rex]

Greetings!  I have never been on this site before, but it got rave reviews from www.bogleheads.com.  I've been asking a question over there, but it either gets locked down or completely ignored, so I figured you guys and gals maybe able to shed some light on it.  I don't know if they just don't have the answer, or they just don't like the answer.

Some background:  I recently read this article (http://www.forbes.com/2010/09/09/high-fee-index-fund-advisor-hypocrisy-personal-finance-indexer-ferri.html?goback=%2Egde_71774_member_29416573) posted on the boglehead website, and it got me thinking.

Why do certain "Low Cost" advisors choose Schwab as a custodian?  I used to have an account with Schwab, but moved because I could get cheaper trade costs and accounts fees elsewhere.  So why would they choose a higher cost custodian over cheaper alternatives if "costs" are such a big deal?

Thanks,

GR

[/quote]

Hey Gano, quit being such a piker! Are you more concerned why your returns suck? one reason may be you're a cheapskate. If I were you I would be far more worried about my net returns than tiny fees. I'm charging a couple points ... your knee jerk reaction ... NO WAY NO WAY!!!  right? My returns are (Joel has penis envy) in a flat to negative market ... NET!

You get what you pay for.

Sep 14, 2010 9:05 pm

Thanks for all of your responses. It just seemed a little strange that an advisor who swears on the bible of low cost uses Schwab.  I guess it is common, but you would think Rick Ferri wouldn't pick the splinter from the competition's eye without removing the timber from his own.

Gaddock - I've got more money then you would know what to do with. I'm not a follower of the Bogle Bible, and currently have advisors that could put the screws to you in ANY trade.

Sep 15, 2010 8:14 pm

[quote=Gano_Rex]

Thanks for all of your responses. It just seemed a little strange that an advisor who swears on the bible of low cost uses Schwab.  I guess it is common, but you would think Rick Ferri wouldn't pick the splinter from the competition's eye without removing the timber from his own.

Gaddock - I've got more money then you would know what to do with. I'm not a follower of the Bogle Bible, and currently have advisors that could put the screws to you in ANY trade.

[/quote]

If you had any serious money you would be paying 2 and 20% and not
sniveling about it. I'm kicking off a penis envy alpha, you don't have
squat you cheap bastard. I would drop kick your cheap ass out of my
office, piker.

Sep 15, 2010 6:51 pm

[quote=Gano_Rex]

Thanks for all of your responses. It just seemed a little strange that an advisor who swears on the bible of low cost uses Schwab.  I guess it is common, but you would think Rick Ferri wouldn't pick the splinter from the competition's eye without removing the timber from his own.

Gaddock - I've got more money then you would know what to do with. I'm not a follower of the Bogle Bible, and currently have advisors that could put the screws to you in ANY trade.

[/quote]

Sep 15, 2010 7:06 pm

Considering the fact that you can't post correctly on the internet, and you have LOW reading comprehension (I've never complained about fees I've paid) - I would gamble that you are ALL talk.  If you were half as good as you think you are, you wouldn't be some scalping retail FA calling clients about $50 Roth contributions.  I've got plenty of Advisers already - ones that know what they are doing.

Sep 15, 2010 7:51 pm

[quote=Gano_Rex]

Considering the fact that you can't post correctly on the internet, and you have LOW reading comprehension (I've never complained about fees I've paid) - I would gamble that you are ALL talk.  If you were half as good as you think you are, you wouldn't be some scalping retail FA calling clients about $50 Roth contributions.  I've got plenty of Advisers already - ones that know what they are doing.

[/quote]

Yawn ... sure piker, sure you do.  On June 6 2010 Gano Rex wrote

"I аm 17 аחԁ һаνе 1000$ tο invest іח аח ira. Wһаt wουƖԁ bе tһе best longterm fund fοr tһіѕ?"

AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAaaaaaaaahahahahahahahahahaahhaahhaahahaha

Poor fool forgot about GOOGLE!!!!!  he he he

Sep 15, 2010 7:51 pm

[quote=Gaddock]

[quote=Gano_Rex]

Thanks for all of your responses. It just seemed a little strange that an advisor who swears on the bible of low cost uses Schwab.  I guess it is common, but you would think Rick Ferri wouldn't pick the splinter from the competition's eye without removing the timber from his own.

Gaddock - I've got more money then you would know what to do with. I'm not a follower of the Bogle Bible, and currently have advisors that could put the screws to you in ANY trade.

[/quote]

If you had any serious money you would be paying 2 and 20% and not sniveling about it. I'm kicking off a double digit alpha, you don't have squat you cheap bastard. I would drop kick your cheap ass out of my office, piker.

[/quote]

You got that in a GIPS compliant format?

Sep 15, 2010 8:01 pm

[quote=joelv72]

[quote=Gaddock]

[quote=Gano_Rex]

Thanks for all of your responses. It just seemed a little strange that an advisor who swears on the bible of low cost uses Schwab.  I guess it is common, but you would think Rick Ferri wouldn't pick the splinter from the competition's eye without removing the timber from his own.

Gaddock - I've got more money then you would know what to do with. I'm not a follower of the Bogle Bible, and currently have advisors that could put the screws to you in ANY trade.

[/quote]

If you had any serious money you would be paying 2 and 20% and not sniveling about it. I'm kicking off a double digit alpha, you don't have squat you cheap bastard. I would drop kick your cheap ass out of my office, piker.

[/quote]

You got that in a GIPS compliant format?

[/quote]

Would a redacted p&l or two or three work for you? If so, why would I bother?

Sep 15, 2010 8:05 pm

I'm just wondering why, if you are able to consistently beat the market like a redheaded step child, you aren't running a hedge fund from your laptop on the beach of your own private tropical island. 

Sep 15, 2010 8:11 pm

[quote=joelv72]

I'm just wondering why, if you are able to consistently beat the market like a redheaded step child, you aren't running a hedge fund from your laptop on the beach of your own private tropical island. 

[/quote]

Ahhhh penis envy eyyy. Don't worry, my t12 reflects it just fine. There are scores of people that are up 10% on the year. It's just not that rare. That's one thing that this industry has left in the dust, performance. It's all about sales. A pity.

Sep 15, 2010 8:15 pm

[quote=Gaddock]

[quote=joelv72]

I'm just wondering why, if you are able to consistently beat the market like a redheaded step child, you aren't running a hedge fund from your laptop on the beach of your own private tropical island. 

[/quote]

Ahhhh penis envy eyyy. Don't worry, my t12 reflects it just fine. There are scores of people that are up 10% on the year. It's just not that rare. That's one thing that this industry has left in the dust, performance. It's all about sales. A pity.

[/quote]

You really didn't answer my question.  Why would you remain in retail sales if you are such a market guru?  I'm sure you could be charging 2/20 and not even need to mess with sales if you're running numbers like that, day in and out.

Sep 15, 2010 8:23 pm

I'm not here to satisfy your jealous little rants am I? You may be better served asking a guy how he does it vs. insinuating it's not true. I would have been glad to share. 'Beating the market' is child's play. Buy the SPY and sell a few covered calls. The fact that you think only a 'market guru' can have a good year is a sad indictment on the industry.

Sep 15, 2010 8:25 pm

I am sure the fact that you have sold all your clients on your ability to beat the market will work well for you in the future.

Sep 15, 2010 8:27 pm

You know, when the market blows through the strike prices and you left all that money on the table.  Wait, I forgot!  You have a camera trained on the e-mini pits.  There's no way you will ever lose.

Sep 15, 2010 11:09 pm

[quote=joelv72]

You know, when the market blows through the strike prices and you left all that money on the table.  Wait, I forgot!  You have a camera trained on the e-mini pits.  There's no way you will ever lose.

[/quote]

You sound so whipped. Are you sure you have the stomach for this gig? Sorry you are feeling miserable. I totally dig my career, my book has increased 36% year to date. Every day I study and get better. You can always shoot holes in what you're not doing, it's human nature. Such a bitter little guy. Must suck to be you. I'll bet you would feel better somewhere were there is a safety net. I wish you luck. Maybe Obama will save you?

I know you feel compelled to have the last word so please fire both barrels. Conversing with you is not only a bummer but non productive so please consider yourself a winner in this pissing match, sounds like you need confidence of at least one win, I happily forfeit. You're not the only one selling 'hang in there slugger'  LOL YOU GO GIRL!!!  Make it happen.

Sep 15, 2010 11:16 pm

I just got a giggle out of that.