Hello Everyone,
I'm 40, live in the US, definitely didn't do my diligent research and job on building a solid portfolio in retirement, but even if it's "late" I'm confident that I can get somewhere if I'm putting enough interest and commitment into building something solid.
Here is my current situation:
Back in 2023 I rolled over my Simple IRA to a FA that my family has known for a very long time, I did it because I had to go live abroad and since I had no clue of what investing meant, the FA seemed the best choice at that time.
The FA charges 1% advisor fee that breakdowns based on the portfolio's value (First $500k 1.00%, Next $500k 0.90%, Next $1Mil 0.80%, Next $3Mil 0.70%, Next $5Mil 0.60%, Next $10Mil Negotiable), plus a 0.27% platform fee.
The portfolio started with a rollover of $55k and had a 14,4% annual return, net of all fees, since inception. So today is sitting around $82k.
Is invested as such, so most of them have a higher expense ratio (~0.50%):
| Morningstar funds | ~62% |
|---|---|
| US equities (ETF) | ~25% |
| International (ETF) | ~11% |
| Bonds | ~10–11% |
Now considering I'll probably retire at 67, assuming the annual return stays at 7% (hopefully more), keeping the same investments, net of the fees, I would probably pay around $170k to the FA. I also looked how much I would lose if the returns were 14%, so if the market will be good and FA is making that happen, I would lose even more money from fees and lost compound on those fees.
I've asked the FA what would I give up if those investments were shifted towards lower costs ETFs? Let's see what the reply is.
That being said, the FA is also advising (free advice, so I consider it added value) on my Fidelity 401k and HSA that I have with my new company and has been performing very well in 1 year, like 24%. Currently investing 6% with 3% match. Today's value is very low since it's only 1y old. The HSA, which I'm maxing out, and the company contributes $500/y, is already 75% invested, keeping some cash just in case I'm in need for medical expenses.
Now, I know this is not the full picture, and considering nowadays with little research a lot can be done by ourselves, what would you do? or what would you suggest?
TIA
Topic about FA fee and my future retirement, I'm now 40.
byu/MrFritz85 inpersonalfinance
Posted by MrFritz85
3 Comments
You’re paying 1%. The advice isn’t free.
You have nowhere near enough money to be paying someone 1% to manage it. The wiki has everything you need to know about investing, which is to put that shit in a target date index fund then add as much as you can to it until you max out your 401k contributions.
There is no reason whatsoever to pay a 1% fee at your current savings level. You would be fine just sticking the money in a Target Date Fund and calling it a day. Or, do a basic 3 fund portfolio with low fee index funds.
The industry knows 1% sounds small but it **compounds** to your detriment. You are giving up a huge percentage of your final portfolio value for use of a FA’s mostly unnecessary “advice”