I'm guessing that not all of the posters here have the time to either run spellcheck or proofread their posts before submitting.  Perhaps they just don't care when it comes down to it.

I believe that the average investor is going to wake up one of these days and realize that he's being raped by middlemen who do virtually nothing requiring deep thought.

Very few of today's "Financial Advisors" do anything other than prepare year end reports and--perhaps--rebalance an asset allocation model among a family of funds.

Investors can learn to do that themselves, and I believe that one of these days somebody is going to start advertising that they will do it for you for a flat dollar total rather than a percentage of the assets.

There is no reason why an investor should have to pay more than $100 per month to some guy who dropped out of college and became a financial advisor because he couldn't get the credentials to be a professional golfer and couldn't make enough money surfing.

That was pretty weak Newbie. I think tjc laid it out as well as anyone could have. If an investor doesn't want to use an advisor they caertainly don't have to.

NWS,

Are you suggesting that financial advisor better start finding new ways to provide value or this line of work will become extinct? <?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

[quote=tjc45]

[quote=Knows Wall St.]How can a guy be a good advisor when he doesn’t know the difference between advice and advise?[/quote]

Now I need my sales assistant to start proof reading my posts.

How about a real answer instead of a cheap shot?

[quote=Knows Wall St.]

I ask again.  Why should an investor pay a middleman 100 or more basis points to do nothing other than combine the figures on year end mutual fund statements into a summary?

You are making an assumption that that is all the service the client is getting during a year.  If that were the case, then they shouldn't pay a fee.  However, if the advisor is actively managing the portfolio and providing guidance in other areas as I discussed in my example of the inherited property, then a fee is deserved. 

Why would somebody with a million dollars not turn $10,000 of it over to an "advisor" to see where they put the money and then simply mirror that allocation with the other $990,000 by buying directly, or through a discount broker?

The answer is that there is nothing to stop the client from doing just that. Have at it.  It would be a pretty stupid client who doesn't realize that the management mechanics and the portfolio selections of a 10K account are going to be significantly different than a million dollar account.  There is no way that they could possibly be a mirror of each other.

While we are at it let's discuss the time value of money and the money value of time.  I can change the oil in my car and tune up the engine if I wanted to (I really can do this by the way) but it isn't worth my time to do it.  Instead I hire a mechanic to take care of that task for me.  My time is too valuable.  For someone like yourself who OBVIOUSLY has nothing BUT time you should do the task yourself.  My mechanic who is perfectly capable of researching investments on his own, has me managing his retirement account.  Society is full of trade offs like this.

My question is are you deliberately obtuse or really as stupid as you seem determined to prove yourself to be?  I try to be understanding of your posts since we are about of an age.....you older of course  . However, you are making it very difficult to find anything of value in your writings when you are so persistently ignorant and belligerent.

[quote=Mike Damone]

NWS,

Are you suggesting that financial advisor better start finding new ways to provide value or this line of work will become extinct? <?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

[/quote]

I think so.  I think the day will come very soon when a financial advisor will charge a flat fee--say $100 per month--to be available to a client who may have a question or wish to adjust his portfolio.

My career has been spent looking ahead, trying to decide what will upset the status quo and attempting to get into the mindset of the clients.

I don't buy the idea that investors with significant assets are not bright enough to do what needs to be done to rebalance his portfolio according to a "plan" that he devised with the help of an advisor who charged him $150 per hour for three or four hours.

I believe that in a bull market lots of things are easily overlooked and/or justified.

I also believe that when you're young and working to add to the portfolio it is easy to lose sight of the money being siphoned off in fees--but when you retire you become fixated on maintaining what you have and if somebody has a portfolio worth $1 million they're going to resent thousands of dollars beinig siphoned off for very little "value added."

They'll decide if they fire the middle man they can take a cruise every year with what they save.

Doesn't Know Anything (especially WallSt.),

Please enlighten the rest of us regarding what will be the catalyst for the sold called "average investor" (and what defines an average investor?) to "wake up?"

As of today, anybody can go sign up at E-Trade, Scottrade, Fidelity, etc and buy no-load funds, stocks and Ishares for as low as $7 or less, buy bonds, and everything in between.

And yet, I haven't lost a client to one of these services yet.  Not even ONE!  None of my collegues have either.  I bet if you could get an accurate poll from advisors all over the US the amount of assets lost to discounters it would be quite minimal.

Surely just before a tsunami there is a trickle...no?

So, again, I ask you:  What will be catalyst behind this great awakening of formerly content brokerage clients, transformed into motivated do-it-yourselfers, and the subsequent catastophic shift of trillions of assets from Merrill Lynch, Goldman Sachs, Morgan Stanley, etc to E-Trade and Fidelity??? 

P.S.  I just can't wait for your response. 

Investors can learn to do that themselves, and I believe that one of these days somebody is going to start advertising that they will do it for you for a flat dollar total rather than a percentage of the assets.-

------------------

Fee-only people are already doing this.  Academically speaking, the concept makes sense.  However, the real world of supply and demand suggests that an hourly or project wage income will not draw in sufficiently skilled people to get clients what they want...so I would guess that the potential result of this realization by clients is that AUM % fees continue to edge downward.  If you "make" or "lose" people $, the size of the portfolio does determine the $ amount of the gain or loss.  So that's somewhat of an argument for AUM fees.  However, I agree that If I can scale up (or use technology), charge .5% and still do exactly what you charge 1% for, you're in trouble in the long run.  Luckily, switching costs (mostly emotional, spending time, or imagined) protect the 1% guy to some degree for now.

[quote=BankFC]

So, again, I ask you:  What will be catalyst behind this great awakening of formerly content brokerage clients, transformed into motivated do-it-yourselfers, and the subsequent catastophic shift of trillions of assets from Merrill Lynch, Goldman Sachs, Morgan Stanley, etc to E-Trade and Fidelity??? 

[/quote]

Two things that will happen.

1.  A protracted bear market.  As I said when everything is going well goofballs such as you are a luxury that can be justifed, but when things turn south you will become a thorn under their blanket.

I asked this morning, if your real estate agent took 1% of the value of your house out of your checking account every year--just because they sold you the house--how long would you put up with that?

2.  Retirement.  The baby boomers are approaching retirement with significant assets--both earned and saved as well as inherited.  While they're still contributing to their accounts fees siphoned off by goofballs are a luxury that can be justifed.

However, when they turn the corner and intend to live on their investments they are going to be far more aware of some goofball's hands going into their pocket every so often and extracting money for no reason other than they opened the account, and a few times a year make a "Just thinking about you and hope all is well" phone call.

Oh, ane invite them to a "Client Appreciation Event" where they get a plastic lei and a fruit driink with little umbrella.

[quote=Knows Wall St.]

I ask again.  Why should an investor pay a middleman 100 or more basis points to do nothing other than combine the figures on year end mutual fund statements into a summary? [/quote]

If that's what you think the job requires you're even more clueless than I first imagined...

[quote=Knows Wall St.]

Why would somebody with a million dollars not turn $10,000 of it over to an "advisor" to see where they put the money and then simply mirror that allocation with the other $990,000 by buying directly, or through a discount broker?

[/quote]

I suppose you could, if you think opening an account (and mirroring the investments) with someone so new to the business that he'd take an account that small was a wise thing to do...

[quote=Knows Wall St.]Very few of today's "Financial Advisors" do anything other than prepare year end reports and--perhaps--rebalance an asset allocation model among a family of funds.[/quote]

Given that you never made it in this business actually working with clients, your views don't surprise me. Most washouts try to minimize the work done by people who succeeded and didn't have to seek shelter in the manager's (much less a "floating manager") office.

[quote=Knows Wall St.]My career has been spent looking ahead, ....[/quote]

Your career was spent accounting for the petty cash receipts, hiring receptionists, making sure the coffee service was satisfactory and abusing the new hires (because you knew the ones that succeeded would be making more than you in just a matter of years, and would treat you like the employee/drag on the bottom line that you were) in an attempt to find someone you could (even monetarily) look down on…<?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

[quote=Cowboy93]

Fee-only people are already doing this.  Academically speaking, the concept makes sense. 

[/quote]

Yes, fee only people are doing it--the difference is there has been no wholesale effort to educate the public.

What could happen--and here I go in my futurist role--is that the mutual funds decide to fund such an "expose" through their lobbying group, The Investment Comany Institute.

I dare say that the ICI is not impressed that the broker dealers will hire high school graduates as "advisors."

There will come a day when arbitration demands will get white hot, the fund families will be named defendants along with your broker/dealers and you.  The funds may well decide that the "problem" is that high school graduates are overselling simple ideas like dollar cost averaging or annual rebalancing as if they were guarantees.

(You may not believe this, but there are registered people who believe that since earnings always go up the market will always go up.)

Anyway, the funds may decide that all they are willing to pay is an old fashioned sales charge for placing the money.  After all, this is a sales job, you're not porfolio managers--so why are you being paid as if you were?

[quote=Knows Wall St] <?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

....is that the mutual funds decide to fund such an "expose" through their lobbying group, The Investment Comany Institute. [/quote]

The what?

[quote=Knows Wall St]

I dare say that the ICI is not impressed that the broker dealers will hire high school graduates as "advisors." [/quote]

Right, the ICI will;

 1) Bite the sales hand that feeds them and

2) Thinks there's any sizeable percentage of the sales force that not a college grads...

[quote=Knows Wall St]There will come a day when arbitration demands will get white hot, the fund families will be named defendants along with your broker/dealers and you.  [/quote]

Of course, because arbitration cases on mutual fund sales are "white hot" and there's no way firms could build suitability screens into their sales and ticketing processes.

[quote=Knows Wall St]The funds may well decide that the "problem" is that high school graduates are overselling simple ideas like dollar cost averaging or annual rebalancing as if they were guarantees.[/quote]

Right, there are so many HS grads in the sales force, and DCA is such and evil thing, and rebalancing, well, why hasn't that been outlawed yet? "As if they were guarantees" oh, that's just a laugh riot coming from someone from your era...

[quote=Knows Wall St]

Anyway, the funds may decide that all they are willing to pay is an old fashioned sales charge for placing the money.  After all, this is a sales job, you're not porfolio managers--so why are you being paid as if you were?

[/quote]

A what manager? “Portfolio”?

Perhaps someone should let this "expert" in on the fact that mutual funds have problems enough of their own given their recent brushes with regulators and the threat posed to them by SMAs and ETFs. The last thing they want to do is pick a fight with the sales force...

"2) Thinks there’s any sizeable percentage of the sales force that are not college grads…<?:NAMESPACE PREFIX = O /><O:P></O:P>

[quote=mikebutler222]<O:P></O:P>

Perhaps someone should let this "expert" in on the fact that mutual funds have problems enough of their own given their recent brushes with regulators and the threat posed to them by SMAs and ETFs. The last thing they want to do is pick a fight with the sales force...

[/quote]

Why should you be paid a percentage of an account's value instead of a sales charge for selling the fund's shares?

Do you think that mutual funds ever did it that way--pay a broker dealer, say, 8% for selling the shares and that was it?

I think it's a revolutionary idea.  There is no reason on earth that you, or anybody else, should have a claim on a percentage of a client's assets simply because you sold the client some investment products once upon a time.

[quote=mikebutler222]

[quote=Knows Wall St]There will come a day when arbitration demands will get white hot, the fund families will be named defendants along with your broker/dealers and you.  [/quote]

Of course, because arbitration cases on mutual fund sales are "white hot" and there's no way firms could build suitability screens into their sales and ticketing processes.

[/quote]

If Mr. and Mrs. Client lose money and contact an attorney in an attempt to get it back all the suitability screens in the world will not help.

Just bringing the demand for arbitration kicks extraordinary costs into gear--which is whey the plaintiff bar whores are eager to bring demands since they get a free shot at a juicy settlement.

If thousands of clients approach attorneys the mutual funds will be named too--after all they made the bad decisions on what to invest in.  The sales guy will be named because, theoretically, they decided what funds to buy--and the sales guy's broker dealer will be named simply because they will be named.

I should have mentioned the fourth defendant--the sales guy's manager who will also be named for failure to supervise.

When the firms--especially the funds--get covered up with complaints and legal fees they will reexamine how they're doing business.

It could be the broker/dealers who decide that there is too much exposure in collecting the middleman fee and seek to return to the simple one time sales charge that absolves them of most of the liability for the ongoing results of the funds.

When you stick your hand into the client's pocket every so often you have much more responsibility than when you stick your hand in there just once--when they bought their shares.

There is also the image that the client's money is being "managed."  The average guy is being led to believe that he is getting treatment similar to what trust departments give their trust clients.

When that image becomes tarnished the lawyers get phone calls.

People are funny about their money.

[quote=Knows Wall St.]

I ask again.  Why should an investor pay a middleman 100 or more basis points to do nothing other than combine the figures on year end mutual fund statements into a summary?

Why would somebody with a million dollars not turn $10,000 of it over to an "advisor" to see where they put the money and then simply mirror that allocation with the other $990,000 by buying directly, or through a discount broker?

[/quote]

I have a friend, Frank, who is a college professor. Frank is a smart guy, he teaches environmental science. Generally speaking Frank is a an assute Do-It-Yourself investor. He understands the basics of sound money management as well as risk management. In fact, there were times that I called him to find out what stocks he liked and why. However,Frank does not a good client make. He knows he doesn't need us and makes a joke of our profession. Usually he does this in a group of like minded educational snobs. I repay him by telling him he's part of of the educational tenure problem of do nothing teachers who get paid for well... doing nothing. We'd laugh, and drink beer to our equally useless professional lives.

I recognize (recognice?)that there are the Franks of the world, those who would benefit very little from a professional relationship. These are people who have the time and expertise (or is it expertice?) to do it on their own, as well as the will to do it. Generally, Advisors can add little value to what the Franks are able to do for themselves. I say generally because there are exceptions to every rule. Frank, is an exception to his own rule. That happened one day when he called me and asked if I had any stocks I could recommend that had an environmental bent to them. It turned out that I did. The company was Ballard Power, a fuel cell manufacturer. We bought 5000 shares for Frank in Febuary 1995. Total investment including commission was $31,900.00. We held the stock long term because we really believed that the product was a winner, and it still is. As time went on the stock eventually doubled and then tripled. We were convinced we'd found the next Microsoft so we held on. Meanwhile the stock had split, if I recall, twice, and Frank's position increased to 15000 shares. Then the market craziness started. The tech bubble. BLDP was right on the leading edge. We'd caught the wave perfectly, if unintentionally. In fact, even though the bubble was giving us a great ride we worried it would screw up the stock by dumping it and burying its true value under the heap of Wall Street BS that was taking place at the time. Still we rode the wave and finally it just got too ridiculous. I made the call, SELL! Value at time of the recommendation, $1,500,000. Frank said no, that he would hold because he believed that the stock would go higher. 1.6 mil,Sell, NO!, 1.7 mil,SELL,NO! Frank was holding to his belief that he knew more than I did. I practically pleaded with him to sell. Sell part, sell half, sell something! No was the reply. Even though I'd given him a life changing opportunity, his inner Do-It-Yourself took over. Cheered on by his DIYS club. The stock collapsed and Frank sold in 2002 for a $128k profit. Still a home run, almost 4x his original investment, but no where near 1.5 million. Frank's refusal to listen cost him $1.3 million. How much was my advice worth(or is it advise)? You be the judge.

The epilog is just as ugly. Frank and I are no longer friends. He blames me for his missing the big one. Don't ask by what logic. He's got 1.3 million DIYS reasons not to apply logic. And then there's this. Frank managed to take about a half a dozen of his colleagues down the drain with him. For years he was feeding these people my advice on BLDP. Some lost money. They also blame me. Apparently, per one of these people, I never advised Frank to sell. My records show six sell reccos over a roughly 12 month time period. Not that it matters, because it doesn't. Other clients who followed the advice made a ton of money. Want to marry a client to you for life? Make them a million dollars on one trade.

So, when it comes to Do-It-Yourselfers you can not possibly win. Some are very capable people who truly do not need us. Others devalue our advice regardless of how good it is. Others suffer convenient memory loss. Some are just plain cheap. And there are others who will steal your advice. This one situation with this one client is the sum of all those people. The lesson is not to take these people on as clients.

[quote=Knows Wall St.][quote=BankFC]

So, again, I ask you:  What will be catalyst behind this great awakening of formerly content brokerage clients, transformed into motivated do-it-yourselfers, and the subsequent catastophic shift of trillions of assets from Merrill Lynch, Goldman Sachs, Morgan Stanley, etc to E-Trade and Fidelity??? 

[/quote]

Two things that will happen.

1.  A protracted bear market.  As I said when everything is going well goofballs such as you are a luxury that can be justifed, but when things turn south you will become a thorn under their blanket.

I asked this morning, if your real estate agent took 1% of the value of your house out of your checking account every year--just because they sold you the house--how long would you put up with that?

2.  Retirement.  The baby boomers are approaching retirement with significant assets--both earned and saved as well as inherited.  While they're still contributing to their accounts fees siphoned off by goofballs are a luxury that can be justifed.

However, when they turn the corner and intend to live on their investments they are going to be far more aware of some goofball's hands going into their pocket every so often and extracting money for no reason other than they opened the account, and a few times a year make a "Just thinking about you and hope all is well" phone call.

Oh, ane invite them to a "Client Appreciation Event" where they get a plastic lei and a fruit driink with little umbrella.

[/quote]

No, this will never happen.  Why?  Because clients don't want to think about the potential of having to look in the mirror and blame themselves when a bear market robs them of their savings.

We just went though a bear market a few years ago...all the options available now were available then (discounters), but last time I checked, all us overpriced brokers are still in business.

Nothing is going to change.

You hate us, fruitlessly attempt to cut us down, and try to downplay our sophistication, services, and education, and yet you are powerless to do anything about it.  I will still be a young "overpaid" middleman 10 years from now, and you will probably be dead.

Rest your head on that tonight.