What Is That 1% Fee Buying You?
If they won't compete on price, let's make them compete on service.
Got a broker or financial planner who is charging you 1% of your portfolio's value each year and all you're getting are mutual-fund recommendations? If you have a portfolio worth $400,000 or more, take this column along to your next meeting, slap it on the adviser's desk and demand an explanation.
The fact is, some folks pay 1% of assets and get the full panoply of financial advice, including help buying cars, insurance and homes. Meanwhile, others pay the same 1% and have nothing to show for it but a slew of mediocre mutual funds. If you're in the second camp, it's time to demand more for your money.
Claiming Their Cut
Like it or not (and I don't), the standard charge among fee-based brokers and financial planners is 1% of assets. Yes, there are advisers who charge less. But they are few and far between.
Brokers and planners talk about that 1% as though it is their birthright. Indeed, that figure has even been institutionalized in mutual-fund C shares. With C shares, there is typically no upfront or back-end sales commission, except for a small sales charge if you unload your shares in the first 12 months. Instead, these funds levy 1% a year, in the form of a 12b-1 fee, which is then used to compensate the advisers who sell the funds.
What if you work with a broker or financial planner who charges commissions or some combination of commissions and a percentage of assets? The amount you pay will vary from year to year, depending on how much trading you do. But over time, you will likely incur costs similar to those levied by fee-based advisers.
"No matter how you cut the mustard, it generally comes out to between 0.8% and 1% a year," says Richard Ferri, a former broker who now runs Portfolio Solutions, a money-management firm in Troy, Mich.
To be sure, 1% may not sound like much. But as Mr. Ferri notes, "that's not the total cost. That's just what you're getting charged for advice."
Damaging Your Returns
If your adviser then invests your portfolio with mutual-fund managers or with private money managers, these managers will also take a cut. Still, the expense might be worth it, if your adviser helps you to beat the market and thereby recoups the costs involved. But frankly, that is so unlikely that the notion is almost laughable.
Suppose your adviser stashes your portfolio in stock-mutual funds. If you ignore 12b-1 fees, these funds charged average annual operating expenses of 1.2% in 2002, according to the Investment Company Institute in Washington. In addition, stock funds might rack up another 0.8% a year in brokerage commissions, trading spreads and other transaction costs, estimates the Bogle Financial Markets Research Center in Malvern, Pa.
Tack on another one percentage point for your adviser's fee, and you are looking at a total annual tab of 3%. In other words, to beat the market, your fund managers would have to pick stocks that outpaced the stock-market averages by more than three percentage points a year.
Your adviser might get lucky, selecting a collection of managers who fare that well over three or even five years. But how many advisers could overcome that 3% annual hurdle over a lifetime of investing? You could probably shake hands with all of them at the same time.
Demanding More
What we need, of course, is more price competition. There is some of that going on. For instance, Mr. Ferri's annual investment-management fee is just 0.25% of assets, and even less for larger accounts.
But I don't see a lot of brokers and planners following Mr. Ferri's lead. My response: If advisers won't improve the odds of good investment performance by cutting their fees, then investors should demand more service.
Whether you pay 1% of your portfolio's value or you pay commissions every time you buy and sell, it might seem like you are paying for investment management. But charging commissions or charging a percentage of assets is just a convenient and relatively painless way for advisers to extract their fee.
In fact, investment management is probably the least valuable service you get. It doesn't take any great brains to put together a well-balanced portfolio of mutual funds. At the same time, it's also highly unlikely that the funds selected will generate market-beating performance.
Instead, when you pay your 1% or pay commissions, the real value comes from the help you get with other aspects of your financial life. Consider Accredited Investors Inc., a Minneapolis financial-planning firm that charges 1% a year on the first $5 million.
In addition to picking investments, Accredited will help clients with estate planning, refinancing their mortgages, tax planning, college funding, retirement-income projections, exercising stock options, negotiating new car purchases, analyzing insurance and purchasing homes.
"The investment management is worth 0.3% or 0.35% a year," figures Accredited President Ross Levin. "All of these other services are worth the other 0.65% or 0.7%."
Mr. Levin says clients do incur a few extra costs for these additional services. For instance, while Accredited will help clients formulate their estate-planning strategy, they will pay an attorney's fee to get the necessary documents drawn up. Similarly, while Accredited will work to minimize taxes, clients may have to pay extra to get their tax returns prepared.
Mr. Levin's firm has a $1 million account minimum, so he is clearly catering to fairly wealthy investors.
Still, Mr. Levin reckons that, "once you get up to $400,000 or $500,000, you should be getting supplementary services. If you're not, you shouldn't necessarily pull your money and leave. But you should sit down with your adviser and ask, 'What other services can you offer me?' You shouldn't be paying 1% just for investment management."
咨询费能买多少服务？
如果那些财务顾问们不肯在收费上相互竞争，我们就应该让他们在服务质量上竞争。
你的经纪人或者财务咨询师是否每年都会收取你相当于投资组合价值1%的费用？你从他们那里所得到的是否只是共同基金的建议？如果你的投资组合在40万美元以上，那么下次你约见财务顾问的时候就拿上这篇文章，去摔在他的桌子上，然后让他给个解释。
实际情况是：有些人花费了相当于资产1%的咨询费，得到了全套的理财建议，包括帮助购买汽车、保险和房屋。而另外一些人也同样付了1%的咨询费，却只得到一堆表现平庸的共同基金的信息。如果你属于后者，那么现在是你提出更高要求的时候了。
要求降费
不管你是否愿意（反正我不愿意），收费经纪人和财务咨询师的标准费率是资产的1%。当然，有的咨询师收费低一些，但这类人为数不多，且距离很远。
经纪商和咨询师谈论1%费率的语气就好像它是天经地义的。的确，在具有共同基金性质的C股票中，这个费率甚至已经被制度化了。投资C股票时，通常前端和后端都不收费，除非你在持有的头12个月内抛售股票会收取少量的交易费。但是，这类基金每年会以12b-1费的形式收取相当于资产1%的费用，用于补偿那些销售基金的顾问。
但你如果雇用那些收取佣金并加收一定比例费用的经纪商和财务咨询师，情况会怎样呢？你每年支付的数额将各不相同，这取决于你交易的金额。但长期下来，你很可能会发现你的成本与雇用那些收取固定费用的咨询师相当。
理查德-费里(Richard Ferri)原先是经纪人，现在经营著位于密歇根州特洛伊的财务管理公司Portfolio Solutions。他表示，不管你如何精打细算，你每年所支付的成本一般都在0.8%到1%之间。
当然，1%可能听上去并不多。但正如费里所指出的，那并不是你全部的成本，只不过是你必须支付的咨询费罢了。
你的回报受损
如果你的咨询师选择与共同基金经理或私人投资经理一起管理你的投资组合，那么这些基金经理还要瓜分一块利益。如果你的顾问帮你跑赢了大市，并足以覆盖相关成本的话，你的钱花得还物有所值。但坦白地说，这种情况出现的几率微乎其微，甚至到了痴人说梦的地步。 假定你的顾问建议你把投资组合放到投资股票的共同基金上。据位于华盛顿的投资公司研究所(Investment Company Institute)称，如果你忽略12b-1费不计，这些共同基金在2002年收取的年度管理费率平均为1.2%。另外，据位于宾夕法尼亚州马尔文的研究机构Bogle Financial Markets Research Center预计，投资股票的基金可能每年还要交0.8%的证券交易佣金、交易价差及其他交易成本。
再加上你付给财务顾问的1%费用，你每年的投资总成本达到3%。换句话说，要想跑赢大市，你的基金经理必须选择那些每年回报率超过股市平均收益水平3个百分点以上的股票。
你的顾问可能会走大运，选择了一些能在3年甚至5年内都跑赢的基金经理。但在投资的一生时间内，有多少顾问能成功地跨越每年3%的收益障碍呢？这样的顾问寥寥无几，也许你和他们同时握手也绰绰有余。
要求更多的服务
当然，我们需要的是更多价格上的竞争。现在已经出现了这种趋势。比如说，费里每年收取的投资管理费仅是0.25%的资产，甚至对某些大客户收的更少。 但我认为不会有大量的经纪人与咨询师追随费里的做法。我对此的看法是：如果咨询师不愿意通过降费来增加良好投资表现的几率，那么投资者应该要求更多的服务。
不管你是支付相当于投资组合1%价值的费用，还是每次交易的时候支付佣金，看上去都像是你正在为投资管理付费。但收取佣金或者收取1%的资产对于咨询师来说，只是一种方便和相对容易的收费方式而已。
实际上，投资管理可能是你所得到的价值最小的服务。把一个共同基金的投资组合平衡好并不需要动多少脑子。同时，咨询师挑选的这些基金也不太可能带来跑赢大市的业绩。 相反，当你支付1%的资产或支付佣金的时候，真正的价值是来自你在其他金融方面所得到的帮助。比如说Accredited Investors Inc.，这家位于明尼阿波利斯的财务咨询公司对于前500万美元的资金收取1%的年费。
除了选择投资对象外，Accredited还会帮助客户进行不动产的规划、抵押贷款的再融资、税务计划、大学教育资金计划、退休收入计划、行使股票期权、新车购买咨询、保险分析和购买房屋等服务。
Accredited的总裁罗斯-勒温(Ross Levin)估计，投资管理的收费每年大约占0.3%到0.35%，所有其他服务占收费的0.65%到0.7%。
勒温说，客户的确会因为某些额外的服务再支付少量的成本。比如，当Accredited帮助客户制定不动产管理策略的时候，他们将收取客户部份代理费，以帮助客户起草必要的文件。同样，当Accredited帮助客户削减税务的时候，客户可能也要支付额外的费用，为获得返税做准备。
勒温的公司最低开户额为100万美元，他显然需要取悦那些相当富裕的投资者。
但是勒温认为，一旦你的投资组合达到40万或50万美元，你应该得到其他补充性的服务。如果你没有，你也不一定非得把钱取出来转身离去，但你至少应该坐下来问问你的咨询师：'你还能为我提供什么服务？'你支付了1%的资产不应该只得到投资管理的服务。
