$10k goes to the advisor. The portfolio can only withstand a $40k draw down. If you draw down $49600, then that is 4.96% not 4%.The math is not right. With no advisor and $1M, 4% is 40K. With an advisor, $1M - 1% = 990,000. 4% of that is $39,600. You have exactly 1% less with an advisor - not 25% less of the income. If the portfolio is averaging 4% a year gain over years (pretty bad), then a 1% fee is a BIG deal.You should expect your returns to be less than a portfolio of equal risk because the advisor is charging you an AUM fee. Also, you should expect less if the advisor is putting you in funds with higher expense ratios (ER).
1% may not sound like a lot, but if one is living off of a portfolio and taking out 4%/yr (rule of thumb for planning), then the advisor is taking 25% of your income. That 1% becomes a lot.
Statistics: Posted by mhc — Tue Dec 12, 2023 11:15 pm — Replies 29 — Views 1649