{"id":9876,"date":"2015-07-17T11:52:03","date_gmt":"2015-07-17T18:52:03","guid":{"rendered":"http:\/\/www.marketriders.com\/investing\/?p=9876"},"modified":"2016-12-21T07:27:43","modified_gmt":"2016-12-21T15:27:43","slug":"is-your-financial-advisor-overpaid","status":"publish","type":"post","link":"https:\/\/www.marketriders.com\/investing\/is-your-financial-advisor-overpaid\/","title":{"rendered":"Is Your Financial Advisor Overpaid?"},"content":{"rendered":"

Every few years, Forbes<\/em> magazine does what is possibly their most entertaining annual list: Most overpaid actors.<\/p>\n

Simply enough, they compare the estimated earnings of the people on their Top 100 Celebrities list to\u00a0box office results to find a ratio. The math is the operating income of each\u00a0actor’s last three films vs. their compensation.<\/p>\n

The result is a very simple number. For every dollar this actor was paid, how much did he bring in? Topping the “worst” list last year was comedian Adam Sandler, who by Forbes’<\/em> calculation was paid $1 and brought in $3.20<\/a>.<\/p>\n

Compare that to, say Shia LaBeouf. He starred in some big-budget action flicks but commanded a relatively paltry $5 million for the robot movie Transformers<\/em>. That’s a lot of cash, but a fraction of what a big-name actor might demand.<\/p>\n

\"financial<\/p>\n

Accordingly, LaBeouf is (or at least was) a great deal for Hollywood<\/a>, turning over $81 for every $1 he earned filming.<\/p>\n

Let’s compare that to your financial advisor. He certainly needs to carry his weight, right? Otherwise you might not retire at all.<\/p>\n

If you have $250,000 in a retirement account, the typical advisory fee is going to be 1% of your total assets. Chances are, your advisor will farm out the actual stock picking<\/a> to a selection of\u00a0mutual fund managers.<\/p>\n

Combined, they will charge you another 1.5%, although that money is coming out of return so you aren’t likely to notice it leaving your account. Added up, though, the impact is real: 2.5% of your money, each and every year.<\/p>\n

That’s $6,250 in cash leaving your retirement fund. But wait a minute, doesn’t your advisor “earn” his or her pay?<\/p>\n

Consider that the goal of your retirement savings is to compound, that is, to double every certain number of years without any headaches. You might reasonably expect to earn 7% in your portfolio. That means $17,500 in cash coming.<\/p>\n

And $6,250 in cash leaving. The managers and advisors are keeping a whopping 36% of your return! Each and every year! Startled yet?<\/p>\n

It gets worse. The impact of that loss is just starting to be be felt. Over the long run of an investing life, financial advisors keep half and up to 80% of your earnings<\/a> from invested money.<\/p>\n

Yet they took no risk at all. It’s your investment that’s in the market, not theirs. All they do is slice\u00a0off their\u00a0take\u00a0and hope you don’t notice.<\/p>\n

Disconnected<\/h2>\n

Okay, they do more than that. They disconnect you from the work of picking your investments. And in theory they help you manage risk.<\/p>\n

But the fact is, you could buy index funds and build a portfolio that does the same thing for pennies on the dollar compared to their fees, and risk is not that hard to manage if you build a solid, diversified portfolio and rebalance it periodically<\/a>.<\/p>\n

Next time you’re standing in line to buy tickets to a Hollywood blockbuster or some\u00a0Adam Sandler family comedy, consider just how much you pay for investment advice and if it’s worthwhile.<\/p>\n

Chances are, the answer will be “Yes, but not 36% of money!” And you’ll reconsider your approach to retirement.<\/p>\n","protected":false},"excerpt":{"rendered":"

Every few years, Forbes magazine does what is possibly their most entertaining annual list: Most overpaid actors. Simply enough, they compare the estimated earnings of the people on their Top … Read more →<\/span><\/a><\/p>\n","protected":false},"author":8,"featured_media":9877,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_wp_rev_ctl_limit":""},"categories":[8],"tags":[42,43,55],"yoast_head":"\nIs Your Financial Advisor Overpaid? | MarketRiders<\/title>\n<meta name=\"description\" content=\"Are financial advisor overpaid? Managers and advisors are keeping a whopping 36% of your return! Each and every year! 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