• Matt Morizio

How your financial advisor makes $10,000 per hour


“I’ve been so busy I haven’t been able to rebalance my clients’ accounts in 10 months.”

Those were the words of an advisor managing hundreds of millions of dollars of people’s hard earned savings. Hundreds of millions of dollars that have been ignored for 10 months, and he’s getting paid a lot to ignore that money.

And know what’s worse? He really doesn’t need to do anything. That’s how most of my industry operates.

I call it “The $10,000 Conversation.”

A typical advisory fee to manage someone’s money is 1% of the total assets under management (AUM) per year. If you have $1,000,000, you will pay your advisor $10,000 a year to put that money to work. That’s not your total out of pocket cost, but if you want to go down that rabbit hole, click here.

Here’s how a typical year looks when hiring a financial advisor:

You will have a long and confusing conversation about risk tolerance, volatility, standard deviation, Sharpe ratios, PE ratios, and a bunch of other industry jargon that will confuse you into believing the person across the table knows a lot more than you and you’re being taken care of. You will settle on an “appropriate asset allocation” according to your risk tolerance.

Your financial advisor will then invest your money in a mix of funds (mutual, index, ETF’s, etc), and those funds all have fund managers around the country, who you also pay, who make the buy/sell decisions within the fund. Your advisor is hands-off at this point.

So, in other words, after that hour long conversation where your “asset allocation” is determined, your advisor doesn’t really do much with your money.

This “not doing much” cycle continues for about 12 months until you get an email from your advisor saying something about it being time for your “annual review.”

You regroup over coffee, and the meeting sounds a lot like the long winded conversation you had 12 months prior. By the end, you feel your head nodding while your advisor talks about a couple changes to your portfolio based off some head winds…or tail winds…or geopolitical something or other….it’s all confusing and all you really care about is getting out of there quickly.

So, the changes are made with your approval, which takes your advisor all of 12 minutes, and the cycle continues. Wash. Rinse. Repeat. Another hour, another $10,000 for the year, and another round of golf for your advisor.

Even though I know this, and even though I was sitting in your seat not long ago as an investor, under the same impression that my money was being closely watched by my advisor, I’m still surprised and frustrated when I hear money managed this way.

You deserve to have someone look at your investments daily. You should expect your advisor to be part of your financial life. You’re paying someone to help make sense of your finances; sometimes that means weekly talks, sometimes quarters pass and not much conversation is needed.

But never should your money be ignored for 12 months.

I don’t even host “annual reviews” as a common practice. If I’m doing what you pay me to do, I’m continually putting your money in the best position to win. For us at Beck Bode, that means looking at all holdings daily and trading every six weeks in growth accounts.

By the time 12 months comes around, we may have made 20 trades in your growth account, so an annual review to “discuss your portfolio” doesn’t make much sense. That’s an ongoing conversation throughout the year.

And since we use individual stocks and not funds, we are the ones making trades, not some portfolio manager in another part of the country.

So next time your annual review rolls around, think twice about how far your $10,000 takes you. Your advisor needs to work more than an hour per year for you, unless you really believe they are worth $20,800,000 per year.

Want to learn more about Beck Bode? Click here.

Follow me on Instagram or connect with me on LinkedIn to get to know me better.

#FinancialAdvisor #Investing

63 views

Investment advice offered through Beck Bode, LLC, a fee-only Registered Investment Advisor in the Greater Boston area.