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Old 02-05-2016, 09:32 AM   #41
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.......... If they're outperforming then the fees are well-spent. Would you choose a fund with a 0.5% expense ratio and a 5% average return after expenses over a fund with a 2% expense ratio (assuming similar investment objectives) and an average net return of 6%, just because the former has a lower expense ratio?
Given two investments with equal risk, this scenario seems like a slam dunk. The problem is that I've never seem a convincing argument that the better performing managed investment can be chosen in advance. Looking backward, it happens, but only for the lucky.
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Old 02-05-2016, 01:22 PM   #42
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I am a financial advisor. Some people are perfectly capable of handling their own investments without the help of a financial advisor, some are not. The thing that makes managing your own investments difficult is that it isn't just money. Its your life savings, its your security and its the difference between working longer or retiring, and also living comfortably in retirement or not. It's a very emotional thing and it is hard for some people to make rational decisions about their money when the stakes regarding failure are so high. ...
Two things -

First, if making a DIY investment decision is so terribly difficult and emotional and fraught with irreversible failure, how does this same person make an intelligent, safe decision on choosing an FA? How would one even evaluate an FA, if they don't know about investing in the first place? Do they just trust them? A lot of people trusted Bernie M.

As we have said here many times, once you have learned enough to evaluate an FA, you have learned more than enough to DIY.

Second, explain what is so difficult about dumping all your money in a target retirement fund, or choosing any AA between 50/50 and 90/10 and dumping that in a an index SP500 and index Bond fund?

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Don't tell everyone they can do it alone- everyone can't!
I do';t believe anyone said "everyone can". But I do';t see how anyone who was intelligent and motivated enough to earn and save a large portfolio would not be able to read a little understand that they can pick an AA and buy a couple funds and let it ride, and that there aren't any FA's with a secret sauce out there that can reliably beat the market after expenses (or maybe even before, not that it matters).

Can you share public information that shows your clients have done better, after your fees/expenses, than a couch potato or other simple DIY, low effort portfolio? I'll wait.

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Old 02-05-2016, 01:25 PM   #43
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Andy Sr, our experience has been the small fee's to our FA and CPA, are well worth it.
And how did you determine this?

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Old 02-05-2016, 01:31 PM   #44
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Given two investments with equal risk, this scenario seems like a slam dunk. The problem is that I've never seem a convincing argument that the better performing managed investment can be chosen in advance. Looking backward, it happens, but only for the lucky.
I agree- I deliberately chose a simple example but the bigger the expense %, the more you have to outperform the benchmarks to justify your existence- and that can mean taking on more risk. This is something I've been watching in my own portfolio and I've gradually been shifting to products with a lower expense ratio and, in some cases, individual stocks and bonds. If I did it all at once, I'd get killed on the taxes in the taxable accounts.
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Old 02-05-2016, 02:09 PM   #45
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I think ugeauxgirl has some valid points. As background, I am a devoted DIY investor and have been for years but BIL and a good friend are FAs (I don't use them but hear their war stories, especially when markets are skittish).

There are some people who are just too skittish to DIY... while it is simple to most of us these people need some hand-holding.... particularly during periods of market volatility. I know a few retirees who were DIY and bailed when things were bad, never got back in an lost out on the rally... these people are still doing fine it is just they lost a nice opportunity... a good advisor likely would have convinced them to stay the course or only moderately pare back their holdings.

There is no logical reason why everyone can't DIY... its pretty easy IMO... but a small set of people are too emotional about their money and lack the self-confidence to really do it.

We don't know enough about Andy Sr. to know which camp he falls into but I still think MOST people can DIY and those who can't/shouldn't are a small subset of the total population.

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I am a financial advisor. Some people are perfectly capable of handling their own investments without the help of a financial advisor, some are not. The thing that makes managing your own investments difficult is that it isn't just money. Its your life savings, its your security and its the difference between working longer or retiring, and also living comfortably in retirement or not. It's a very emotional thing and it is hard for some people to make rational decisions about their money when the stakes regarding failure are so high. If you are not sure if you can stick with your plan if your portfolio declines in value by 25, 40 or 50%, you may want to hire some help. If you can stand the volatility, you will certainly get off cheaper doing it yourself. Financial Advisors, (like Doctors, Lawyers, Accountants, Engineers etc all have to earn a living)

Financial Advisors are accustomed to being "interviewed" by prospective clients. He/she should explain all of your options and all of the fees, and explain what you expect to get in return for your fees. Referrals are a great idea- one of the best indicators of a good financial advisor is when they advise you of something that is clearly not in their best interest- its in yours. Ask your friends which of their advisors have told them NOT to sell in a down market, have discouraged them from buying "hot stocks" they heard about on the golf course, and have steered them away from expensive products they don't need.

Y'all are a very self-sufficient bunch. Anyone who has the self-discipline to accumulate the assets you have requires intelligence and good decision-making skills. Recommending to EVERYONE that they invest on their own assumes that they have the same er, intestinal fortitude that you do- could be a mistake. Tons of investors sold out during 08-09 and will never recover from that loss. Don't tell everyone they can do it alone- everyone can't!
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Old 02-05-2016, 02:24 PM   #46
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"There are some people who are just too skittish to DIY... while it is simple to most of us these people need some hand-holding"

"but a small set of people are too emotional about their money and lack the self-confidence to really do it"

pb4uski, painting with a pretty broad brush there aren't you?
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Old 02-05-2016, 02:38 PM   #47
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I don't think so.. why do you say that?
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Old 02-05-2016, 03:05 PM   #48
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Was wondering what most people think of financial advisors versus leaving my money in my company 401K. There's a few people at work that are taking their funds from there 401K and transferring them over to personal financial advisors. Not sure how to find a good one. Not sure if it's a good move.

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About ten years ago, my significant other retired and moved her investments (first changing them into cash) from her employer's 401K plan (or whatever it was called) to Vanguard. It was a simple process (thank goodness, as we are simple folk). The rep at Vanguard walked us through the process (several times). Selecting the Vanguard mutual funds wasn't difficult, especially after having read various investment threads on this board. Anyhow, there have been no regrets since moving to Vanguard. And, if you should become uneasy during a financial downturn and have a need for handholding (or whatever else you might desire to be held) members of this forum can be quite helpful.
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Old 02-05-2016, 03:41 PM   #49
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I'm not sure what the threshold is for free FA guidance from Vanguard, Fidelity etc but it's not that high. That advice is, in my opinion, at least as good as independent FA's.
So, for those people who are "skittish" there is an excellent option beyond turning over 1% of their assets each year.
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Old 02-06-2016, 10:08 AM   #50
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I don't think so.. why do you say that?
Was I not clear in quoting you? Do you have first hand knowledge as an FA and the reasons folks use an FA? Have you ever utilized the services of an FA?

We do use an FA and would not consider ourselves "skittish" or need "hand holding".

Our FA and the team provide a tremendous service, and we're extremely appreciative of the service.
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Old 02-06-2016, 10:21 AM   #51
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"There are some people who are just too skittish to DIY... while it is simple to most of us these people need some hand-holding"

"but a small set of people are too emotional about their money and lack the self-confidence to really do it"

pb4uski, painting with a pretty broad brush there aren't you?
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I don't think so.. why do you say that?
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Was I not clear in quoting you? Do you have first hand knowledge as an FA and the reasons folks use an FA? Have you ever utilized the services of an FA? ....
serie1926 - No, I don't think he used a broad brush, he said "some people", and "a small set of people". He did not say "everyone". I suspect that "most" do it for some hand-holding, wouldn't that be reasonable assumption? What other reasons would you say?


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Originally Posted by serie1926 View Post
Was I not clear in quoting you? Do you have first hand knowledge as an FA and the reasons folks use an FA? Have you ever utilized the services of an FA?

We do use an FA and would not consider ourselves "skittish" or need "hand holding".

Our FA and the team provide a tremendous service, and we're extremely appreciative of the service.
You have not explained what services they provide, or what 'small' is, or how you determined their worth: "small fee's to our FA and CPA, are well worth it."

I think that would help the discussion - reasons, pros/cons, rather than just 'we like it'.

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Old 02-06-2016, 10:57 AM   #52
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"First, I'm going to sell you long term bonds that are totally inappropriate for someone who shouldn't even buy green bananas." -Fast Eddie

I damn near spit out my coffee...
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Old 02-06-2016, 01:04 PM   #53
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I would prefer to see people pick an institution as the FA, if they must. AUM fee of .50% to .75% seems reasonable. There will be downward pressure on such fees as more of the public becomes educated.

If you pick the other type of FA, there are too many unknowns, in my opinion. One setback becomes clear when you are under the care of an FA, and the market goes sideways or down. You still pay the FA. My inlaws were in that situation. They were early 70's age, and could not understand anything about the situation they were in. However, my FIL sensed something deeply wrong when market started tanking in 08, but his fees and trading expenses were growing. CHURNING, pure and simple.
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Old 02-06-2016, 07:51 PM   #54
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"There are some people who are just too skittish to DIY... while it is simple to most of us these people need some hand-holding"

"but a small set of people are too emotional about their money and lack the self-confidence to really do it"

pb4uski, painting with a pretty broad brush there aren't you?
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I don't think so.. why do you say that?
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Originally Posted by serie1926 View Post
Was I not clear in quoting you? Do you have first hand knowledge as an FA and the reasons folks use an FA? Have you ever utilized the services of an FA?

We do use an FA and would not consider ourselves "skittish" or need "hand holding".

Our FA and the team provide a tremendous service, and we're extremely appreciative of the service.
Actually, pb4uski tends to be even-handed in his replies (unless he's ranting about the loser Patriots). But, putting that aside, his post made it clear he was talking about some people and later a small set of people. So, he was not using a broad brush, but a brush that was the appropriate size. For some reason, you took that brush, turned it into a laser, pointed it at yourself, fired, and hit your target. Nice shot.
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Old 02-07-2016, 12:32 AM   #55
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As life, investments, and taxes get more complicated, a good FA could have saved me a lot of work. Of course, I wouldn't know if that FA was good unless I did the work and ran my numbers to check anyway. Most of what I get for FA advice goes against my experiences and against my situation. I work at understanding tax code details.
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Old 02-07-2016, 09:01 AM   #56
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A bit dated but nonetheless a good article.
The Cold, Hard Truth About Brokers and Financial Advisors
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Old 02-07-2016, 11:24 AM   #57
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Was I not clear in quoting you? Do you have first hand knowledge as an FA and the reasons folks use an FA? Have you ever utilized the services of an FA?

We do use an FA and would not consider ourselves "skittish" or need "hand holding".

Our FA and the team provide a tremendous service, and we're extremely appreciative of the service.
I actually do have first-hand experience and pb4uski described exactly why SOME folks use a FA. Despite my best efforts to explain how expensive her FA is, and how she could do as well (or likely better after fees/expenses) by letting me manage her finances, my mother sticks with her FA precisely because she needs "hand-holding". In other words, she doesn't have the confidence to do it herself, doesn't want to burden me with it, and there's probably a little bit of pride in being "self-sufficient" and not reliant on her son for her finances. To her, it's worth paying $6,000 per year or more in straight advisor fees, not to mention loads and ridiculous expenses on bad funds. I've said my piece, and now I'm quiet about it because she's comfortable and trusts her FA for some reason, I don't know what.

I can't think of a more rational reason to pay someone that much money other than lacking confidence to do it yourself (hand-holding) or wanting guidance in the down times to keep you on course (being "skittish").

Perhaps you should explain to us why you choose to pay someone if you don't require "hand-holding" and are not "skittish" in down markets? I ask because in my experience with folks who use FAs (mom is just one of a few I know), pb4uski's general description fits. You've taken umbrage with it, thus you must have another reason, so please explain if you would!
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Old 02-07-2016, 11:44 AM   #58
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I know some of us preach DIY when it comes to investing. And claim that those with FA's require "hand-holding" or are "skittish". Although I manage most of my investments now, I was lucky enough to have an experienced FA managing our company 401k for almost 30 years. He certainly provided me with some investment knowledge and "hand-holding" along the way.
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Old 02-07-2016, 11:47 AM   #59
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I know some of us preach DIY when it comes to investing. And claim that those with FA's require "hand-holding" or are "skittish". Although I manage most of my investments now, I was lucky enough to have an experienced FA managing our company 401k for almost 30 years. He certainly provided me with some investment knowledge and "hand-holding" along the way.
Maybe it's the choice of words that's rubbed some the wrong way.

Is it correct to say some people use a FA because they require "guidance" and "perspective" when it comes to investing their money?

I mean if all this comes down to is word choice, then there's nothing to discuss. I'd just like to know the rationale behind paying someone that much money if it's not because you require guidance and someone to help maintain perspective. Maybe I'm really missing out.
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Old 02-07-2016, 11:54 AM   #60
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Maybe it's the choice of words that's rubbed some the wrong way.

Is it correct to say some people use a FA because they require "guidance" and "perspective" when it comes to investing their money?

I mean if all this comes down to is word choice, then there's nothing to discuss. I'd just like to know the rationale behind paying someone that much money if it's not because you require guidance and someone to help maintain perspective. Maybe I'm really missing out.
I'm not chastising the word choice. I'm fine with "skittish", "hand-holding" or "guidance" and "perspective". I just wanted to point out that I learned a lot from an FA along the way to managing my own investments. And I still question DW's FA on investment choices. My point is that FA's are and have been helpful to some of us that now manage our investments.
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