Personal Investments • How to convince parents of the dangers of financial advisors/fees?

My dad and I have been in a bit of a frustrating situation. One of their IRA accounts with about 500K of value in it currently has been under active management with a 1% management fee and average ER's of about 0.4%. The account started out in Fidelity with about 445K in value, so about 51K was generated under this active management. The advisors fees add to about 6K YTD, so if you subtract the fees, my parents "see" about 45K in gains.

I priced out 3 Fidelity Index funds to reflect the same asset allocation the advisor had: 40% Bonds, 40% US Equities, 40% International Equities. Doing so, the same 445K invested generated about 47K. In other words, the index funds generated about 2K more compared to the active funds

My dad argues with me and says that actually, the active fund generated 51K total (before advisory fees), while mine generated only 47K in gains. He uses this as an argument that the "special funds" that an active manager has is worth the fees and active management because they generated a lot more in returns. I tell him that this is incorrect thinking because even though 51K was generated to my 47K, they removed 6K from the 51K in their fees. He then says that if this is only a 2K difference, why even do it yourself? The discussion continues to go in circles.

Who is right? And what are your thoughts? Thanks in advance.

I think you are right. Problem is, the money is your Dad's and not yours and he will do with it as he sees fit. It is not your monkey, it is not your circus.

You can be thankful that he is at Fidelity and not somewhere else where his fees would be even higher. What he is paying for an Advisory service is not outrageous but if he could do this himself with index funds, we would likely do better. That being said, there are logical reasons why people employ Advisors.

Statistics: Posted by medicineman694 — Sat Dec 09, 2023 10:43 pm — Replies 67 — Views 2301