No. of Recommendations: 4
“I don't see how I can continue with Fidelity, though, given the fees and long-term gap between what I'd consider my target benchmark given my target risk. Over my time with them, the cumulative underperformance difference is over 100%.”
FYI, I ran the numbers as I see quarterly data from my 85yo mother’s account managed by a wealth mgt. firm who then has a 3rd party firm choose the specific funds & trades & allocation. The account has been created from our desire to be US focused and predominantly large cap focused with very mild bond exposure, as she is really focused on growing these funds for the next generation and will not need to tap into them to any significant degree.
Here is what I found 2023 thru Q3:
Wealth Mgt(WM)acct up 9.76%
S&P up 13.07%
BRK up 15.2%
5 year returns of WM-6.05% gross, yet 4.60% net of mgt fees
5 year S&P 9.92%
5 year BRK 11.7%
She is paying well into 5 figures in annual mgt. fees yearly (1.2%, I believe) and the current WM account value is over 17% less than a similar funded family account managed by me and my brother from a similar starting point over the last 8 years. I estimated 2/3 of this six figure underperformance gap is based on the WM advisor’s choice of underperforming funds and 1/3 is based on the mgt fees.
Mom truly likes the WM team but she has paid a dear price. We may present her the real data and see if she has any inclination to shift a portion of the WM funds to our self managed approach. Obviously, it is her choice. Either way, we feel better that her eyes would be wide open as to the real six figures less growth from compounded weaker fund performance + mgt fees.
