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Using wealth management company to manage assets
Posted: Fri Jun 01, 2007 3:40 am
by bigb
We're returning to India in June'07 and have $300K+ from the sale of our home in US and 401(K) savings of $150K+.
We are considering taking service of wealth management companies like Bernstein/Merril Lynch.
Does anyone have experience or opinions on these? Here's a quick situation:
Ages: 38 (My wife and I)
We will both work in India in the IT industry
We have purchased a flat in India (Pune) with 20% down and an EMI of INR 25K/month that we plan to finance with jobs in India.
We have two kids (6 and 2)
Thanks in advance for your advice.
Using wealth management company to manage assets
Posted: Fri Jun 01, 2007 4:26 am
by Desi
I will do it at half their price and better:emteeth:
Using wealth management company to manage assets
Posted: Fri Jun 01, 2007 4:28 am
by Desi
Seriously, there is enough material here in this forum for you to save yourself a pretty penny.
They will make fancy pie charts for you but you would have no idea how much money is being bilked from you in various expenses (hidden ) and selling you products that you probably do not need but generates commisions for them.
Using wealth management company to manage assets
Posted: Fri Jun 01, 2007 4:48 am
by Leha-Leha
Desi;26882I will do it at half their price and better:emteeth:
Desi, maybe you should start a hedgefund.
Seriously speaking, I agree that it is not a good idea to let someone else manage your money. If you understand the fund manager's investment strategy, and believe that your risk appetite is in line, you may invest a certain portion of your wealth for the purpose of diversification.
Having said that, if you understand sophisticated financial products, and want to express views to enhance returns, you may want to open a private banking account to have access to these products. UBS is clearly the best, but has much higher minimum fund requirement. ING and Coutts are good alternatives. ICICI PB is not a bad choice either. Last time I heard, their requirement is INR 1 Crore. As Desi said, you have to watch out for aggressive selling!!!
Using wealth management company to manage assets
Posted: Fri Jun 01, 2007 6:13 am
by Desi
bigb;26880We're returning to India in June'07 and have $300K+ from the sale of our home in US and 401(K) savings of $150K+.
We are considering taking service of wealth management companies like Bernstein/Merril Lynch.
Does anyone have experience or opinions on these? Here's a quick situation:
Ages: 38 (My wife and I)
We will both work in India in the IT industry
We have purchased a flat in India (Pune) with 20% down and an EMI of INR 25K/month that we plan to finance with jobs in India.
We have two kids (6 and 2)
Thanks in advance for your advice.[/quote]
I suggest that you go thru a few AAPs done here and in MSN forum. Take your time and read thru the threads. That time if it takes you a month to go thru will save you a lot of money.
Services such as these do not come cheap and do not add value. Typically services such as these charge 1% to 2% of assets per year for fees. If the assets exceed a million dollars, some may be willing to do it for about 0.8%.
That is not all, you get sold high expense and high commisions generating stuff. Mutual funds with high load and expense ratios are sold. All said and done, you could be paying 15K to 20K per year (3to 4%) which you should not be paying. Remember that not all of this expense will be visible to you.
Do not fall for annuities, life inurances of any kind except "pure term life insurance". Remember that life insurances are not sold as "life insurances" but rather as savings and investment plans etc and they have a huge cost. If you want to buy life insurance buy nothing else but a pure simple term insurance.
Do not fall for these investment vehicles that supposedly give you life insurance for "free" sold as guaranteed return of money etc.
Same thing for annuities. Do not buy them. Do not go for individual stocks.
Divide your long term money into two buckets, one bucket for fixed income and second for equity mutual funds.
Then within each bucket what to put, I suggest go thru some AAP threads.
I highly discourage the use of these wealth managers.
Using wealth management company to manage assets
Posted: Sat Jun 02, 2007 4:36 am
by KRV
Vanguard also offers this service for clients who have at least $500K to invest. Their fee is 1% and goes down for larger asset sizes. Even though their investment advisors are salaried and generally use Vanguard investment products, you should not that this annnual fee is on top of what the underlying mutual funds themselves charge.
Ask yourself if you cannot afford to spend at least some time to understand the basics of AAP and long term investing, to save at least $5000 a year, which will only increase as your asset size grows each year!
Using wealth management company to manage assets
Posted: Mon Jun 04, 2007 9:55 pm
by Bhaski0407
Agree with Leha on access to sophisticated financial products.. In my view, It may be a good idea to have wealth management firm to manage if assets go beyond certain level.. it gives diversification and gets better returns then market during down turns.. I have been looking to enter into hedge funds at limited scale.. but I am not finding any good options that are offered outside these wealth management firms..
As per the fees, Desi mentioned.. if you are financial savy enough to understand and follow an AAP (Vanguard or Fidelity) by yourself, you will be able to get an idea of what wealth management firm is selling to you in advance, its underlying costs.. And how you portfolio is doing compared to indexes..
I am not investing through wealth management firm yet, but I am looking for one.. I wouldn?t mind paying extra bucks.. if great minds are working on my money to beat the market averages? Please let me know, if guys have any experience/use wealth management firm
Using wealth management company to manage assets
Posted: Mon Jun 04, 2007 10:26 pm
by KRV
I am looking for a firm that can agree to the following "pay for performance" regimen, I would not hesitate to invest with them:
1. Actual Performance: Below Benchmark* Return
What they should commit & Why:
Make up for the underperformance with their own reserve capital contribution
to match Benchmark Return (This applies for the first 3 years to avoid serious
capital erosion due to mis-management but can be relaxed after 3 years of outperformance)
2. Actual Performance: Marginally better (Upto 2%) than Benchmark Return
What they get & Why:
They can retain 20% of return above Benchmark return
(Reward sharing for marginal out-performance)
3. Actual Performance: Significantly better (>2%) than Benchmark Return
What they get & Why:
They can retain 50% of return above Benchmark return
(Substantial reward sharing for substantial out-performance)
* Benchmark is what each investor would choose based on his/her own risk tolerance and capital growth expectations. It will not be a simple fund like S&P500, but rather an investable mix of low cost index funds. For eg, for some one with 70:30 S:B, a benchmark could be derived as: 35% Total Stock Market Index Fund (Vang. or Fidelity), 35% VGSTX (Vang. Total International Index Fund), 30% VBMFX (Vang. Total Bond Market Index). This should be the alternate the investor would have chosen had he/she not hired the wealth management firm.
Is there a firm out there that can agree to the above? :emthup:
Using wealth management company to manage assets
Posted: Tue Jun 05, 2007 1:37 am
by bigb
Thanks Desi, KRV and all. I guess, I have a lot to chew on.
I have had poor experience with me managing my own money. I put money in mutual funds and some stocks suggested by friends. But, due to time-pressure from work and family, never get a chance to watch out for it like probably you guys do. Let's accept it, we're not investment savvy and quite conservative.
Our current assets are savings of hard-work by my wife and me for over 10 years in the Tech-industry and we do not want these to be touched if we don't have to until our kids grow.
At the same time, if we leave it as is, it will stale due to inflation. This is the reason I thought of using this firm so that I could 10% or so return and manage expenses using new jobs in India.
If for some reason, we need to come back, we will look at this money to jump-start our lives in US again. Or if we continue living in India, we will use it to fund our retirement, kids education, some charity etc.
I will ask the reps from these companies the questions KRV posted.
Thanks once again!
Using wealth management company to manage assets
Posted: Tue Jun 05, 2007 1:55 am
by Mel
KRV #8,
EHHH.... not worth my time, too little incentive for me. :emteeth:
If you remove that first requirement, I think you will find many takers. :emwink:
Your last requirement about the mix of stocks and bonds that the investor chooses is actually the toughest requirement. NO ONE will accept that if they are supposed to beat the benchmark. The only way Warren Buffet or anyone else beats the benchmark is by not diversifying into several thousands of stocks but concentrating into a few that they think will outperform - moving to cash when required - means less % in stocks for some time being.