Making 2012 GREAT…What You Pay and Who you Pay Matters!

We are working on a ‘Year in Tickers’ at Stocktwits which should be live sometime next week. In the meantime, there is some great stuff to read on what happened in 2011 and some ideas for the year ahead.

I am biased but my favorite recap is from Ivan on The Stocktwits 50. My friend and chessmaster, Robert Sinn has a great wrap to the year as well.

Looking ahead beyond the current Stocktwits 50 from this week, we should all be thinking about how to make 2012 great. I just read Joe’s great post and you should too.

As we begin the year, everyone has a war room running 24/7/365 and it’ streams information to you from everyone and everywhere.

Case in point…my daughter Rachel…

The people most in the dark are the brokers behind the walls of the banks. The one’s that can’t use the internet during work hours and the ones that don’t know how to use Gmail, Stocktwits, LinkedIN and Twitter. There is a term used by the Fidelity’s and Schwab’s called ‘Breakaway Brokers’ with respect to the grab for the best producing brokers and RIA’s from wire houses. Those that are not good enough or smart enough to break away, are the one’s you DO NOT want managing your money ever again.

Elsewhere in the world of finance, there are those with Bloomberg machines and everyone else. Bloomberg got smarter in 2011, trying to lure everyone that does not have a Bloomberg for $2,000/month by coming to their website for information and stories after the fact. They write headlines that The National Enquirer would be proud of. I hope I am living proof that you can invest well without a Bloomberg machine.

It’s all smoke and mirrors though and we know it. What you pay and who you pay has always mattered and people are starting to care again.

If you don’t read Tom Brakke, you are truly missing out. He writes and links under the handle @researchpuzzler and he is an investment advisor. Here is a recent letter to his clients:

What is a reasonable amount of money to pay an asset manager or investment advisor?

That question never goes away, although in good times it’s often forgotten, since healthy gains tend to push discussions about costs to the back burner. But returns have been harder to come by in the last decade or so, highlighting the inherent issues in paying too much.

In fact, for most financial products, your ultimate return (and therefore your ultimate ability to fund your retirement, etc.) is directly related to what you pay in fees. Pay more and your returns will be less and your financial security will be more tenuous. Simple.

I revisit this topic now because of a blog post that I just published about an “advisor” who had made $55,000 in fees from a client who could have gotten equivalent investment exposures for almost nothing.

Are you in that boat? Adding up all of the fees that you pay, how much did it amount to (in dollars) during 2011? What did you get in return?

I read a number of publications that are aimed at investment advisors. One recently had an article about “five ways to raise fees,” and that theme is prevalent throughout the business. Many advisors are paid on assets under management and, well, assets haven’t been growing much at all, so they are looking to increase fees. However, they are trying to do so at a time when information about investments is freely available, low-cost products are easy to find, and many fees are too high already.

So, how do you decide whether you are paying too much? Start with that total expense for 2011, including every fee that you pay directly and those that are hidden within the investments that you own. It might help to have someone familiar with the industry identify where all the fees are, since you may not know where to look. The sum will likely be much more than you thought it would be.

When you have that total, you should ask yourself what you are buying with the money. Hopefully, you are receiving well-researched (and unconflicted) recommendations, perspective on what the odds are of achieving your goals, and a clear sense of what might go wrong with the decisions that you make.

There is no doubt that a bond of trust can develop between an advisor and a client, and if it’s based upon substantive factors rather than emotions, it has real value. It’s just that it’s all too common to pay a premium price for mediocre advice.

In today’s world, you shouldn’t have to settle for that.

Right on!

Have a happy new year’s everyone.


  1. Anonymous says:

    agree totally. my counterparts who are locked in the dark cellars of wirehouses are completely behind what’s happening out there and without the advantage that of what working at a large firm used to mean.

    Wall Street 1.0 is embarrassing at this point.

  2. Redwood Mtn says:

    Year 2011 ended with a gain of 40% YoY for me, but I am ashamed to say that I paid over 6000$ in brokerage fees. There were a lot of trades that were no loss/ no gain (within a 0.005% range) but resulted in only brokerage fees. Of course, there are other expenses like charting fees etc which I don’t think I can reduce.

    My first trading resolution for 2012 is to reduce the brokerage fees to 1/3rd of that of 2011’s.

  3. Mark Essel says:

    I’m locked in to a company 401k until I leave, then I can roll into an IRA and invest into a nice mix without fees.

    Just riding the s&p 500 down, along with international (negative) growth. YoY I’m down 1-2% + inflation.

  4. Mark Essel says:

    I’m locked in to a company 401k until I leave, then I can roll into an IRA and invest into a nice mix without fees.

    Just riding the s&p 500 down, along with international (negative) growth. YoY I’m down 1-2% + inflation.

  5. Mark Essel says:

    I’m locked in to a company 401k until I leave, then I can roll into an IRA and invest into a nice mix without fees.

    Just riding the s&p 500 down, along with international (negative) growth. YoY I’m down 1-2% + inflation.

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  8. Keith says:


    I beat you by 4%.  Probably because I moved 70% of my trading to IB.  Kept a couple old accounts because I liked their trading screens better… but refuse to pay $9 a trade when I can pay $1 or 8% mgn rate vs. 2%.  Loyalty now a days counts for very little.

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  10. Bebeto15 says:

    I pay 1.5% to my adviser,who I trust,and let him handle 85% of my investments
    The other 15% I am turning to mush…i am retired,and if not for him,I would have to go back to work! 

      • Bebeto15 says:

        I just visited my money(at his office),and have more confidence in his decisions,than my riverboat gambler mentality.
        I appreciate what I have learned from the suggested names,but have not been able to make any substantial headway with profits..

  11. I often wonder what in the world all of these very bright people are doing down on wall street. For example it does take some brains to be a retail stock analyst or a airline analyst. But why would a very bright person not become quickly bored out of their mind doing this type of work. A financial analyst  does not seem to be the  most  intellectually challenging field to go into for a very bright student  from an Ivy league school.

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