"Do you believe that an advisor should make less money because you invest $1,000/month instead of $12,000 upfront for the year? That appears to be what you are saying."
Well they will, with any %age fee, due to the time value of money.
Many financial groups, like banks and loan servicers, institute discounts for regular mechanized transactions. I don't see a real reason for a difference here.
Note though that I'm not arguing against a %age fee. Again, I'm saying that the fee appears to be high relative to the competitive options. If PA had some amazingly talented hedge fund manager running the fund, then maybe (if I wanted that much risk) I could see paying more in fees. I haven't seen anyone argue that PA's performance, or fees, are particularly good.
I believe that a continued 4.75% sales commission is too high given the service provided in this instance, and I will encourage my father to pursue other options because of it.
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"There are plenty of cheaper options. The cheapest option is to stick your money under your mattress. There are no fees at all. My sarcastic point is that it is a mistake to focus on fees instead of performance. Fees are just one factor of many that will determine the performance of an investment."
Of course. But fees are one of the more concrete examples that a client has to work with. Past performance does not guarantee future results, yadda, yadda, yadda. There is a certainty available with fees that is not inherent with performance.
Anyway, I have yet to make specific performance comparisons (beyond looking at the cap-ratings, if indeed they incorporate performance).
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"Does anybody really believe that there is a big difference between the share types? Really. Don't you think the mutual fund companies ran the numbers and make the same amount or more on other types of shares when looking at a longer term investment."
Obviously, I hadn't gone through a thorough analysis when I agreed to buy the 529-B shares. I hindsight, given the time value of money, I'm still not 100% cerain that it makes less sense to avoid the 5.75% upfront sales charge today, in exchange for deferred 80-100 BP charges (admittedly, on a larger pool of money) over later years. It appears that the discount and hurdle rates chosen would be key to the analysis over the time horizon (for VA CA 529-Bs, 8 years). My initial guess was that it roughly nets out.
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"A prior poster said that he is not working with an advisor and not paying any up-front sales charges, and that he's only paying the annual fee."
Not quite. I never said I wasn't working with an advisor for the VA 529. I'm considering not working with an advisor for one or two future 529s.
[This message has been edited by DC Chak (edited May 04, 2006).]