My "investment guy" is a gal and I made it clear to her that I was totally aware that she'd react with horror at my (lack of) diversification, but she had to get over it. Well, more diplomatically than that, but you get the idea.
She did a very good job of playing by my rules; whether or not I knew what I was doing, I was hiring her with specific goals in mind. Her job was to tell me whether my expectations were silly or not. And I should add that I'm more than pleased with the results.
The critical bit I think was that she was "fee based", meaning she was a consultant; billing her time to clients was her only compensation. No pressure on her part to recommend "whole life" policies, no commissions on whatever I bought etc.
It's remarkable to me how much of a scam "investment professionals" engage in. Even 1/2% annually for $1M amounts to $5,000/year. To "manage" a portfolio by balancing it among index funds. Sheesh! I could write a program for that and spend about 10 seconds/year "managing" someone's investments. That's a nice rate of return. And that 1/2% is in addition to the transaction fees.
Somehow people think that "only" getting clipped for 1/2% is better than paying someone $300/hour for a couple of hours a year. I suppose that I should factor in that I have to go to my brokerage accounts and rebalance things every year, that's another hour. Done.
And 1/2% is cheap. I've seen them in the 1.5-3% range. You gotta be kidding!
I'll never forget two experiences.
One company I worked for had a managed IRA thing where they matched funds up to 5% or some such, which was cool, it's hard to beat a 100% return instantly. What was not cool was that we got to choose from among a number of "actively managed" funds clipping a percent or two each year 90% of which underperformed their index fund benchmarks even before fees were deducted. I wondered how the guy presenting it dealt with the embarrassment.
The other one was a presentation where we got to choose where we wanted the funds distributed for the next year 6, weeks after the performance numbers for the previous year were announced. When asked why the answer was something like "because if we told you beforehand you might chase the market and that might not be best". Talk about paternalistic crap. It was one of those occasions Spider Robinson calls "rupture". You realize the people in the conversation have no way to bridge the gap and be understood by the other. I felt like saying something along the lines of "Look fool, it's my money and if I want to lose it it's none of your damn business. So take your silly statement, fold it until it's all corners and......".
Let's just say I moved my funds to a self-directed IRA as soon as I could in both situations. Now, whether I've done a better job than they would have is still debatable ;)
Enough on a Friday night.
Erick |
