But first . . .
Flynn: “The other day I took a ride in a Toyota Prius, a hybrid
car. It's silent when idle at stops –
no noise, no guzzling gas. You've got to get yourself in one and take a
drive. The new technology it delivers
is simply wonderful. (Extra plug: check
out the Union of Concerned Scientists,
whose good work on the subject makes one sit up and take notice.)
F I watched in
awe on C-SPAN as Republican Minority Leader Trent Lott derided such cars
on the floor of the Senate last month. But,
yes, fuel-efficient vehicles are clearly the future.
And now . . .
Eric E. Haas:
“[With regard to yesterday’s
comment on Vanguard’s $500-or-less financial planning service], I wanted to add
that, not only is $3,000 too much for a good financial plan, but 1% is too much
for good asset management services. Altruist Financial Advisors does fee-only
Comprehensive Financial Plans for $1,450 and outstanding asset management for
0.6% of assets managed. Perhaps most
significantly, this company is the only one in the country, to my knowledge,
which offers a Complete Satisfaction Money-Back Guarantee on both of those
services. On average, each of
Altruist's financial planning clients saves about $5,000 per year based on
their advice (i.e., the service usually pays for itself in less than a year). I agree with you that many people can do
pretty well following the investment advice found in the minority of good
investment books available. However, I
agree with the anonymous Vanguard employee that many people could benefit more
from competent professional advice, particularly if there is a complete satisfaction
money-back guarantee. This recommendation
may be self-serving (Altruist Financial Advisors is, well, me), but I believe
in it.”
F Studies show that the average
net worth of the readers of this column is $17 million, give or take, which
accounts for all the upscale advertising you see here everyday from Rolex and
BMW and Prada. But the numbers are
skewed, because included in the average is Bill Gates, who comes to check the
Gates $$$ Clock to see how much money he has. Deleting Bill from the
calculation, the average net worth of the readers here is $19,231. (I was this close to getting Walgreen’s to advertise
their clothing line, but even that fell through.) And I raise this simply to point out that however good Eric’s
counsel may be (and I’m sure he would agree), even $1,450 is a lot for someone
with fairly limited investable funds.
Even at $100,000, it’s 1.5% of your whole net worth – or a third, say,
of what you might earn in municipal bonds.
As for a .6% asset management fee, it may be very reasonable, but it
nicks your expected return by .6% (which for most people would not be
tax-deductible). If you have $100,000 that compounds for 25 years at 5% after tax instead of 5.6%, it grows by $238,000
instead of $290,000. So there's a lot to be said for keeping your investment expenses low.
Our Own Estimable Less Antman: "Although
$500 is quite a reasonable price for the portfolio review that Vanguard is
calling a financial plan, it must be noted that all this buys you is a list of
Vanguard funds and dollar amounts to invest in them (they also suggest which of
your current assets to sell in order to buy these Vanguard funds). Those who think that estate planning,
insurance needs analysis, tax planning, goal-setting, spending, saving, and
debt management are also part of a financial plan might balk at their description
of their offering as a financial plan.
They do, for another $500, issue a report on the ways to reduce or
eliminate estate taxes and probate fees through proper titling of assets and
standard will and trust arrangements (you implement without their help), and
for another $500 they will do a retirement needs analysis. At this point, you've spent $1,500 and have
around half of a comprehensive financial plan.
So they are offering a fair deal but not an extraordinary one. I'm not panning their offering, but merely
the assertion of the Vanguard representative that you have mischaracterized the
cost of comprehensive financial planning.
A list of funds to buy is not a financial plan.”