Financial advisors

[ERD50]

"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?

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? ....

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?

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'.

-ERD50

 

[nash031]

"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...

 

[target2019]

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.

 

[redduck]

"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?

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.

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.

 

[devans0]

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.

 

[frayne]

A bit dated but nonetheless a good article.
The Cold, Hard Truth About Brokers and Financial Advisors

 

[nash031]

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!

 

[Ronstar]

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.

 

[nash031]

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.

 

[Ronstar]

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.

 

[urn2bfree]

1)should the money stay in the 401k?
That depends. Some 401k's offer reasonable investments, others are sadly inadequate and are milking the investors with fees that might make the average Financial Advisor jealous.

2)if you move the money out should you use a FA?
That also depends. You could be fine doing it yourself. Here are 8 good possible constructions from obliviousinvestor.com
http://www.obliviousinvestor.com/8-sample-and-simple-portfolios/

Your tax situation may be complex and professional advice could help.
You may believe that DFA funds are worth investing in.
http://www.bloomberg.com/news/artic...d-s-shadow-small-firm-scores-tweaking-indexes
"Over the past 15 years, almost 90 percent of the company’s stock and bond strategies with a track record that long have topped their benchmarks, Dimensional data show."
You MUST use an advisor if you want to invest with DFA (or have access thru an institution like the Utah 529 accounts or a 401k). If you want to go that route use a low cost advisor with low flat fees or low AUM if your portfolio is small enough that the AUM fee is less than the flat fee. (Portfolio Solutions charges 0.37% for access to DFA. I have a large enough portfolio that my flat fees amount to less than 0.07% - and will get less percentage wise if my portfolio grows)



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[nash031]

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.

Why and what did they provide that was helpful?

 

[Ronstar]

Why and what did they provide that was helpful?

Primarily AA assistance. I was 31 in 1986 when I first got into a 401k. There wasn't a plethora of information out there on investing for retirement. Our 401k FA would meet with each employee annually, discuss their situation, and give advice on how to allocate 401k $ into the funds (+/-8) available to us.

He also prepared spreadsheets projecting 401k $ at retirement, and updated us with new 401k laws (catch up contributions, loans, etc).

DW's FA also sheds some light on tax issues, SS, rollovers, stock sales, annuities, etc.

 

[aja8888]

I think Nash fails to realize that back in the early 1980's (when I had an "FA" of sorts too) there was virtually no internet or a plethora of computers along with only a few ways to even learn the "ropes" of investing.

I remember having to go to Merrill Lynch offices during lunch just to "see" what the market was doing. I had a ML FA who helped me with an AA and made trades that I approved (or at least agreed to). It worked back then.

Now it is so easy to learn about investments, and for some of us who are old enough to have experienced the early days, it is amazing the info available with the push of a keyboard key.

I'd venture to say that in the early 1980's there were very few folks who invested purely on their own.

 

[nash031]

Primarily AA assistance. I was 31 in 1986 when I first got into a 401k. There wasn't a plethora of information out there on investing for retirement. Our 401k FA would meet with each employee annually, discuss their situation, and give advice on how to allocate 401k $ into the funds (+/-8) available to us.

He also prepared spreadsheets projecting 401k $ at retirement, and updated us with new 401k laws (catch up contributions, loans, etc).

DW's FA also sheds some light on tax issues, SS, rollovers, stock sales, annuities, etc.

So, generally speaking, your FAs provide guidance.

The issue I've expressed to my mom is that she can't really put her finger on what the FA does, yet she pays him more than $6,000 per year (her third highest annual expense after mortgage payments and income tax) in direct fees, and this does not include the loads and expenses for the funds he puts her in. She's said to me, "he does very well for us," but seems surprised when I show her how he doesn't even meet market benchmarks that she could meet with an index fund. So for her, it really boils down to "hand-holding", and very expensive hand-holding at that.

I think many people who use FAs do not understand what their FA does and in particular how much they cost. It is, in my opinion, the most expensive "service" there is, and one that is most easily replaced when compared to auto service, plumbing, etc., for many people. An investment in learning and understanding this stuff for yourself is one of the best investments in time one can make.

The "1% AUM" is just very, very misleading. I'd argue it's borderline dishonest.

/rant

 

[mystang52]

I think Nash fails to realize that back in the early 1980's (when I had an "FA" of sorts too) there was virtually no internet or a plethora of computers along with only a few ways to even learn the "ropes" of investing.

I remember having to go to Merrill Lynch offices during lunch just to "see" what the market was doing. I had a ML FA who helped me with an AA and made trades that I approved (or at least agreed to). It worked back then.

Now it is so easy to learn about investments, and for some of us who are old enough to have experienced the early days, it is amazing the info available with the push of a keyboard key.

I'd venture to say that in the early 1980's there were very few folks who invested purely on their own.

I think this is spot-on.

 

[MRG]

It's true that pre-internet many folks didn't perceive they had the ability to invest without an advisor. That was LAST CENTURY! The majority of the FAs charging 1% AUM are not in it for anything but themselves. My 94 yo DF'S FA neighbor hooked him, sold home the exact same Pimco funds dad could have bought himself at an extra 1% ER on top of his 1% fees. Special kind of place in he!! for that kind of FA.

 

[jazz4cash]

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.

Did you have to pay for the FA to manage your 401k?


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[Ronstar]

Did you have to pay for the FA to manage your 401k?


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I did not pay the FA personally. But the funds were loaded, so I imagine he got a % of the loads. I remember that the company total 401k dollars eventually reached a point where loads were reduced or eliminated. FA also handled government 401k reporting for the company, so I imagine the company paid fees for this, but I can't remember the details.

 

[Car-Guy]

I did not pay the FA personally. But the funds were loaded, so I imagine he got a % of the loads. I remember that the company total 401k dollars eventually reached a point where loads were reduced or eliminated. FA also handled government 401k reporting for the company, so I imagine the company paid fees for this, but I can't remember the details.

I just got my 401k statement in the mail a few days ago and "actually" read all the paper work that comes along with it each quarter. (about 10 pages of info) Usually I just look at the current balance/gains and toss it aside. I knew our plan fees were very low but I was surprised to see this quarter the fees were "zero". Not sure if they charge fees on an annualized basis or waive them you have reached a certain level and/or if you don't make any changes in a particular quarter. I'm going to dig out some of the old statements just out of curiosity.

 

[nash031]

I think Nash fails to realize that back in the early 1980's (when I had an "FA" of sorts too) there was virtually no internet or a plethora of computers along with only a few ways to even learn the "ropes" of investing.



I remember having to go to Merrill Lynch offices during lunch just to "see" what the market was doing. I had a ML FA who helped me with an AA and made trades that I approved (or at least agreed to). It worked back then.



Now it is so easy to learn about investments, and for some of us who are old enough to have experienced the early days, it is amazing the info available with the push of a keyboard key.



I'd venture to say that in the early 1980's there were very few folks who invested purely on their own.

Yep. I'm 38. I see no reason to hire a FA at 1% AUM today. I don't frown on those who've used them before, I just can't figure out a reason why someone who has the time and mental capacity would ever pay that much for that "service".

 

[jazz4cash]

In the mid 80's I started listening to Bob Brinker's radio program and he advocated DIY using low cost mutual funds and other things like Treasury Direct. That's primarily how I got the confidence to DIY.


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[redduck]

Yep. I'm 38. I see no reason to hire a FA at 1% AUM today. I don't frown on those who've used them before, I just can't figure out a reason why someone who has the time and mental capacity would ever pay that much for that "service".

I think you are saying you can't figure out a LOGICAL reason for people to hire an FA. There are lots (approximately 3 or 4 anyway) of logical reasons (which are in reality may actually be emotional reasons) that lead investors to hire an FA. I think you could see them if you kept your logical mind from interfering.

(No offense meant in the above paragraph).

 

[aja8888]

Yep. I'm 38. I see no reason to hire a FA at 1% AUM today. I don't frown on those who've used them before, I just can't figure out a reason why someone who has the time and mental capacity would ever pay that much for that "service".

I agree entirely.

I have close friends that are my age, have a ton of financial assets, and use an FA (in this case, Ameriprise ). We have had some discussions about this and these intelligent and successful friends of mine would rather pay the fees than be burdened with learning and investing on their own to save the fees. Nothing I could do will change this so I don't even mention investing or anything related to it with them.

 

[6miths]

I feel a slight tinge of nausea at the thought of an FA getting 1%+ of anyone's savings. It's all such a racket. Still can't believe the number of my colleagues that go that route.