Ric Edelman Financial Services

[theo]

I recently attended a "seminar" put on by Ric Edelman's people. It was being held right down the street in cool, air conditioned comfort on that searing hot summer day, so it was a welcome two hours respite (even if not much more).

I handle my own investments and did not find the "seminar" to be any particular wealth of information (no pun intended). It seemed to be more of a "marketing" session to entice people to sign on with Edelman's outfit as a financial advisor. They are clearly big fans of the stock market --- that much was certainly quite clear.

Anyway, when I met with a rep on hand after the "seminar" ended, I asked some pointed questions about their fees. It turns out that they charge .5% (one half of one percent, if you missed the little decimal point) of the client's current portfolio value each quarter; this amounts to 2% of the total portfolio value charged in fees per year (regardless of performance).

I have no interest in pursuing this further and I have no experience with other "financial advisors". I'm just curious if, in the experience of others here, this particular fee structure of 2% of portfolio value per year (regardless of portfolio performance) is common, unusual, high or low for such "portfolio manager" services.

Any thoughts, experiences, opinions --- or winning lottery numbers --- to share?

 

[Ironwood]

The annualized admin fee or service fee is driven by portfolio size, program and what you negotiate. Two percent per annum would be high for most portfolio's over 100K. You can ETF you portfolio for as little as 10 basis points. Before you pay 2% per annum for advisory fees determine what you get for that and how responsive your advisor will be to market corrections. Remember, it is in your advisors interests to keep you invested through all markets....that's how they make money. They don't earn anything keeping you in cash.....from someone who retired from the industry!

 

[Kal]

Hmmm, let me think. I have the guy buy a 5-year CD earning maybe 0.5% per year. He makes a couple of mouse clicks and it's a done deal. I would pay 10% for the 5-year term....and earn 2.5% before taxes.

Step right up and do business with my new Financial Advisor P.T. Barnum.

 

[theo]

Not much of an example...

Hmmm, let me think. I have the guy buy a 5-year CD earning maybe 0.5% per year. He makes a couple of mouse clicks and it's a done deal. I would pay 10% for the 5-year term....and earn 2.5% before taxes.

Step right up and do business with my new Financial Advisor P.T. Barnum.

I get your point, but the fact is that if all you were doing was buying a multi-year CD, then you certainly wouldn't have any need to bother with any financial services or advisors at any fee structure in the first place.

As I attempted to convey in my original post, these Edelman guys clearly love the stock market. Not sharing their ardor at all, I certainly have no further interest in (or any use for) them. I was just curious about where their particular fee structure fit within that "investment management services" world.

 

[Kal]

The CD is just one piece of a balanced portfolio. Bonds would probably be a better example. Any across-the-board flat rate on all investments is outrageous. Maybe a 1.5% fee would work for stocks, then maybe something much less for bonds. It's the low (or no-risk) investments that get gouged.

A muni-bond rated at maybe 4.5% would yield 2.5% after tax so even that instrument wouldn't work in their portfolio.

Now if these characters can consistently show an 8-10% per year return on stocks it would be worth putting their track record under a magnifying glass. What did they do in 2008?

 

[theo]

Now if these characters can consistently show an 8-10% per year return on stocks it would be worth putting their track record under a magnifying glass. What did they do in 2008?

A good point and a fair question, but I understood their "model" to first identify the objectives and risk tolerance of each individual client. Accordingly, it seems (to me, anyhow) that there can't be a single valid or meaningful performance comparison to the broader (and generally dismal) stocks performance picture of 2008 (or any longer time frame), without directly comparing that 2008 (or longer time frame) outcome to each client's individually, originally identified objectives and risk tolerance.

I'm guessing that the Edelman "model" might perhaps be appealing to someone maybe willing to acquire and monitor all of their safe, "ho hum" investments entirely on their own (e.g., CD's, munis, etc.) and then entirely separately let these people work only with a chunk of funds allocated solely and specifically to stocks, willingly letting Edelman take their 2% along the way (regardless of performance). That prospect is certainly of no interest to me personally; I shy away from the stock market and also regard the 2% fee as excessive, but they clearly appeal to someone; Edelman's ongoing advertising / radio program assault seems quite relentless.