But first . . .

Flynn: ‘The other day I took a ride in a Toyota Prius, a hybrid car. It’s silent when idle at stops – no noise, no guzzling gas. You’ve got to get yourself in one and take a drive. The new technology it delivers is simply wonderful. (Extra plug: check out the Union of Concerned Scientists, whose good work on the subject makes one sit up and take notice.)

☞ I watched in awe on C-SPAN as Republican Minority Leader Trent Lott derided such cars on the floor of the Senate last month. But, yes, fuel-efficient vehicles are clearly the future.

And now . . .

Eric E. Haas: ‘[With regard to yesterday‘s comment on Vanguard’s $500-or-less financial planning service], I wanted to add that, not only is $3,000 too much for a good financial plan, but 1% is too much for good asset management services. Altruist Financial Advisors does fee-only Comprehensive Financial Plans for $1,450 and outstanding asset management for 0.6% of assets managed. Perhaps most significantly, this company is the only one in the country, to my knowledge, which offers a Complete Satisfaction Money-Back Guarantee on both of those services. On average, each of Altruist’s financial planning clients saves about $5,000 per year based on their advice (i.e., the service usually pays for itself in less than a year). I agree with you that many people can do pretty well following the investment advice found in the minority of good investment books available. However, I agree with the anonymous Vanguard employee that many people could benefit more from competent professional advice, particularly if there is a complete satisfaction money-back guarantee. This recommendation may be self-serving (Altruist Financial Advisors is, well, me), but I believe in it.’

☞ Studies show that the average net worth of the readers of this column is $17 million, give or take, which accounts for all the upscale advertising you see here everyday from Rolex and BMW and Prada. But the numbers are skewed, because included in the average is Bill Gates, who comes to check the Gates $$$ Clock to see how much money he has. Deleting Bill from the calculation, the average net worth of the readers here is $19,231. (I was this close to getting Walgreen’s to advertise their clothing line, but even that fell through.) And I raise this simply to point out that however good Eric’s counsel may be (and I’m sure he would agree), even $1,450 is a lot for someone with fairly limited investable funds. Even at $100,000, it’s 1.5% of your whole net worth – or a third, say, of what you might earn in municipal bonds. As for a .6% asset management fee, it may be very reasonable, but it nicks your expected return by .6% (which for most people would not be tax-deductible). If you have $100,000 that compounds for 25 years at 5% after tax instead of 5.6%, it grows by $238,000 instead of $290,000. So there’s a lot to be said for keeping your investment expenses low.

Our Own Estimable Less Antman: “Although $500 is quite a reasonable price for the portfolio review that Vanguard is calling a financial plan, it must be noted that all this buys you is a list of Vanguard funds and dollar amounts to invest in them (they also suggest which of your current assets to sell in order to buy these Vanguard funds). Those who think that estate planning, insurance needs analysis, tax planning, goal-setting, spending, saving, and debt management are also part of a financial plan might balk at their description of their offering as a financial plan. They do, for another $500, issue a report on the ways to reduce or eliminate estate taxes and probate fees through proper titling of assets and standard will and trust arrangements (you implement without their help), and for another $500 they will do a retirement needs analysis. At this point, you’ve spent $1,500 and have around half of a comprehensive financial plan. So they are offering a fair deal but not an extraordinary one. I’m not panning their offering, but merely the assertion of the Vanguard representative that you have mischaracterized the cost of comprehensive financial planning. A list of funds to buy is not a financial plan.’


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