I met with an old school friend that is a financial planner to discuss some available investment options. Currently I manage my own investments across different asset classes and re-allocate based on market trends and imbalances. I look to sell overvalued assets and reinvest in undervalued yet fundamental alternatives.
My primary hesitation with using an advisor is the commission structure and limited available asset options. I would be happy to pay an advisor a high fee for their time and advice on as regular basis but not on a commission of total invested assets. Commissions based on invested assets causes several issues, one being because the available investible assets are a subset of what I am interested in they are disincentivized to help allocate towards assets they don’t sell. Secondly the commission fees are disproportionately high when investing a retirement level of assets.
In my case I plan is to grow my assets and place one million dollars in index stock and bond funds and use the expected four percent yearly return as backup income to cover my cost of living. My current living expenses are around twenty something thousand dollars per year making my monthly draw about two thousand dollars. If I was to have a financial advisor invest one million with a 1.5% commission that works out to be $1250.00 a month. With a drawdown of $2000.00 a month to live that is a high percentage considering that the alternative is a $25.00 fee for managing my own investments through an online broker. Note that each of the stock index funds have a commission fee attached that applies weather they are self directed or managed through an advisor.
Ultimately I want to make my own decisions for where to invest and have the responsibility to research opportunities and learn from the experience.