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Consuelo Mack WealthTrack: Charles Ellis and Mark Cortazzo

August 11, 2012
GuruFocus

GuruFocus

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On this week’s Consuelo Mack WealthTrack: in a television exclusive, Financial legend Charles Ellis joins innovative financial planner Mark Cortazzo to explain why investment fees are much higher and more harmful than you think, and how you can fight back.


Rating: 4.0/5 (6 votes)

Comments

lajunglita
Lajunglita - 2 years ago
I consider myself an expert at evaluating fee structures and I can tell you that this interview does nothing to enlighten the subject. First, the 1 - 1.5% they were discussing as typical fees does not include the expenses/fees associated with the actual investment products themselves. The fee they are discussing is the fee to the "advisor". You have to add another 1-2% if mutual funds or professional managers are being used or .25 - 1% if index funds are being used. (that's right !! Not all index products are cheap).

I believe the fee model that should emerge one day (it's rare today because it's not as lucrative) is a "fee for service". In the institutional world, you will be paid $100k a year for being an advisor weather it's $100mm or $500mm. An advisor does no more work for a $1mm relationship as he does for a $500k relationship.
lajunglita
Lajunglita - 2 years ago
The other thing that drives me crazy is that, these guys recommend index funds/ETF's.

If you walk into your broker/advisor's office and say "I was told to invest in index funds/ETF's"

The broker will say " I totally agree, I use ETF's for my clients." The problem is, the broker

a) charges a big fee on top of those inexpensive ETF's (sort of defeats the purpose, right?)

b) the broker will trade / shift around the ETF's thereby "actively managing passive investments" (sort of defeats the purpose, right?)
sww
Sww - 2 years ago
The only way I think it's fair for the management fee is performance base -

0% for less than 6% return

25% of anything above the 6%

So when a fund made 10%, the manager get 1%. The customer got 9%

20% then (20% - 6%) * 25% = 3.5% The customer got 16.5%

AlbertaSunwapta
AlbertaSunwapta - 2 years ago


Much of this has been talked about for a couple decades and many authors have pointed out the standard example of a 1% MER taking 50% of your return in 2% annual return years. It's good to see that the pressure is still on the industry to actually perform.

Now, while I never short companies, it seems obvious that low rate of return environments generate a lot of opportunity to short fund management companies. Sudden mergers of course can ruin your day.

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