IFA and DFA Fee Calculator
1. Custodians have additional trading costs, but they are not an annual percentage of assets under management, see here. Also see IFA's fee schedule and/or request a copy of the ADV Part 2 by calling 888-643-3133 and asking for an Investment Advisor Representative.
Morningstar Report on Advisor Value
Investors can benefit from enlisting an investment educator or mentor who will focus on changing their investing behavior, encourage long-term investing, and discourage the gambling practices of trying to beat a market.
The fund tracking service Morningstar started disclosing these "investor returns" in 2006. On the Data Definition page of their web site, they state that "Morningstar investor returns (also known as dollar-weighted returns) measure how the typical investor in that fund fared over time, incorporating the impact of cash inflows and outflows from purchases and sales. In contrast to total returns, investor returns account for all cash flows into and out of the fund to measure how the average investor performed over time. Investor return is calculated in a similar manner as internal rate of return. Investor return measures the compound growth rate in the value of all dollars invested in the fund over the evaluation period. Investor return is the growth rate that will link the beginning total net assets plus all intermediate cash flows to the ending total net assets."
Now that Morningstar is tracking such data, investors bad behavior is finally quantified, as well the advantages of using a passive advisor who helps reduce investor error. In the Morningstar Indexes Yearbook: 2005, they analyzed how the average index investor did on their own versus those that are guided by an advisor using asset class index-type funds from Dimensional Fund Advisors. Here is what they had to say:
"Consider the success Dimensional Fund Advisors (DFA) has had in selling its funds through advisors who undergo training on the merits of passive investing and in portfolio construction theory. Consider that over the past decade the dollar-weighted return of all index funds was just 82% of the time-weighted return investors could have gotten with those funds. Yet, the figures for DFA are much better. In fact, the dollar-weighted returns of DFA funds over the past 10 years are actually higher than their time-weighted returns [see Table 1-3]. Suggesting advisors who use DFA encourage very smart behavior among their clients, even buying more out-of-favor segments of the market and riding them up, rather than buying at the peak and riding the trend down, which is usually the case with fund investors."
The emotions of active investors go up and down like a roller coaster, leading them to negative returns on average, after expenses and taxes are deducted. The lessons in this 12-Step Program should help investors to resist the behaviors that have caused them such despair and poor results in the past.