Let's be very clear here ---- Nobody is going to be on a fee managed account anywhere, without having a rather substantial amount of money to plunk into an account. They're not offering fee based accounts to people with 5 grand to invest...
I know this because I have fee based accounts with at least TWO different large institutional investment firms. One is a hedge fund - we won't even get in to that kind of investing here.
Here is something you may want to read...
If you have $10,000, you can open an account at, say, Morgan Stanley, a prototypical full-service brokerage. You’ll work with a broker, who, for a fee of up to 2% of assets annually, will provide guidance on mutual fund investments. But to get more-comprehensive advice at Morgan Stanley—from an adviser who offers a range of services, from investing guidance to retirement and estate planning to banking services—you need at least $100,000. Fees are negotiable and may include commissions on investments, asset-based advisory charges or both. At Merrill Lynch, you’d need at least $250,000 to access that level of service.
Now --- I have a rather large "estate" and have professionals on many different levels from trust accounts on up. I can tell you that most of these "pros" are 30 something folks that are mostly wet behind the ears, they're all "VP's" and when you drill down on them -- they don't know very much except that they can read the "reports" from the analysts in their respective firm. What I LOVE TO DO is to have one of my "team" call and give me some sage advice. I usually then hang up the phone and call my other firm and say --- hey! I was thinking about doing "X" (using the information I just received from broker A)... most of the time - brokerage B has a completely different and opposing view. I have my own view - which is generally not to take either ones advice and do something (If I choose to do anything) in the middle... Broker B was insistent that I continue to hold the 4 million laddered bond portfolio they had built for me (fee managed @ .75% at that level) I owned stocks in this account as well. Thank gawd I knew more than they did and sold the entire portfolio and then closed that account. It saved me at least a half a million bucks, perhaps MORE than that if you figure in the gain I took that I would have otherwise lost and add it to the loss of holding til today. They were FIRED. He was a Senior VP and personal friend. In fact - I wouldn't even let them sell the bonds - I just transferred them lock stock and barrel over to another account and sold them via Schwab (I have 4 accounts just as schwab).
The key to paying FEES of any kind is whether or not you are willing to abdicate decision making to someone else. Because they really are just "selling" their advice. Supposedly educated advice - and they have all manor of people doing lots and lots of analysis. But what you're really looking for then -- is that they can do a better job than you can. I'm good with that! Nothing wrong with that -- but then I demand all manor of other services and features and entrance to investment vehicles for my fee. I get away with that because they'll kiss my butt to infinity if that's what I ask for.... I get free tickets to all kinds of stuff - golf events - pro sports - fancy dinners - and entry to things I otherwise would have no access to at all. For instance -- I just borrowed 5 million dollars -- at 2%. CASH. I can do anything I want with it - no questions asked. How many of you can do that?? That's worth a management fee to me.
But if you're investing 10 grand a year -- and have under 100K invested -- and are expecting to make an 5% ANNUAL dividend -- and the "market" is on average growing 9% per year -- then paying someone 2% looks mighty expensive to me... And that 2% is whether you have an up year or a down year. Let me tell ya -- when you're down 15% and then pay 2% (Cash mind you!) for them to "manage" your account -- you're not going to be a happy camper.
What most people do is pay a fee based firm TO BEAT the average market... Do you understand that "beating the market" also means that if the market is DOWN 12% and they are ONLY down 10% this means they "beat the market"! You also pay a fee for the access to info - and to basically NOT have to do much thinking. The minute you let someone else run things -- your interest drops just about to zero. The next time you have any interest is when you get a statement that shows you LOST MONEY.... and all of a sudden you get REAL INTERESTED. But by then - it's too late - and they always have a reason. My point is and always will be on this issue ---- That it isn't that hard to do most of this ---- and the thread was about learning how to do it on your own because it isn't hard to figure out. If it's not worth your time -- then when your "broker" calls and advises you -- how would you know if he's right or wrong -- or even if you should say yeah "go ahead" or "no - let me look into that"?
Just sayin'.
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