Originally Posted by Connemara
It's often even more costly than that. Money managers exist to make money...for them, not you.
Clearly they are doing it to provide a income, that much should be clear to everyone involved, to say or imply otherwise is foolish. That said a person who takes a certain level of pride and has some decent self respect will know that they have to also add some level of value to the mix or they will be out of a job as grinding clients for trades doesn't work. This can be found in a few different areas like asset selection, risk management, income enhancement or just plain advice in the simplest of forms.
I would agree that 1% or greater can be a hefty fee to pay and most people who are in the position to need a manager would/should be paying less but there is a degree of fault of the consumer to make sure that they are paying a fee that is both fair and stated up front. I find it hard to feel sorry for people who purchase something, advised or not, where the fee is found to be higher than expected after the fact.
All wrapped up I think that 0.3-0.9% is fair for 90% of the people I meet, clearly the larger the household the smaller the fee becomes but there is also a factor of the asset mix that comes into play. A higher weighting of equity vs fixed income will tend to make the process more costly to the client(hence the 0.9 range). The hedge fund people have done a amazing job telling people that 2-3 and 10-30 is fair which makes me roll in my head.
Again it all comes down to those three topics that I mentioned before and if you have all three. If so than you should be able to do a fine job as long as you don't think that you have any insight on where the market is going, no one does. Making large bets on the direction of anything is just that and was best done in Vegas when they would give you free drinks to do so. Think with a real plan and a goal for what you want the investement to do as you will never have another chance after the fact. Most people I meet are in the later stage of life after they have blown up a sizable chunk of money, sad.