Hi, my wife and I are living the good life.

[Irwin41]

Or at least that's what they are telling us. We decided to turn over our finances to an advisor and they have been good to us so far.

I thought about doing it myself, but I don't need that grief at this stage of my life.

 

[HFWR]

Welcome, Irwin

 

[riskadverse]

Hi Irwin . . . glad to hear you're living the good life. Make sure you watch your financial adviser very very closely so you can continue to live the good life. His job is to invest your money, your job is to monitor that he has your best interest in mind (if that is possible).

 

[Nords]

Welcome to the board, Irwin.

Or at least that's what they are telling us.  We decided to turn over our finances to an advisor and they have been good to us so far.

I thought about doing it myself, but I don't need that grief at this stage of my life.

It's a choice driven by interest & circumstances. But good luck with that.

Most people have a tough time paying an advisor when the market turns ugly for a year or two. Or the advisor is perceived to be earning more money than they're providing in fruitful guidance. Or there's a clear conflict of interest in how the advisor is paid and what funds your money ends up buying.

"Doing it yourself" can be incredibly complicated or elegantly simple. It's up to you. For the latter try the Coffeehouse approach (http://www.coffeehouseinvestor.com/Default.htm) which can be as straightforward as putting half your retirement assets in a Vanguard total-stock-market fund, and the other half of your retirement assets in a bond fund. Then go back to living your life.

 

[Cut-Throat]

Or at least that's what they are telling us. We decided to turn over our finances to an advisor and they have been good to us so far.

I thought about doing it myself, but I don't need that grief at this stage of my life.

The real grief that you don't need in your life, is the realization one day that your financial advisor was more concerned with his own finances than yours. Guess what; he/she is!

You are paying him for something that you could do better yourself.

Vanguard has balanced index funds that will beat over 90% of the fund managers over the long haul. The fees are much lower, therefore they have an advantage.

Do you even know what you are paying your 'advisor'?

 

[SamHouston]

The real grief that you don't need in your life, is the realization one day that your financial advisor was more concerned with his own finances than yours. Guess what he/she is!

You are paying him for something that you could do better yourself.

Vanguard has balanced index funds that will beat over 90% of the fund managers over the long haul. The fees are much lower, therefore they have an advantage.

Do you even know what you are paying your 'advisor'?

Having just "fired" my advisor last week, and having another long conversation with him last night, in fact, I couldn't agree more. I'm in the process right now of setting up self-directed accounts with Vanguard and I'm looking forward to when I'll have one less thing to worry about...what my advisor is doing and why. I learned the hard way that the investor is a secondary concern for most advisors. Their first concern is their own income and future, not ours. I grew tired of spinning the wheel and trying to come up with an advisor who was the real deal. It's not worth it to me anymore.

 

[garrynky]

Having just "fired" my advisor last week, and having another long conversation with him last night, in fact, I couldn't agree more.  I'm in the process right now of setting up self-directed accounts with Vanguard and I'm looking forward to when I'll have one less thing to worry about...what my advisor is doing and why.  I learned the hard way that the investor is a secondary concern for most advisors.  Their first concern is their own income and future, not ours.  I grew tired of spinning the wheel and trying to come up with an advisor who was the real deal.  It's not worth it to me anymore.

I agree totally. I'm in the process of getting out from under an advisor agreement. If I had a lot more money then maybe I wouldn't notice the money being siphoned off. Unfortunately I don't.

 

[Helen]

Or at least that's what they are telling us.  We decided to turn over our finances to an advisor and they have been good to us so far.

I thought about doing it myself, but I don't need that grief at this stage of my life.

If you really don't want to manage your own money then it might be worth it. However, if you are paying your advisor 1% of your assets to manage your wealth for you and you are living on a total withdrawl rate of 4%, then you are paying a huge percentage of your "annual salary" to do so.

As was pointed out, there are very simple approaches to investing and you can do it through Vanguard.

Read some books by John Boggle and find a simple solution.

Personally, I would not sleep well letting someone else guard my nest egg. There is a huge conflict of interest.

JMO,

-helen

 

[JPatrick]

Or at least that's what they are telling us.  We decided to turn over our finances to an advisor and they have been good to us so far.

I thought about doing it myself, but I don't need that grief at this stage of my life.

I think we ought to give Irwin a break here.  There are very good advisors out there and for all we know he may have hooked one.  If I could find one that could beat me by 200BP or so (plus his expenses< I'd dump the whole thing in a heartbeat.
Judging by your websight, you are out of country a fair amount accompanied by(based on your crew pics) a number of dead cats.
The only thing I'd recommend if you are going to use an advisor is this.  When you meet to do a  review, be it quarterly or otherwise, come armed with the performance numbers of a portfolio like the "coffehouse" to give yourself an idea how things are going.  If the coffeehouse did 8% and his fee is 2% then he ought to be able to show you 10% gains.  If no--time for a change.  If yes--go sailing and have fun.  If yes by a bunch--publish his/her name here.

 

[Spanky]

Irwin's advisor is also living the good life.

It's nothing wrong to have an advisor as long as you are happy with his/her services.

 

[Irwin41]

Thank you all for the suggestions and concerns. I've been actively investing in stocks and mutual funds since the early 80's. Tobias's guides "The only investment ..." were quite helpful in establishing my early investment strategies and help me refrain from panicking during the '87 crisis. I remained fully invested and have never tried to time the market. I did due diligence on selecting my adviser. They are fee only advisers and rake off about 1%. Their target percentage is 9%, a moderately aggressive goal, but they have been able to meet or beat that for the last 3 years. They showed me their track record for the 1999 -2003 time period for the same investment mix and it was acceptable, considering what the market did. I believe their numbers and did interview a couple of their clients that had been with them for a while now. They invest in mutual funds exclusively and use their own brand of "Modern Portfolio Theory". I do monitor them on a regular basis and have questioned some of their trades, but they've been able to explain them satisfactorily.

They use Fidelity for trading, are very sensitive to tax issues and at not additional cost have given us addition services, such as keeping a file of important documents like wills, insurance policies, etc. Much like what an expensive lawyer might do.

Someone mentioned they are more interested in making money for them than for me, however as fee only advisers, the best way for that to happen is for them to continue to grow my nest egg, thus giving them more funds to draw their 1% from and keep me from going somewhere else. I do measure their performance against a mix of stock and bond indices and so far they have beat the mix by a multiple of their fees. They are a small firm but a good track record.

Of course I'll keep an eye on them, but so far I'm quite happy with their results.

My only complaint is the need to hire a prettier receptionist!

Jim.

 

[2B]

They are fee only advisers and rake off about 1%. Their target percentage is 9%, a moderately aggressive goal, but they have been able to meet or beat that for the last 3 years.

If I only averaged 9% over the last 6 years, I might start looking for an advisor.

I don't know how many people I encourage to lose their advisor and do it themselves. I've even seen people financially raped by their advisors and still be too scared to make the leap.

No one will ever be more interested in your money than you are. You can buy the same type of stuff they do. You can rebalance your portfolio every year just like they should do. You can also take the 1% fee and do something nice for your self with. If you have a $1MM portfolio that would be $10,000!

 

[TromboneAl]

Here’s the bottom line: Brokers have nearly inevitable conflicts of interest with their clients, and they work in a corporate culture where sales come first and customers come second. As a result, I have started recommending that investors stop doing business with brokers altogether and instead work with independent advisors who don’t sell products.

 

[AltaRed]

I think that is what Irwin was saying... a fee only advisor. Now what is wrong with that if he/she is making recommendations that in the aggregate beat the market?

 

[Jane_Doe]

Interesting subject. Why can't they charge an hourly or set fee ($1000 for example). I don't get why someone should pay a PERCENTAGE of their portfolio. It doesn't make sense. Again, an hourly or reasonable set fee, I can see but if you take 1% of MY money - I wouldn't do it. No way, no how. It's not like they are guaranteeing you anything (except to take some of your money for fees regardless of the outcome). What if you gave them 1% (or whatever %) of the total gain for the year - THAT would be an incentive for them to perform!!

Sorry, Irwin - not trying to jump on your case (at all!) - just wondering if you have checked out how other "fee only" advisors charge.

Wishing you the best -

Jane

 

[2B]

What a concept! Charge 1% of assets annually to recommend a broadly diversified portfolio of low fee, primarily index based mutual funds. Would everyone please send me the names and addresses of customers for my new business.

I got the impression that their advisor was buying/selling individual stocks through Fidelity but I could certainly be wrong. That would be more credible for the fee but I still can't believe it's worth the money. It goes back to the basic premise that 75% of all money managers don't beat their respective index in any given year. Almost none will beat it over any extended period. The advisor is at least not blowing smoke about "substantial double digit returns every year." The number he is shooting for is conservative for most individual index investors.

 

[rs0460a]

Jim (AKA Irwin41):

An interesting topic, and timely since I have been looking at the same "situation".

I/DW are 58, 2 years away of retiring at age 60 (not really early, but that's our plan).  I've managed our "joint retirement portfolios" (meaning our respective 401K/IRA's) over the last 24+ years.

Over the last five years, we've gone from a 70/30 to 60/40 mix.  If you look at your returns provided by "your firm" as stated for the last 3 years, I assume you are talking about the period of 2003 thru 2005. 

Checking my own records, I show the net return (gains - contributions) for our joint portfolio averaging 16.76 per year (50.28% total).

Now I'm no "investment genius".  I read all the "basic books", along with information on the various commercial web sites, and participated in discussions with "good folks" as are on this site.

While I understand your "exhaustion" for doing it yourself all these years, please consider what you are talking about.  Like one person pointed out, with a $1M portfolio, at $10K/year, the "service gets expensive".  25 years of retirement, with no gain would still yield a cool quarter-million $$$.

Since it's "your money", I not saying what you should do.  However, with "my money", I'll manage my own investments.  Since the 1% would "cost" me more than $10K (due to our current "base") I'll take the time to manage my resources.  If I "stumble", I'll be the one to blame.  If your advisor "stumbles", you "paid for the option" to blame him.  However, in either case, the $$$ is still gone.

Anyway - that's my story... 

- Ron

 

[Dog]

Sometimes managing money can be a curse. Makes you yearn for earlier days when you just worried
about paying the bills. Lots of great discussion, but ultimately, it comes down to being able to sleep at night and enjoy your days. Give your finances their due diligence and don't second guess your choices (sometimes we can be too close to see the big picture). May you enjoy calm winds and following seas.

 

[JPatrick]

My only complaint is the need to hire a prettier receptionist!

Jim.

Not so fast Jim, that would probably cost you another 50 BP's. 

 

[mathjak107]

we loose money the old fashioned way: by ourselves ha ha ha

 

[Irwin41]

I guess I must have not been clear. My advisor doesn't invest in index funds. They have a screen for finding funds. Funds have to be in the top 25% of their category (previous quarter performance), have good performance for some period of time (I don't know the quantitative formuala), have a fund manager that has been around for a few years (again, I don't know the actual number), etc.

Since they are using an asset allocation scheme I can't get the performance that a good stock picker might get, but then I won't lose as much in the down markets either.

I went back and looked at 2005. S&P was up 4% I think, our porfolio was up almost 11% (net, after fee). I'm happy to continue.

Jim.

 

[Irwin41]

Reply to Jane, They charge that because that's pretty much what all the fee only advisors do. Yes, I've checked and most of them have a sliding scale. Something like 1.25 percent of the first $200K, 1 % from 200K to !M and 1/2 percent after that. Now those numbers are not exact. I don't recall exactly the details, but that is the way they determine the fee.

Jim

 

[Nords]

I guess I must have not been clear.  My advisor doesn't invest in index funds.  They have a screen for finding funds.  Funds have to be in the top 25% of their category (previous quarter performance), have good performance for some period of time (I don't know the quantitative formuala), have a fund manager that has been around for a few years (again, I don't know the actual number), etc.

So essentially you're paying them 1% of your assets every year to run a computer program?  That must be some pretty impressive software. 

If their screening tool is so effective, I wonder why they need your money instead of just using it to make their own fortunes with their own money.  Oh, wait, I remember, it's because they like helping people succeed-- except they don't like that enough to want to do it for free.

If your arrangment helps you sleep at night then it's a good thing.  You're paying them to allow you to remain blissfully ignorant, not that there's anything wrong with that.  It's your money and your choice.

But when Taylor Larimore over at the Vanguard Diehards spends a grand total of four hours a year in a portfolio that's split between the total stock market index and a bond index, then you might be able to find other uses for that 1% of your assets.  1% doesn't sound like much until, as others have pointed out, it's one quarter of your annual SWR.

If the advisor could reliably earn you an excess over Taylor's indexed returns, and if that excess was more than the 1% you're paying for it, then you're getting a good deal.  Have you researched whether you're getting that?  More importantly, have your managers compared your performance to Taylor's portfolio-- or any index that represents your portfolio?  (I don't know if you've noticed that just about any schmuck with a dartboard has beat the S&P over the last five years, which is why so many managers compare their performance to it.) And will they refund your money when they don't maintain this performance over a long term, say 5-10 years?  Or do they get paid the same 1% whether they "beat the index" or not?

 

[rrspike]

Not an expert on this, but i have read of advisors who will charge a fixed fee for sevices, as someone here suggested (i.e not % of portfolio). Kind of like the legal profession.

I like the give and take on this subject of advisors. Dimensional Funds Advisors have a world-beating stable of funds that are made up of stocks from many indexes to cover just about every asset class and tilt you can imagine. They have over 40 funds and are absolutely index-driven. Their performances have beaten every other over index fund the last years. Extremely low management fees/expenses. Problem is, unless you are institutional investor you can'y buy in. DFA offers their funds only through certain advisors. Do i bite?

 

[poboy]

Well, I self manage my investments, my brother does not.  I have all my clocks set, microwave, tv, vcr, alarm, coffee maker, etc.   Spent a few days visiting brother, got up early went to kitchen and all the clocks were blinking. I thought power had gone off during the night so I set them all.  Made coffee, was reading paper and sister in law came in.  Told her about power and clocks and she said you know, we never have set those clocks.  They had been in their home over a year.  Moral of the story.  They will live to be 150 years old and are quite confortable having an advisor handle their money while I prefer to do it myself.   I feel we do what we think is the best fit for us.