Have you tried to advise friend on investing?

[brett]

No, never. The only people I discuss investments with is my spouse, one like minded investor friend, and our investment advisor.

I may give some very general advice about products and strategies but never down to micro level. Besides, I believe that many people who ask really are not interested in following through on advice. Not even the most basic.

[Chuckanut]

Quote:

Originally Posted by haha I have found that almost everyone thinks they know more about whatever than I know.

Ha, Your situation is an example of the Dunning-Kruger effect.

https://en.wikipedia.org/wiki/Dunnin...3Kruger_effect

Quote:

the Dunning–Kruger effect is a cognitive bias in which people mistakenly assess their cognitive ability as greater than it is. It is related to the cognitive bias of illusory superiority and comes from the inability of people to recognize their lack of ability.

Back on topic:

When it comes to investment advice I tell what people what I am doing and why I am doing it. Most do nothing with that information. A few ask for more details and then I go into things like how I use index funds, AA, dollar cost averaging, etc. I mention I read articles by people like Jonathan Clements. I make a point of mentioning that there is risk in everything financial decision I make.

They can take what they want, and leave the rest.

[misshathaway]

No, based on personal experience. My father advised me on investments - all Vanguard mutual funds, when I was in my 30's. He was a successful investor himself, but in individual stocks. He traded every day.

I really was not interested in investing or retirement or anything having to do with money. What an idiot 30-year-old self was. So there was a pretty big market swing down and all my mutual funds lost money repeatedly for months. At the bottom I sold them all and blamed him.

This person you want to help is willing to cede complete control to someone else, without understanding anything. Just ask yourself what will happen if she takes your advice and it doesn't seem to pan out in the short term.

[Sunset]

Quote:

Originally Posted by MichaelL Thanks for the replies. I knew that I'd get some good comments. I agree with what many of you are saying. As soon as I started asking questions I had a feeling that I'd make my friend uncomfortable. She seemed set on buying real estate. She didn't understand how to read a broker statement and didn't want to do it. She doesn't have logins to her accounts or use any financial tools. She doesn't want to read financial books. My concern about advisers is that they sell you things that earn them money and that have high management fees. Also I've heard so many stories about advisers taking the money and people don't find out until they try to make a large withdrawal. Of course if I tell her this then she'll get stressed about who to trust. If she sends me the statements I think I'll just give her the facts and let her sort out her own decision.

This is a tough situation.
I too have heard the horror stories of these small private FA's stealing the money, at least with large corporations, there is some safety from that issue, and recompense if it happens.

My experience colors my view, which is that the FA is probably taking a huge amount of money for the services provided, and putting your friend into weird and odd investments in order to fill his/her own pockets with front-end loads or win a free trip.

See if you can find the fee charged annually, it should be in the yearly summary, once I showed that to a couple of people, they were shocked at how much they were paying to be invested.
This amount is of course on top of the fund fees.

I also found some investments (interest earning ones) that nicely listed the interest rate paid as: 0.01% (yes 1/100th of a percent).

Those types of things convinced the people they could move the money to do better. When they asked, then I told them where they could move their money.

However, maybe you don't want all that involvement, and your friend needs to read some investing for dummies type book, to have some basic knowledge.
Just telling your friend how much all this investing is costing might be a good start.

[Starsky]

One of the first things financial advisers will suggest is that you get both the husband and wife into the conversation together. It's both of their money that is being invested. This sounds like a disaster in the making.

In this case, I'd stay far, far away and suggest that your friend and her husband find a new adviser if they don't like their current one.

[kcowan]

Quote:

Originally Posted by flintnational In my experience, this forum is the only place where people respect my opinions and follow my advice. If she asks, I would provide my opinions. But, I would also suggest she read a couple of books and that she gets up to speed on investing and I would explain why she needs to do this.

I would offer to take over her investments for a fee. I did that for MIL. She was very happy to pay my fee because her returns were higher after fees. It helped that she was already paying 1% AUM that I claimed as part of the savings.

I remember a financial adviser saying that he does not mind giving advice as long as he is getting paid. If they don't follow it, he is fine. He does not give advice to anyone not paying.

[unclemick]

I usually paraphrase Bogle - aka buy the haystack at the lowest possible cost cause the needles are in there. And don't sell.

If they persist - I get wound up about index funds and am sometimes hard to shut up.

heh heh heh - In 1994 I gave my oldest nephew (wedding gift ) a copy of Bogle On Mutual Funds. He got it. Unfortunately twenty plus years of TSP success has made him 'smarter'.

[travelover]

No good deed goes unpunished. Your intentions are good, but you will get burned in the end.

[Offgrid Organic Farmer]

Quote:

Originally Posted by MichaelL ... Her husband was a house flipper who got totally wiped out in 2009. He's of course reluctant to buy more real estate. I guess I'm wondering if people on here have had similar discussions with friends and how that went.

When I was working, we owned a series of apartment buildings. We did very well with them. When I retired, we consolidated our real estate holdings down to only one. It had been our best performing property, so we thought that was a smart move. We refinanced it and used the cash to buy our retirement home.

In 2008 that city's big employers experienced lay-offs and we lost all our tenants. If we had not had that mortgage, we would have been fine. But servicing the mortgage without rental income ruined us.

In 2016 we bought another rental property. This time there is no mortgage.

[LiveBelowMeans]

I would be worried about fraud with a small financial adviser. If i were to use an adviser, I would only chose a large company who would not want to damage their reputation by taking my small potatoes. Merrill Lynch etc. (not advocating, just pointing out that the big guys are safer in my opinion) There are numerous incidents of investors being taken by small local operators. Manufacturing fake statements.....

[EarlyBirdly]

" It is hard enough to adequately tend to my own business without tending to anyone else's."

YUP. What this ^^ guy said.

Also, it sounds like the person in question is quite happy with being clueless.

Anything brought to her attention will not really register, so why bother?

Unless maybe you can show, in indisputable Black and White, and in simple Layman's terms.. " Look, here is the exact dollar amount you lost last year due to your adviser, his fees, and/or his advice."

And even then, believe it or not, they will quite likely continue to do exactly as they have been doing. ( Don't ask me how I know this. )

I believe a young Southerner stated it most succinctly and eloquently a few years back:

" Stupid is as stupid does."

[FreeBear]

OP, you can help your friend know how much money the FA is costing her, both in percentage terms and absolute dollar value. I recently encouraged a couple to calculate the $$ spent toward FA fees, not even including the well below market benchmark performance, and they decided to ditch the FA. To be fair, they were already considering and discussing this and they just wanted a second opinion and encouragement to get over the inertia to change.


In your case, I also suggest that you have a simple alternative for your friend such as a single target date fund with Vanguard/Fido/Schwab or advisor/robo advisor with same. Seems like your friend's real question concerns RE vs "investments" due to a desire for stronger return than the current 5%. Presumably, she believes she can beat this in RE. I'd suggest talking to her about concentrated risk, unless she has so much $$ she can spread her bets among several units/locations, although this wouldn't be true of a typical real estate investor.

[unclemick]

1 more thing. There is being right and there is being married.

heh heh heh - Hitched again at 70.

[RobbieB]

Nobody asks me for advice and I do the same.

[foxfirev5]

No way I'd be giving advice. Anyway it was always considered taboo to discuss finances outside the immediate family. In any event it is unlikely anyone outside the family will ask this guy who drives a 15 year old Lexus and is attired in Dickies work clothes.

[WestUniversity]

I only dispense advice when I’m asked for it. Many are puzzled about my early retirement, as in how was I able to do it. They speak in generalities on the subject but no one has directly asked me how I was able to do so...

[kcowan]

Quote:

Originally Posted by EarlyBirdly And even then, believe it or not, they will quite likely continue to do exactly as they have been doing. ( Don't ask me how I know this. ) I believe a young Southerner stated it most succinctly and eloquently a few years back: " Stupid is as stupid does."(

I don't think you can underestimate the fear of the unknown. I have heard people say: "You can fix it yourself. There is a youtube that shows you how!" yet I say let the experts fix it if it is something that only happens once.

In financial affairs, we underestimate all the layers of learning we have had over the years that gives us confidence to take the tiny next step.

[travelover]

Quote:

Originally Posted by FreeBear OP, you can help your friend know how much money the FA is costing her, both in percentage terms and absolute dollar value. ..........

Yea, you'd think so. But you also run the risk of making them mad by pointing out how much money has been wasted and by the way, they make the bad choice. I pointed out that my nephew was getting ripped at over 3% annually by the "advisor" that the fire fighters' union had hooked him up with. Then, I was the bad guy for making him look bad.

[kcowan]

Yes that is the problem. I have been successful in convincing my friend but then he was mentored by me into a $400k/yr job. So I have some credibility. Others I have been naturally vague because they are in denial. It is amazing how the Financial Industry has momentum on their side. They have convinced their clients that the skill is like a surgeons.

[Midpack]

Quote:

Originally Posted by jollystomper I never give advice unless asked. And even then, I (a) try to first discern if the person is really asking for advice, instead of looking for confirmation for a choice they already desire to make, and (b) always add the caveat of my advice being based on the level of risk I am willing to take, which may not match theirs.

I never give advice, even when I am asked (e.g. even my sister who has asked several times). If the other person isn't interested in understanding investing to begin with, if I give them good advice, odds are they will panic sell one day - too late, after the paper losses have already occurred. And then it will be my fault they lost money and didn't predict/warn them in advance - why didn't I tell them to sell when the gains peaked? No thanks...

I had co-workers ask me to advise them, but it was pretty clear they just thought I'd give them foolproof advice to beat the market and they wouldn't have to know anything themselves. Again, that ends badly every time so I gave them some very basic info and suggested books they might read - I don't remember even one of them following up with my suggestions, they just wanted simply answers. Interestingly, when I did retire at age 57, they were the same people who thought I'd somehow cheated to reach FI (not that they even know what FI is) - and why didn't I do the same for them? They resented that I was able to retire.

I've only been seriously asked to give advice to a few people, all folks who didn't want to learn anything. I give them very basic information and books to read, it's up to them...