Recently, as the stock market has gyrated from a surprisingly up year last year into an early “correction”, I’ve been thinking about returns – and financial advisors – and it seems to me that we can (and need to) do the “advising” model better. A friend of mine has been attending a 6 week lecture series on personal wealth, and the group has heard from a financial planner, a tax attorney, an estate attorney, a stock broker and a cpa – all of whom are potential players on a personal financial team – and the information they’ve shared has, by and large, been really helpful for him as he seeks to increase his personal knowledge and make thoughtful choices. As he was reflecting on the course thus far, though, and doing the math (not complicated – simple addition) – he realized that if he hired each of these professionals at their stated rates, he would be paying an annual rate of 6% of his wealth – in fees. (I should say that he depends on this portfolio as his income source). “I’m just learning about this, but this is my perspective: I’m being told that over the long term, a conservative expectation for returns is 4-6% in this ‘new normal’ economy. If I’m paying these professionals 6% in fees, and I’m only making 4-6%, I’m going to be spending the principal so I can pay myself. Which means that if I have a budget of spending 6% of my portfolio annually, I need a return of at least 12% annually, or I’m behind the eightball before I start.” It’s true that he probably doesn’t have to hire ALL of these professionals at the same time for an annual fee, but can we understand how confused, upset, angry – you name the emotion – people get when they are trying to plan for their financial health – and end up paying for everyone else’s??? I don’t know what the perfect solution is (yet), but something’s gotta give – and support a healthier conversation – and solution.