In-Laws financial advisor charges 1.0% on AUM. Say something?

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arcticpineapplecorp.
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Re: In-Laws financial advisor charges 1.0% on AUM. Say something?

Post by arcticpineapplecorp. »

Glockenspiel wrote: Tue Jun 06, 2023 9:37 am
Watty wrote: Tue Jun 06, 2023 9:30 am
The only concern I would have is if the advisor is also doing things like putting them into high cost mutual funds.
Their website does say their investment approach, "centers around keeping portfolios low-cost, focusing on global diversification, and tax-efficient investing."
the portfolio could be low cost (index funds could be used)...it's the advisor fees that are taking them to the cleaners!
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Re: In-Laws financial advisor charges 1.0% on AUM. Say something?

Post by deltaneutral83 »

Glockenspiel wrote: Tue Jun 06, 2023 1:18 pm
deltaneutral83 wrote: Tue Jun 06, 2023 1:10 pm
However, if they are sophisticated enough (and they likely are as evidenced by their NW) to not worry when markets tank 30-50%, they might entertain a 10 minute conversation on a highly regarded fee only guy who is a CPA or a former CPA.
I'm not sure if this is any indication of whether they are "sophisticated enough", but they did mention they put the proceeds from the sale of my wife's grandma's house (she passed away last year), into 5% CDs because they were "nervous about the stock market", which was a bit of a red flag for me.
Yea, I would focus on finding a cheaper fee only guy if anything. And their 5% CD's have probably done the same as the market but you mentioned "last year" which could be Jan 2022 or Sept 2022. Either way, that house money "slept well at night" in CD's and is "doing fine" to them I bet. I'm guessing your in laws are small business owners that have absolutely crushed it the past few decades and know how to make money with their eyes closed so I'd probably throw out a fee only type suggestion and leave it there.

I once had a colleague where we can rattle each others cages and I threw out the "when you're tired of paying your guy's BMW car note, check out the math behind index funds" and he in fact came around about 6-12 months later. He was actually pretty upset with his guy since they were "friends." The initial discussion has very little to do with the reality (that you would save truck loads of money over the decades) and more to do with how much cache you have with them and how you all communicate.
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Harry Livermore
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Re: In-Laws financial advisor charges 1.0% on AUM. Say something?

Post by Harry Livermore »

OP, I am in the MYOB camp. I would say nothing, and even if asked my opinion in earnest, would tread carefully.
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Re: In-Laws financial advisor charges 1.0% on AUM. Say something?

Post by Money_Badger »

The only thing I might ever say about it is that "the fees seem high" and drop a hint about renegotiating those fees.

But that would only be if the topic arose ...
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Re: In-Laws financial advisor charges 1.0% on AUM. Say something?

Post by tibbitts »

The OP would have to have more information before commenting. It's not clear exactly what services are being provided or what the returns on the investing services portion have been. For example if someone owns a mutual fund that charges high-by-Boglehead-standards expenses, you're going to look ignorant if you point that out and then learn that the fund has earned back the expenses and maybe then some vs. some reasonable benchmark over the period the person has owned it. You can say "past performance..." blah blah but you're still going to look ignorant. And you're never going to earn that credibility back. So now for the rest of their lives you get to listen to the in-laws telling you how you should be investing, since you're obviously financially ignorant.
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Re: In-Laws financial advisor charges 1.0% on AUM. Say something?

Post by Chardo »

bsteiner wrote: Tue Jun 06, 2023 12:42 pm
Chardo wrote: Tue Jun 06, 2023 10:01 am Contrary to what most Bogleheads would believe, most high net worth people have financial advisors. They are not DIY investors, they prefer to pay someone to manage their money, and the cost is inconsequential to them.
Are there any studies on this? My anecdotal experience is that some do and some don't but I don't know what percentage falls into which category.
There are assorted studies. Depending on the study, over 70% of millionaires use some sort of financial advisor. Ultra high net worth is even higher.
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Glockenspiel
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Re: In-Laws financial advisor charges 1.0% on AUM. Say something?

Post by Glockenspiel »

arcticpineapplecorp. wrote: Tue Jun 06, 2023 1:35 pm
the portfolio could be low cost (index funds could be used)...it's the advisor fees that are taking them to the cleaners!
Agree. That's my dilemma. But I don't think I'm able to say anything to them about it.
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Glockenspiel
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Re: In-Laws financial advisor charges 1.0% on AUM. Say something?

Post by Glockenspiel »

deltaneutral83 wrote: Tue Jun 06, 2023 1:44 pm I'm guessing your in laws are small business owners that have absolutely crushed it the past few decades and know how to make money with their eyes closed so I'd probably throw out a fee only type suggestion and leave it there.
Actually, both FIL and MIL were employees. FIL became Executive VP of a large national company. That + owning hundreds of acres of land in western ND provided most of the source of their net worth.
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Re: In-Laws financial advisor charges 1.0% on AUM. Say something?

Post by Rocky Mtn Man »

OP

Do you have a normal body weight? Do you floss every night? Do you exercise 30 minutes at least 5 days a week? Have your in-laws ever seen you drink more than one drink in an evening? Do you use tobacco?

"Thanks son in law for bringing up our finances, is now a good time to discuss your drinking/smoking/obesity. Me and my wife/husband have been concerned for a long time about it and think you have a serious problem....."

Be careful what door you open.
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Re: In-Laws financial advisor charges 1.0% on AUM. Say something?

Post by coffeeblack »

So they included you and your wife in meetings with their lawyer and financial advisor? This is how you know the fees? OK.

I would still mind my own business. Say nothing and just listen. If they ask you what you think about the fees, ask them what do they think? Always ask them their opinion. Be a sounding board. If after that they press forward, very gently say something like, Well I would shop around for an advisor just to make sure you are getting a good value for your hard earned money.

Don't ever start that conversation with them.

Don't start it again with you wife either. Not because you don't trust her but because she is their daughter and I can bet you she has conversations with her mother and father. There is no need to open that can of worms. Ever.
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Re: In-Laws financial advisor charges 1.0% on AUM. Say something?

Post by ROIGuy »

Your making an assumption based totally on the 1% they pay. He might be worth every penny they pay him, you don't know. We all know what the 1% AUM is costing them per year, but that is all you know. Their money, their decision; not yours!
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Glockenspiel
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Re: In-Laws financial advisor charges 1.0% on AUM. Say something?

Post by Glockenspiel »

coffeeblack wrote: Tue Jun 06, 2023 3:30 pm So they included you and your wife in meetings with their lawyer and financial advisor? This is how you know the fees? OK.
No, I only assume the fees because that's what they listed on their website. The meeting my wife and I were included in was with their lawyer who went over all the estate including current values
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Re: In-Laws financial advisor charges 1.0% on AUM. Say something?

Post by Jimbo Moneybags »

Why are you so concerned about the decisions your in-laws are making concerning their investments? With a portfolio of $10m to $20m, it appears that they are doing something right. :happy

Would your concern be the same if you learned that their net returns, after AUM fee and taxes, have for the past few decades been substantially higher than the returns of a three-fund Bogleheads portfolio consisting of low-cost index funds? I certainly am not suggesting that is the case as I am not a fan of AUM arrangements, but if it were?

And while I am not a fan of AUM arrangements, I am a fan of tending to one's own affairs and not engaging in the uninvited meddling in the affairs of others (absent threat of harm or lack of mental capacity). :wink:
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Re: In-Laws financial advisor charges 1.0% on AUM. Say something?

Post by Parkinglotracer »

Glockenspiel wrote: Tue Jun 06, 2023 9:01 am My in-laws have a very high net worth, between $10 and $20 million. They use a financial advisor that charges 1.0% on assets under management on assets under $3 million, and 0.85% on assets over $3 million. This means they're likely paying more than $100,000 EVERY YEAR to their financial advisor.

Is there anything I can do or say about it, or do I just need to keep my mouth shut? I'm having a really difficult time not speaking up about it.

I also talked to my spouse about it and her response was something like, "I don't know how anyone with that much money WOULDN'T have a financial advisor that they pay."
My guess is your in laws are going to say the exact same thing your spouse said.

I would STF (stay the full) out of this unless asked specifically what you would recommend.

100K is chump change for them like 10K if you have 2M.

Congrats on your wife’s family’s financial success.
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Re: In-Laws financial advisor charges 1.0% on AUM. Say something?

Post by coffeeblack »

Glockenspiel wrote: Tue Jun 06, 2023 3:36 pm
coffeeblack wrote: Tue Jun 06, 2023 3:30 pm So they included you and your wife in meetings with their lawyer and financial advisor? This is how you know the fees? OK.
No, I only assume the fees because that's what they listed on their website. The meeting my wife and I were included in was with their lawyer who went over all the estate including current values
So you know what they say about assumptions?

FLP's can get complicated. Safe assets in and LP in one place, Real estate and other things in different LLC's. You wife is a 20% partner in all of this so it is important you were included. That doesn't mean they were asking for advice. The advisor is helping manage all of that with them. It may or may not be worth it.

What is important here is to understand that it is their business. And your wifes response was a good one. Anyone with that much net worth or even less has to have had some kind of financial advice either along the way or at least once. Most will get it along the way or on going.
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Re: In-Laws financial advisor charges 1.0% on AUM. Say something?

Post by TomatoTomahto »

Chardo wrote: Tue Jun 06, 2023 2:44 pm There are assorted studies. Depending on the study, over 70% of millionaires use some sort of financial advisor. Ultra high net worth is even higher.
A lot can hide behind “some sort of financial advisor.” Does my CPA count? Does my estate attorney count?
I get the FI part but not the RE part of FIRE.
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Re: In-Laws financial advisor charges 1.0% on AUM. Say something?

Post by Young Boglehead »

I'm amazed that so few people think saving 6 figures a year for probably better advice is worth even mentioning. If money was so taboo in the family I wouldn't think OP would have such detailed information in the first place. Do the people here who recommend keeping quiet ever offer advice on anything to someone they think would benefit?

If I was OP I would bring up, tactfully, that they could probably save 6 figures and get better advice if they chose a fee-only arrangement instead of AUM. If they are interested, talk more, if not, end it there. Not sure how that's such a bad idea.
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Re: In-Laws financial advisor charges 1.0% on AUM. Say something?

Post by Chardo »

TomatoTomahto wrote: Tue Jun 06, 2023 3:57 pm
Chardo wrote: Tue Jun 06, 2023 2:44 pm There are assorted studies. Depending on the study, over 70% of millionaires use some sort of financial advisor. Ultra high net worth is even higher.
A lot can hide behind “some sort of financial advisor.” Does my CPA count? Does my estate attorney count?
"Some sort of financial advisor" means someone directing or managing the investments. A CPA or attorney would not count. If they did, it would be close to 100% of millionaires.
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Re: In-Laws financial advisor charges 1.0% on AUM. Say something?

Post by Gardener »

As wealthy as the in laws are, 1 percent on aum is not going to make a material difference in their lifestyle or their heirs lifestyle. Just not worth bringing it up.
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arcticpineapplecorp.
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Re: In-Laws financial advisor charges 1.0% on AUM. Say something?

Post by arcticpineapplecorp. »

The only thing to say to them is "For the amount of money you're paying your advisor, he really should be bringing you breakfast in bed."
It's hard to accept the truth when the lies were exactly what you wanted to hear. Investing is simple, but not easy. Buy, hold & rebalance low cost index funds & manage taxable events. Asking Portfolio Questions | Wiki
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Re: In-Laws financial advisor charges 1.0% on AUM. Say something?

Post by tibbitts »

arcticpineapplecorp. wrote: Tue Jun 06, 2023 5:35 pm The only thing to say to them is "For the amount of money you're paying your advisor, he really should be bringing you breakfast in bed."
What would be the point of making a snide comment like that?
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Re: In-Laws financial advisor charges 1.0% on AUM. Say something?

Post by Beensabu »

Young Boglehead wrote: Tue Jun 06, 2023 4:40 pm Do the people here who recommend keeping quiet ever offer advice on anything to someone they think would benefit?
People tend to not like getting advice, particularly when it is unsolicited.

Especially advice that implies they don't know what they're doing.

If it were a couple $100k and a 2% AUM or 5% loads, then yeah. Say something because they probably have no clue and they actually need the money wasted on fees. Even then, it takes convincing that "yes, you are indeed getting charged $X dollars a year for this..."

But $10-20m and <1% AUM? They know and are completely fine with it.
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Re: In-Laws financial advisor charges 1.0% on AUM. Say something?

Post by student »

Young Boglehead wrote: Tue Jun 06, 2023 4:40 pm I'm amazed that so few people think saving 6 figures a year for probably better advice is worth even mentioning. If money was so taboo in the family I wouldn't think OP would have such detailed information in the first place. Do the people here who recommend keeping quiet ever offer advice on anything to someone they think would benefit?

If I was OP I would bring up, tactfully, that they could probably save 6 figures and get better advice if they chose a fee-only arrangement instead of AUM. If they are interested, talk more, if not, end it there. Not sure how that's such a bad idea.
One has to know whether the other party is receptive at all. Do you like people coming to you saying I think you dress badly tactfully, we can talk more if you are interested. Just by raising the issue, you are implying the other party is making a mistake. The truth is the tone that OP is giving here does not impressed me. OP said "FIL was lucky enough to become an executive VP at a Fortune 100 company for 7 years before retirement." OP also said "I'm pretty analytical, like a lot of us on this board, and like to optimize expenses to grow net worth." Later stated 'I'm not sure if this is any indication of whether they are "sophisticated enough", but they did mention they put the proceeds from the sale of my wife's grandma's house (she passed away last year), into 5% CDs because they were "nervous about the stock market", which was a bit of a red flag for me.' OP further opined "Actually, both FIL and MIL were employees. FIL became Executive VP of a large national company. That + owning hundreds of acres of land in western ND provided most of the source of their net worth." First of all, I don't think get 5% CD is any red flag at their asset level. The tone from OP seems to be along the line I am hot stuff and they made their money by luck.

My take is OP' in-law are not idiots given their net worth. They can afford to waste/spend money the way they like and it does not impact OP. I can see the need to intervene if OP thinks that the-laws are being scammed or they are in bad financial shape that they will need financial support from OP later. Moreover, we do not know whether 1% is buying any additional service.
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Re: In-Laws financial advisor charges 1.0% on AUM. Say something?

Post by dekecarver »

That's a pretty big spread $10mill to $20 mill; regardless, it's their money; they made it, they spend it. If they want your advice on their finances they will ask you.
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Re: In-Laws financial advisor charges 1.0% on AUM. Say something?

Post by EdNorton »

Ask them to borrow 1/2 million and also tell them you can handle their finances. Should be a good family discussion.
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Re: In-Laws financial advisor charges 1.0% on AUM. Say something?

Post by StevieG72 »

I would be alarmed if anyone else was more concerned about my finances than myself.
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arcticpineapplecorp.
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Re: In-Laws financial advisor charges 1.0% on AUM. Say something?

Post by arcticpineapplecorp. »

tibbitts wrote: Tue Jun 06, 2023 6:36 pm
arcticpineapplecorp. wrote: Tue Jun 06, 2023 5:35 pm The only thing to say to them is "For the amount of money you're paying your advisor, he really should be bringing you breakfast in bed."
What would be the point of making a snide comment like that?
my attempt at humor clearly failed here.

sometimes levity can reduce the gravity of the situation, that's all i was after here. There's not much to say after dozens of people have already told the OP to just give it up.

since my joke bombed, is chatgpt's version any better?:

When asked, "Tell a joke about someone paying $100,000 in advisor fees."

chatgpt:
Why did the person pay $100,000 in advisor fees?

Because they thought hiring a financial advisor would make their money multiply like rabbits, but instead, it just disappeared faster than a magician's assistant!
bada boom!
It's hard to accept the truth when the lies were exactly what you wanted to hear. Investing is simple, but not easy. Buy, hold & rebalance low cost index funds & manage taxable events. Asking Portfolio Questions | Wiki
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Re: In-Laws financial advisor charges 1.0% on AUM. Say something?

Post by Young Boglehead »

student wrote: Tue Jun 06, 2023 7:08 pm
Young Boglehead wrote: Tue Jun 06, 2023 4:40 pm I'm amazed that so few people think saving 6 figures a year for probably better advice is worth even mentioning. If money was so taboo in the family I wouldn't think OP would have such detailed information in the first place. Do the people here who recommend keeping quiet ever offer advice on anything to someone they think would benefit?

If I was OP I would bring up, tactfully, that they could probably save 6 figures and get better advice if they chose a fee-only arrangement instead of AUM. If they are interested, talk more, if not, end it there. Not sure how that's such a bad idea.
One has to know whether the other party is receptive at all. Do you like people coming to you saying I think you dress badly tactfully, we can talk more if you are interested. Just by raising the issue, you are implying the other party is making a mistake. The truth is the tone that OP is giving here does not impressed me. OP said "FIL was lucky enough to become an executive VP at a Fortune 100 company for 7 years before retirement." OP also said "I'm pretty analytical, like a lot of us on this board, and like to optimize expenses to grow net worth." Later stated 'I'm not sure if this is any indication of whether they are "sophisticated enough", but they did mention they put the proceeds from the sale of my wife's grandma's house (she passed away last year), into 5% CDs because they were "nervous about the stock market", which was a bit of a red flag for me.' OP further opined "Actually, both FIL and MIL were employees. FIL became Executive VP of a large national company. That + owning hundreds of acres of land in western ND provided most of the source of their net worth." First of all, I don't think get 5% CD is any red flag at their asset level. The tone from OP seems to be along the line I am hot stuff and they made their money by luck.

My take is OP' in-law are not idiots given their net worth. They can afford to waste/spend money the way they like and it does not impact OP. I can see the need to intervene if OP thinks that the-laws are being scammed or they are in bad financial shape that they will need financial support from OP later. Moreover, we do not know whether 1% is buying any additional service.
Maybe I'm wrong but I usually assume that most people are open to a risk free 6 figure return every year. I was telling my family and friends about even I-bonds and they were all eating it up. This is very different than simply criticizing someone's taste in clothing.

And yes, imo, someone who pays 1% of their very large assets every year is making a mistake, although they may be too ignorant to know it. Whether or not OP thinks his FIL's net worth was well-earned or luck is irrelevant to the fact that he is overpaying for his financial advice to the tune of 6 figures every year.

I would argue that a 5% CD could be a red flag because of the reasoning that they're "nervous about the stock market". It's obviously a reasonable place to store your money and can be part of a reasonable investment plan, but if they're trying to time the market, especially at the advisor's advice, that's a red flag.

They can definitely afford to waste their money. I dont think that necessarily means they want to waste their money the way they are doing it with their financial advisor right now. If the OP proposes the alternative and they understand and still don't care, then it's clear they do.
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Re: In-Laws financial advisor charges 1.0% on AUM. Say something?

Post by Young Boglehead »

Beensabu wrote: Tue Jun 06, 2023 6:59 pm
Young Boglehead wrote: Tue Jun 06, 2023 4:40 pm Do the people here who recommend keeping quiet ever offer advice on anything to someone they think would benefit?
People tend to not like getting advice, particularly when it is unsolicited.

Especially advice that implies they don't know what they're doing.

If it were a couple $100k and a 2% AUM or 5% loads, then yeah. Say something because they probably have no clue and they actually need the money wasted on fees. Even then, it takes convincing that "yes, you are indeed getting charged $X dollars a year for this..."

But $10-20m and <1% AUM? They know and are completely fine with it.
Personally, I love getting advice when it means that I have an extra few hundred k every year to spend as I wish. I've read plenty of people on this very forum who are grateful for their friends and acquaintances who turned them on to the bogleheads way. Just because the parent-in-laws have a lot of money doesn't actually mean they know what they're doing with investing. I would bet that most people, even high net worth, don't actually do the math on a 1% AUM and understand how much of their growth it actually takes.

I don't see how it's different in your scenario. With a 2% AUM that's only 6k a year which is actually a reasonable amount to pay for financial advice! On a dollar for dollar basis that example is a magnitude less of a rip-off than the one we're talking about.
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Re: In-Laws financial advisor charges 1.0% on AUM. Say something?

Post by donaldfair71 »

Young Boglehead wrote: Tue Jun 06, 2023 8:41 pm
student wrote: Tue Jun 06, 2023 7:08 pm
Young Boglehead wrote: Tue Jun 06, 2023 4:40 pm I'm amazed that so few people think saving 6 figures a year for probably better advice is worth even mentioning. If money was so taboo in the family I wouldn't think OP would have such detailed information in the first place. Do the people here who recommend keeping quiet ever offer advice on anything to someone they think would benefit?

If I was OP I would bring up, tactfully, that they could probably save 6 figures and get better advice if they chose a fee-only arrangement instead of AUM. If they are interested, talk more, if not, end it there. Not sure how that's such a bad idea.
One has to know whether the other party is receptive at all. Do you like people coming to you saying I think you dress badly tactfully, we can talk more if you are interested. Just by raising the issue, you are implying the other party is making a mistake. The truth is the tone that OP is giving here does not impressed me. OP said "FIL was lucky enough to become an executive VP at a Fortune 100 company for 7 years before retirement." OP also said "I'm pretty analytical, like a lot of us on this board, and like to optimize expenses to grow net worth." Later stated 'I'm not sure if this is any indication of whether they are "sophisticated enough", but they did mention they put the proceeds from the sale of my wife's grandma's house (she passed away last year), into 5% CDs because they were "nervous about the stock market", which was a bit of a red flag for me.' OP further opined "Actually, both FIL and MIL were employees. FIL became Executive VP of a large national company. That + owning hundreds of acres of land in western ND provided most of the source of their net worth." First of all, I don't think get 5% CD is any red flag at their asset level. The tone from OP seems to be along the line I am hot stuff and they made their money by luck.

My take is OP' in-law are not idiots given their net worth. They can afford to waste/spend money the way they like and it does not impact OP. I can see the need to intervene if OP thinks that the-laws are being scammed or they are in bad financial shape that they will need financial support from OP later. Moreover, we do not know whether 1% is buying any additional service.
Maybe I'm wrong but I usually assume that most people are open to a risk free 6 figure return every year. I was telling my family and friends about even I-bonds and they were all eating it up. This is very different than simply criticizing someone's taste in clothing.

And yes, imo, someone who pays 1% of their very large assets every year is making a mistake, although they may be too ignorant to know it. Whether or not OP thinks his FIL's net worth was well-earned or luck is irrelevant to the fact that he is overpaying for his financial advice to the tune of 6 figures every year.

I would argue that a 5% CD could be a red flag because of the reasoning that they're "nervous about the stock market". It's obviously a reasonable place to store your money and can be part of a reasonable investment plan, but if they're trying to time the market, especially at the advisor's advice, that's a red flag.

They can definitely afford to waste their money. I dont think that necessarily means they want to waste their money the way they are doing it with their financial advisor right now. If the OP proposes the alternative and they understand and still don't care, then it's clear they do.
We can only assume they would be open to a risk free rate if we can assume that they too will look at it the way we do, and immediately.

What does it do to a family if you, risk free, save them 90k a year but we have a 2008 or 2020 event and, wrong as it is, they find out their guy went to cash and only saw the account lost 6% instead of 35%?

It’s one thing to drink the low cost Kool Aid and believe or are doing the right thing. A completely different animal when you only changed begrudgingly, then saw the “old way” do much better.

Really comes down to conviction, and I certainly don’t want to have to be in the middle of good intentions gone bad.
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Re: In-Laws financial advisor charges 1.0% on AUM. Say something?

Post by KaskadeForever »

Glockenspiel wrote: Tue Jun 06, 2023 3:36 pm
coffeeblack wrote: Tue Jun 06, 2023 3:30 pm So they included you and your wife in meetings with their lawyer and financial advisor? This is how you know the fees? OK.
No, I only assume the fees because that's what they listed on their website. The meeting my wife and I were included in was with their lawyer who went over all the estate including current values
You are making a big assumption to assume they are paying the fee listed on the website. Those fees are quite negotiable and advisors often charge less than the posted fee for high net worth clients.
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Re: In-Laws financial advisor charges 1.0% on AUM. Say something?

Post by student »

Young Boglehead wrote: Tue Jun 06, 2023 8:41 pm
student wrote: Tue Jun 06, 2023 7:08 pm
Young Boglehead wrote: Tue Jun 06, 2023 4:40 pm I'm amazed that so few people think saving 6 figures a year for probably better advice is worth even mentioning. If money was so taboo in the family I wouldn't think OP would have such detailed information in the first place. Do the people here who recommend keeping quiet ever offer advice on anything to someone they think would benefit?

If I was OP I would bring up, tactfully, that they could probably save 6 figures and get better advice if they chose a fee-only arrangement instead of AUM. If they are interested, talk more, if not, end it there. Not sure how that's such a bad idea.
One has to know whether the other party is receptive at all. Do you like people coming to you saying I think you dress badly tactfully, we can talk more if you are interested. Just by raising the issue, you are implying the other party is making a mistake. The truth is the tone that OP is giving here does not impressed me. OP said "FIL was lucky enough to become an executive VP at a Fortune 100 company for 7 years before retirement." OP also said "I'm pretty analytical, like a lot of us on this board, and like to optimize expenses to grow net worth." Later stated 'I'm not sure if this is any indication of whether they are "sophisticated enough", but they did mention they put the proceeds from the sale of my wife's grandma's house (she passed away last year), into 5% CDs because they were "nervous about the stock market", which was a bit of a red flag for me.' OP further opined "Actually, both FIL and MIL were employees. FIL became Executive VP of a large national company. That + owning hundreds of acres of land in western ND provided most of the source of their net worth." First of all, I don't think get 5% CD is any red flag at their asset level. The tone from OP seems to be along the line I am hot stuff and they made their money by luck.

My take is OP' in-law are not idiots given their net worth. They can afford to waste/spend money the way they like and it does not impact OP. I can see the need to intervene if OP thinks that the-laws are being scammed or they are in bad financial shape that they will need financial support from OP later. Moreover, we do not know whether 1% is buying any additional service.
Maybe I'm wrong but I usually assume that most people are open to a risk free 6 figure return every year. I was telling my family and friends about even I-bonds and they were all eating it up. This is very different than simply criticizing someone's taste in clothing.

And yes, imo, someone who pays 1% of their very large assets every year is making a mistake, although they may be too ignorant to know it. Whether or not OP thinks his FIL's net worth was well-earned or luck is irrelevant to the fact that he is overpaying for his financial advice to the tune of 6 figures every year.

I would argue that a 5% CD could be a red flag because of the reasoning that they're "nervous about the stock market". It's obviously a reasonable place to store your money and can be part of a reasonable investment plan, but if they're trying to time the market, especially at the advisor's advice, that's a red flag.

They can definitely afford to waste their money. I dont think that necessarily means they want to waste their money the way they are doing it with their financial advisor right now. If the OP proposes the alternative and they understand and still don't care, then it's clear they do.
We do not know what kind of service that 1% is buying, perhaps some sort of private banking. It is none of OP's business and it does not affect OP's finance at all (unless OP is counting on inheritance). Do I think 1% is too much too pay? Yes. I think it is a mistake too. The in-laws are getting some services in return that some of us think are not worth it. I also think buying expensive cars are not worth it but many people, including bogleheads, have expensive cars because they can afford it. Both you and OP are making assumptions that the in-laws are ignorant. I see no such evidence presented by OP.

I told my friend about ibond too. But did you tell your friend that they are not investing correctly or simply you have discovered this great investment and you are just passing the along info. I don't think OP's intention is as passive as this. You said "Whether or not OP thinks his FIL's net worth was well-earned or luck is irrelevant to the fact that he is overpaying for his financial advice to the tune of 6 figures every year." To me, it is relevant because it suggests that OP does not respect the in-laws' ability and how receptive will the in-laws be if such belief is reflected in the conversation? As you can see in the thread, most people do not appreciate unsolicited advice.
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munemaker
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Re: In-Laws financial advisor charges 1.0% on AUM. Say something?

Post by munemaker »

I have a fairly wealthy friend who uses a pricey advisor who sponsors and advertises at a lot of local events. I often thank my friend for subsidizing these events through the fees he pays.

Mun
Maverick3320
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Re: In-Laws financial advisor charges 1.0% on AUM. Say something?

Post by Maverick3320 »

I think my wife's parents have a decent amount of money (maybe $3 million)? I've never asked my wife and I honestly don't want to know. They are awesome people and I feel extremely lucky to have them as in-laws. Having good in-laws, to me, is almost priceless. I wouldn't touch this with a 10 foot pole.
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Re: In-Laws financial advisor charges 1.0% on AUM. Say something?

Post by tibbitts »

Young Boglehead wrote: Tue Jun 06, 2023 8:46 pm I don't see how it's different in your scenario. With a 2% AUM that's only 6k a year which is actually a reasonable amount to pay for financial advice! On a dollar for dollar basis that example is a magnitude less of a rip-off than the one we're talking about.
I'm not sure how you're arriving at $6k/year, but I'd be much more likely to question whether someone with a few hundred thousand dollars can afford to pay $6k/year for financial services vs. someone with over ten million paying $100k/year. Yes, $6k a year may be more reasonable relative to what it may cost an adviser to provide services, but the "loss" of 2%/$6k is likely to have much more of an impact on the client with a few hundred thousand dollars - and on their retirement lifestyle - than the "loss" of 1%/$100k is likely to have on someone with more than $10M.
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Beensabu
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Re: In-Laws financial advisor charges 1.0% on AUM. Say something?

Post by Beensabu »

Young Boglehead wrote: Tue Jun 06, 2023 8:46 pm I don't see how it's different in your scenario. With a 2% AUM that's only 6k a year which is actually a reasonable amount to pay for financial advice! On a dollar for dollar basis that example is a magnitude less of a rip-off than the one we're talking about.
It is different because of the diminishing marginal utility of wealth.

$100k is a lot to me, and it is a lot to you.

A person with a $10m portfolio often sees their balance go up or down by that much in a single day.

It is like telling a wealthy person who neither needs nor chooses to work that they can save money by skipping the live-in nanny or the personal chef. They are choosing to pay for a service they can readily afford because it makes life more convenient for them.
"The only thing that makes life possible is permanent, intolerable uncertainty; not knowing what comes next." ~Ursula LeGuin
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Re: In-Laws financial advisor charges 1.0% on AUM. Say something?

Post by UpsetRaptor »

1000% stay out of it OP. They've worked hard, built their own success, are worth 8 figures, and likely in their minds they're getting "good" financial advice, and are probably already aware (even if not fully comprehending) that they're paying good money for it. Even if you're right, why risk sticking your nose in it? I.E. What specific scenario are you worried about long term here? You and your wife are obviously not going to have to take care of them. Your wife's inheritance might be slightly less at some point down the road?

My parents are overpaying for an Edward Jones advisor they've used for decades and trust highly. The AUM is slightly higher than your in-laws, and the investments are all high fee funds. They're worth 3M, have some SS income, are in their 70s, live reasonably / happily, the money will last, and they have a few kids who will split any future inheritance. Sure, as a boglehead it's irksome to be knowledgeable about the inefficiency, but I long ago realized this boat just isn't worth rocking.
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Re: In-Laws financial advisor charges 1.0% on AUM. Say something?

Post by BogleFan510 »

Sometimes higher NW people have reasons for advisors you might not fully recognize. A friend was CEO of a business unit at a prominent Fortune 500 company and I believe the ‘advisor’ allowed him to trade in stocks with some protections against insider trading risks. An advisor can move in and out of positions and allow one if ‘the elite executive types’ to claim they had no knowledge about the timing of trades (hint hint).

Just sayin. This might be worth 1% as insurance, especially if other services and value are realized like complex taxes, etc (this indivisible also worked a global job with work occurring in many countries which means tax headaches).
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Re: In-Laws financial advisor charges 1.0% on AUM. Say something?

Post by will86 »

Cultivate a relationship with FIL where you are able to honestly ask his advice on career choices and and investing
perhaps some day the conversation will be ripe for a discussion about paying for advice of others
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Re: In-Laws financial advisor charges 1.0% on AUM. Say something?

Post by ccompounder »

Glockenspiel wrote: Tue Jun 06, 2023 9:19 am
FIL was lucky enough to become an executive VP at a Fortune 100 company for 7 years
"Lucky". Maybe opportunist or skilled instead?

Yeah. Don't bring it up. The advice will be badly received.
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Re: In-Laws financial advisor charges 1.0% on AUM. Say something?

Post by ccompounder »

Glockenspiel wrote: Tue Jun 06, 2023 3:36 pm
No, I only assume the fees because that's what they listed on their website.
:oops: So this whole discussion is based on a presumption ?

The website lists a negotiation price. At this level of NW, everyone negotiates.
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Re: In-Laws financial advisor charges 1.0% on AUM. Say something?

Post by Young Boglehead »

Beensabu wrote: Wed Jun 07, 2023 12:04 am
Young Boglehead wrote: Tue Jun 06, 2023 8:46 pm I don't see how it's different in your scenario. With a 2% AUM that's only 6k a year which is actually a reasonable amount to pay for financial advice! On a dollar for dollar basis that example is a magnitude less of a rip-off than the one we're talking about.
It is different because of the diminishing marginal utility of wealth.

$100k is a lot to me, and it is a lot to you.

A person with a $10m portfolio often sees their balance go up or down by that much in a single day.

It is like telling a wealthy person who neither needs nor chooses to work that they can save money by skipping the live-in nanny or the personal chef. They are choosing to pay for a service they can readily afford because it makes life more convenient for them.
I don't see how its similar to a nanny or personal chef. I'm not suggesting they go from advisor to no advisor, I'm saying they go from one advisor to a probably better advisor who charges 10x less, and I don't see how paying more makes life more convenient for them. In the case of the nanny or chef, they charge based on hours or meals and its very transparent, no one is being hoodwinked there. Heck, I would have less of a problem if advisors wanted a check every quarter instead of siphoning it out of the account, because then people would really have to reckon with the astronomical sums they're paying.
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Re: In-Laws financial advisor charges 1.0% on AUM. Say something?

Post by Young Boglehead »

tibbitts wrote: Tue Jun 06, 2023 11:57 pm
Young Boglehead wrote: Tue Jun 06, 2023 8:46 pm I don't see how it's different in your scenario. With a 2% AUM that's only 6k a year which is actually a reasonable amount to pay for financial advice! On a dollar for dollar basis that example is a magnitude less of a rip-off than the one we're talking about.
I'm not sure how you're arriving at $6k/year, but I'd be much more likely to question whether someone with a few hundred thousand dollars can afford to pay $6k/year for financial services vs. someone with over ten million paying $100k/year. Yes, $6k a year may be more reasonable relative to what it may cost an adviser to provide services, but the "loss" of 2%/$6k is likely to have much more of an impact on the client with a few hundred thousand dollars - and on their retirement lifestyle - than the "loss" of 1%/$100k is likely to have on someone with more than $10M.
300,000*.02=6000... you're right it would have a bigger impact even if it's a reasonable fee and in this scenario I would also mention that the fees are exorbitant and point them in the boglehead direction
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Re: In-Laws financial advisor charges 1.0% on AUM. Say something?

Post by Young Boglehead »

If OP really wants to get to the bottom of it, he should ask the in-laws for advice. Ask how they found their financial advisor and how they settled on a reasonable fee. Maybe he'll learn that they're not paying 1%, or they're getting a lot more than he realized for 1%. Then he can mention that there's a cheaper way to get the same or better advice and leave it at that. At least at that point he'd know he gave them a shot...
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Re: In-Laws financial advisor charges 1.0% on AUM. Say something?

Post by mrmass »

Beensabu wrote: Wed Jun 07, 2023 12:04 am
Young Boglehead wrote: Tue Jun 06, 2023 8:46 pm I don't see how it's different in your scenario. With a 2% AUM that's only 6k a year which is actually a reasonable amount to pay for financial advice! On a dollar for dollar basis that example is a magnitude less of a rip-off than the one we're talking about.
It is different because of the diminishing marginal utility of wealth.

$100k is a lot to me, and it is a lot to you.

A person with a $10m portfolio often sees their balance go up or down by that much in a single day.

It is like telling a wealthy person who neither needs nor chooses to work that they can save money by skipping the live-in nanny or the personal chef. They are choosing to pay for a service they can readily afford because it makes life more convenient for them.
So true. It’s what they asked for.
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Re: In-Laws financial advisor charges 1.0% on AUM. Say something?

Post by TomatoTomahto »

If an in-law told me that I was paying too much to my landscaper, gardener, pool maintenance, plumber, electrician, CPA, estate attorney, etc., I would listen respectfully, but probably behind their back I’d roll my eyes and grumble something about how they’re “good with my money.”
I get the FI part but not the RE part of FIRE.
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Re: In-Laws financial advisor charges 1.0% on AUM. Say something?

Post by bradinsky »

OP,
Out of curiosity, how do you know that your in-laws wealth didn’t come from the wise decisions made or recommended by the advisor?? You’re assuming the advisor has been ripping them off, but the truth is that possibly you’re incorrect. I hope they continue to accumulate & possibly one day your DW inherits a significant amount.
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Re: In-Laws financial advisor charges 1.0% on AUM. Say something?

Post by 8foot7 »

Plenty of young folks in this thread with no business discussing advisor choices with family who has 10x+ their own wealth. Absolutely no business.

At 10-20MM I would absolutely have an advisor mainly for my wife’s sake. The fee is noise and someone who can carry out my investment style in the event something happens to me? Have some continuity in a difficult time? Talk me out of stupid stuff? Talk her out of stupid stuff?
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Re: In-Laws financial advisor charges 1.0% on AUM. Say something?

Post by Aggieland »

I think the intent matters! OP comes across as self reflective of their behaviors( I find this a rarity in the world) and concerned for people they care.

I have seen situations were people draw rigid boundaries and don’t warn folks when they think someone is heading towards trouble. After it’s too late, I have seen family ask why no one around them said something. I know this situation is not necessarily the same as trouble! But, the mechanics of reaction towards the people one cares is the same:

- see something that is an issue?
-brain storms if something needs to be said
- makes a decision! To zip or say something!
- if decides to say something, subject yourself in the persons shoes and provide a positive respectful feedback while admitting their own biases. Intent and tone matters!
How you make someone feel matters!
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Re: In-Laws financial advisor charges 1.0% on AUM. Say something?

Post by donaldfair71 »

8foot7 wrote: Wed Jun 07, 2023 7:31 am Plenty of young folks
I would imagine that the opinions in this thread skew neither older nor younger.
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