When you know what your doing, its easy.  When a lawyer is looking at a case the basic strategy is obvious, so he sizes it up easily then expands on the plan. An accountant knows the obvious answers but a good one finds 1 or 2 issue that could be addressed.   After you get the basics setup, you should alway make sure you spend time to step back and understand the big picture.  

I work with 1000 - 1500 people. I help and see how they manage the transitions in their lives. Some are more successful than others. Some bring great difficulties upon themselves, while others seem to repeatedly thread the needle. I’m able to share these experiences with clients so that they don’t have go through life happenings on their own.



In this way I work with a client as an architect does - how many windows do you want on the first floor & the size & thickness of those windows is very similar to the 360 degree retirement conversation. My role in investing, though, ends with determining a strategy for short medium & long term money. How do we invest short term money for safety & access? What do we need in cash vs how much does it make sense to have available in a LOC? It’s a Jungian conversation of comfort vs. benefit. Does it make sense to drop extra savings into the house or to invest it? How does one change the strategy of a portfolio 3 - 4 yrs from retirement? Do you choose a VA, cd’s, or a SPIA for guaranteed income - or do you just keep a 60/40 stock/bond portfolio & take a 4% withdrawal? What if a 6% withdrawal is necessary? Is there a need for life insurance if one spouse has a pension that will disappear or be cut in half if that spouse passes? When do you buy LTC - it’s getting earlier & earlier - when do you get it through the company vs. when do you do it privately? Do you use a traditional LTC policy or a life insurance policy w/ a LTC rider?



Then we hand the picture of what we want to achieve to a general contractor like a Morningstar or Ibbotson to implement the investment strategy & handle the tactics. They choose subcontractors to do the plumbing & the electricity. Naturally, you don’t want an electrician doing plumbing. That would be a bad thing. But that’s what often happens when you choose one asset manager to run someone’s entire portfolio. Van Kampen is awesome at small & medium growth co’s, but the Comstock fund decided not to take the energy bet that everyone else made a few years back & is now dramatically underperforming. How do you change the portfolio at those points - how do YOU even know that it should be changed without looking through the rear view mirror? Real investments including gold & real estate, basic materials, & energy have been shown to reduce risk & have low correlation to the general market - do you include these? When and how much? Microcap funds are sometimes good and sometimes bad. Did you miss the emerging markets run? Did you take real estate off the table at the right time? Are you getting back in to real estate now? Did you know that the Franklin Real Estate fund has about 25% of its assets invested in home builders & is becoming one of the most aggressive real estate funds in the market? Do you have model portfoios so that you can adjust allocations to take advantage of inefficiencies in the marketplace? Is it your job to manage investments or help clients have no regrets at the end of their days?



If you educate yourself on how to make people’s lives better you’ll stick around, help more clients, garner more referrals, and live a happier and more fulfilling life. If you continue to be an investment advisor - you’re right - you will go the way of the buggy whip.

Reminds me of the old plumbing joke: a man’s boiler fails, and he calls
in the plumber. The plumber looks at the boiler, nods, takes out a
hammer, hits the boiler and voila - it’s working.

The plumber than gave the man an invoice for $125.

"$125!?" shrieks the man. "But it only took you ten seconds!"

The
plumber shrugged, took back the invoice, and added: hitting the boiler - $2.  Knowing where to hit the boiler - $123."


If you were the plumber, you’re making the mistake of thinking everyone knows pretty much what to do and where to hit, because you know it and you know there are countless places, especially in the internet, that give that exact information.

Most don’t know, don’t want to know, or don’t have time to know.  That is the key.  Those that are ready willing and able to be DIY’ers, aren’t your target market.  It’s the vast majority who DO want help.

As Mark Twain once said, “We are all ignorant - only on different subjects.”

I understand where the original poster is coming from. Its already been said here, it seems easy to us, because its what we do. But the reality is apparent, if you examine investor behavior. What percentage of the prospects who have been doing it themselves then come to you, have a good understanding of the cycles of growth vs value. What percentage of them have had more than 5-10% international investments in their portfolios (gee that sounds so risky!). What percentage of them understand the relationship between interest rates and bonds. And what percentage of them are capable of picking up a financial calculator and figuring out how much they need in 15 years to produce the income they need, then discounting that back to the present for inflation, then figuring out how much they need to put away a month till that time, and what IRR they need to achieve their goal.

The longer I work in this business (which is approaching a whopping two years), the clearer the investing world, or at least the one in which I roam, becomes. Technology and the internet has greatly reduced the information gap between FAs and the general public. I’m convinced that if a person would spend a little time online learning the basics of IRAs, annuities and mutual funds, they could invest successfully on their own.

Borker,
 You nailed it. In under two short years, you’ve managed to uncover a scam that’s been going on for over 120 years. The first thing you should do is resign your position at your broker dealer. The second thing you should do is begin to educate the “investing public” on just how easily accessible the technology and research is to them and exactly how to use it efficiently. You should, of course, do this at no cost to anyone but yourself.
 Oh wait, I was high just there. Go F yourself. That’s how I “justify my profession”.
 

[quote=Ashland]I work with 1000 - 1500 people. I help and see how they manage the transitions in their lives. Some are more successful than others. Some bring great difficulties upon themselves, while others seem to repeatedly thread the needle. I’m able to share these experiences with clients so that they don’t have go through life happenings on their own.



In this way I work with a client as an architect does - how many windows do you want on the first floor & the size & thickness of those windows is very similar to the 360 degree retirement conversation. My role in investing, though, ends with determining a strategy for short medium & long term money. How do we invest short term money for safety & access? What do we need in cash vs how much does it make sense to have available in a LOC? It’s a Jungian conversation of comfort vs. benefit. Does it make sense to drop extra savings into the house or to invest it? How does one change the strategy of a portfolio 3 - 4 yrs from retirement? Do you choose a VA, cd’s, or a SPIA for guaranteed income - or do you just keep a 60/40 stock/bond portfolio & take a 4% withdrawal? What if a 6% withdrawal is necessary? Is there a need for life insurance if one spouse has a pension that will disappear or be cut in half if that spouse passes? When do you buy LTC - it’s getting earlier & earlier - when do you get it through the company vs. when do you do it privately? Do you use a traditional LTC policy or a life insurance policy w/ a LTC rider?



Then we hand the picture of what we want to achieve to a general contractor like a Morningstar or Ibbotson to implement the investment strategy & handle the tactics. They choose subcontractors to do the plumbing & the electricity. Naturally, you don’t want an electrician doing plumbing. That would be a bad thing. But that’s what often happens when you choose one asset manager to run someone’s entire portfolio. Van Kampen is awesome at small & medium growth co’s, but the Comstock fund decided not to take the energy bet that everyone else made a few years back & is now dramatically underperforming. How do you change the portfolio at those points - how do YOU even know that it should be changed without looking through the rear view mirror? Real investments including gold & real estate, basic materials, & energy have been shown to reduce risk & have low correlation to the general market - do you include these? When and how much? Microcap funds are sometimes good and sometimes bad. Did you miss the emerging markets run? Did you take real estate off the table at the right time? Are you getting back in to real estate now? Did you know that the Franklin Real Estate fund has about 25% of its assets invested in home builders & is becoming one of the most aggressive real estate funds in the market? Do you have modular portfoios so that you can adjust allocations to take advantage of inefficiencies in the marketplace? Is it your job to manage investments or help clients have no regrets at the end of their days?



If you educate yourself on how to make people’s lives better you’ll stick around, help more clients, garner more referrals, and live a happier and more fulfilling life. If you continue to be an investment advisor - you’re right - you will go the way of the buggy whip.[/quote]

Thanks for the heads-up about Franklin.  That’s very interesting!

Borker Boy, Yes we do earn our Keep–There are some clients that would do well on their own–most would not.  We are a clearing house of information–we don’t make the investments–we narrow down the choices and try to controll emotions of the client.  How may clients do you have that would have done a stupid move in their accounts if it wasn’t for you?  I give you an example–I had a couple–she was in her final days before death from cancer–she called and said she wanted everything put into her husband’s name so their wouldn’t be probate and so he would have access to all the money…Since this is a community property state I recommended they not do that (turns out thats what their lawyer recommended).  After I spoke to the lawyer and let him know they would be missing out on the stepup basis (Saving them $220,000 in capital gains taxes) and since he (the lawyer was located in a common law state) he did not understand that we had the account set up for Survivorship Marital Property so there would be no probate.  You get the point–get educated, get a CFP, provide unbias advice!  So yes, if you know what you are doing, you provide a service that people will and should pay for!

I have two types of clients:

[quote=Borker Boy]The longer I work in this business (which is approaching a whopping two years), the clearer the investing world, or at least the one in which I roam, becomes. Technology and the internet has greatly reduced the information gap between FAs and the general public. I’m convinced that if a person would spend a little time online learning the basics of IRAs, annuities and mutual funds, they could invest successfully on their own.

Panty salesman possibly.  Ok…this is my last post on panties…

Borker Boy is an absolute hack.  He must be sitting behind his bank teller desk wasting all our time typing this post.  Even the most educated investor has 1/10 the knowledge of an experienced advisor. Borker Boy has 2 years experience, and still doesn’t think he adds value?  Please start prospecting and stop wasting all our time.

If you have read my posts you’d know. For example, paying an ongoing wrap fee is NOT in your client’s best interest. And you get  paid regardless of the performance of your client’s investments.  
 
Let me be explicit (again). If your client has $800,000 invested with you and is paying a 1% wrap fee (in addition to fund expenses) then they are paying $8,000 a year ongoing. No matter how the market (or you) do, they still pay that 1% of assets. To quote Warren Buffett: “heads, the Helper takes much of the winnings; tails, the Gotrocks lose and pay dearly for the privilege of doing so.”
 
Back to $8,000 a year. That’s over $650 a month. For what? Do you send them an itemized bill every month? No. You never tell them exactly what you are doing to earn that money. So tell me. Give me a monthly breakdown, hour by hour, month by month, task by task, of exactly what you are doing to earn that $650 every stinking month.  
 
And what if a client has $250,000? They are paying $2,500 a year, or about $200 a month. Do you do that much LESS work for them? How does that work? Socialism?  
 
Also, as I have stated, unless there is some additional training attained separately by the broker, there is so little provided in licensing training or continuing education that it makes no sense to pay 0.25%, never mind 1% or more. And the broker (you) can’t do what is in the client’s best interest because he has no idea what is in the client’s best interest.  
 
Also, I think you are fee BASED. That means that you are getting some form of commission in addition to your wrap fee. So we have to add that financial conflict back in.  
 
To sum it up, it is in the client’s best financial interest to pay you as little as possible (and, after the initial set-up, for you to do as little as possible). It’s in your best financial interest to get as much in fees as you can. In fact, paying a load might be much LESS expensive over the long run than paying a wrap, especially with breakpoints and staying the course.  
 
“That makes absolutely NO sense”
 
Of course not:  “It is difficult to get a man to understand something when his salary depends on his not understanding it.”
 
“What a crock – now I thnk you’ve gone over the deep end. Take a breath. For some reason you have this mental picture that every advisor is out to screw their cleints,”
 
I think the road to hel! is paved with good intentions. There are plenty of salesmen out there that do not want to explicitly screw their clients. But they do want to earn a good living and the way to do that is to ‘compromise’ and ‘rationalize’. They have an exaggerated sense of their ability to time the market. They withhold information because everyone else does it. They call themselves ‘financial advisors’ because they can, not because they should. They hurt their clients.
 
“This is a competitive market.”
 
And you are all doing the same thing. The way the industry is set up sucks. And, like it or not, people not using you are doing far better than people that are using you. You have no idea where the market will go, your asset allocations are no better than the ones DIY’ers set up (actually, they are WORSE), you promote market timing. And you charge so much for it that even if you do happen to match the market your fees kill it.
 
“And that’s where we are today: A record portion of the earnings that would go in their entirety to owners – if they all just stayed in their rocking chairs – is now going to a swelling army of Helpers. Particularly expensive is the recent pandemic of profit arrangements under which Helpers receive large portions of the winnings when they are smart or lucky, and leave family members with all the losses – and large fixed fees to boot – when the Helpers are dumb or unlucky (or occasionally crooked).” – Warren Buffett
 
" You know how long you’d survive if you didn;t have your clients best interests at heart?"
 
How long would you last if your clients knew the WHOLE truth and paid by check every month? Your industry has done a great job of covering up the filthy underbelly and advertising the superficial.  

[quote=macca] Let me be explicit (again). If your client has $800,000 invested with you and is paying a 1% wrap fee (in addition to fund expenses) then they are paying $8,000 a year ongoing. No matter how the market (or you) do, they still pay that 1% of assets. [/quote]<?: prefix = o ns = "urn:schemas-microsoft-com:office:office" />

I don’t think you should be using funds for accounts like this, but that issue aside, you seem to fail to realize that the rep makes MORE if the client does well, and he makes LESS if the client does poorly. Is it your position that not only should the amount paid change, but the percentage should too? Or is it you just have problems with simple math?

[quote=macca]

No. You never tell them exactly what you are doing to earn that money.[/quote]

Actually, I do tell them, it’s in the documents they get when they open an account.

[quote=macca] Also, as I have stated, unless there is some additional training attained separately by the broker, there is so little provided in licensing training or continuing education that it makes no sense to pay 0.25%, never mind 1% or more.[/quote]

Perhaps that’s true for you. OTOH, for many informed clients, it makes great financial sense. It really doesn’t take much in useful advice to keep clients from doing harm to themselves that would be far, far more expensive than the fee they pay me, not to mention the higher risk/lower return they most likely would face if they didn’t have me. Frankly, a good advisor is a bargain.

[quote=macca]Also, I think you are fee BASED. That means that you are getting some form of commission in addition to your wrap fee.[/quote]

Not in any business model that I know of. If a client has both fee and commission accounts (it wouldn’t be a mix of the two in a single account) the various fees and commissions are disclosed.

[quote=macca] In fact, paying a load might be much LESS expensive over the long run than paying a wrap, especially with breakpoints and staying the course.  [/quote]

Again, I don’t think funds are the best vehicles for fee accounts, but let’s not forget that even in fund account the client has access to the best funds in the various sector. In your load/breakpoint scenario they’re limited to a single family to achieve those pricing points. Tell me that means nothing in terms of performance in the long run.

 
[quote=macca] How long would you last if your clients knew the WHOLE truth and paid by check every month?

[/quote]

My clients know the WHOLE truth and they pay me quarterly. The fact that doesn’t meet your approval means nothing to me.

My house needs a new roof. Now, I have to tell you I’m pretty handy. I’ve done lots of things around my house. I’ve replaced doors, walls, and floors. I built an 1100 square foot triple level deck with a gazebo. So, I know my way around power tools and I’ve definately got the carpentry thing down. Yet, a roof? I’ve never done a roof before. However, I’m sure with my amateur carpentry skills and a little time on the net I could do a roofing job. Hmm? Nah, I think I’ll pay a professional roofer the $7000 he wants to do the job for me.

Hey MACCA, get a prostate check!  You got your head up there to far!  We help people who do not what to help themselves–I get paid for it!  We give Edward Jones a lot of crap on this tread–however, I do like the commercial of doing surgery on yourself–if you can stand the pain go ahead–MACCA you are right about one thing–I have not had a single client question me about your study–you are…well get the prostate check!

Does your wife pay for sex?

Bspears, that was for MACCA right? 

No, I was playin with Bondguy,,,handed things over to a professional.  I thing we need to step back and take a deep breath.  Borker Boy is probably hitting a wall.  Calling on the same prospects for sometime now and not getting any results.  At this point he is starting to doubt himself, which at some point in our career we all do.  I know I did.

Borker, when I started  this thought process, I took a few days away from the office.  Recharged and came back and looked for new prospects to talk about investing with.  The constant cold calling on product puts you in a funk, but we all have to do it. I always answer someone who mentions no loads or doing it themselves with the plane scenario.  WOuld you be comfortable knowing there was noone flying your plane, well this is what happens when you purchase online for yourself.  I know I wouldn't get on a plane if there wasn't a pilot and I would think you would want someone watching and guiding your investments the same as a pilot does when your flying.  Kinda goofy, but it makes people think.  And if they say.." I can talk to someone if I want...and I say...how good would the pilot be if he wasn't getting paid to take care of you or your plane because you didn't want to pay for a ticket or very little for the plane ticket.  I'll answer, not very well.