A Plan for FA to Convert DIYers

[mickeyd]

Financial advisors/planners/brokers have a big plan to try to convert all of us DIYers. This article presents a scenerio that may or may-not be realistic. Should we be more considerate and not concentrate on all of the time consuming personal finance stuff when we could be spending our limited time left on earth with family? Article assumes that by teamng up with a pro, DIYers could achieve "outperformance bonus."

Expect a call from one soon.

The discussion that follows will be enlightening. It could be Archie values his time and energy and would prefer to spend it on other things besides finances. He may realize Edith wants more of his attention as much as she wants solid financials. There is a cost to doing things yourself, and sometimes people like Archie realize it is a high price. (If you frame it the right way.)

The couple should list things in life that are most important to them. They will come up with several things besides money. Then you should ask them how much better their lives would be if they could redirect their time and energy toward their health or their relationship with each other, their families, friends, their community, their causes or God? How many of those things could they delegate? None. Money matters, on the other hand, can be delegated. And portfolio management is one of the easiest to hire out.

If they realized the high price of DIY, Archie would no longer need you to beat him at some imaginary, beside-the-point investing game. He partners with you to help him keep control of his life. Your likely outperformance is a nice bonus. Hiring you is no longer a threat to his relevance or his manhood; it is a prudent, smart, empowering, liberating choice that has tremendous value even if the value cannot be precisely quantified.

Converting A Do-It-Yourselfer To A Client

 

[jollystomper]

I think they miss the point that, in my view, many DIYers *enjoy* being DIYers. In a sense, it is another hobby that is not taking away from other things that they want to do.

My personal analogy in home computers. It be easier for me to but fully equipped, pre-configured computers. But my hobby is building computers, so the time I take to building and configuring it for my own uses is a joyful time and gives me more personal enjoyment than just buying a pre-configured one.

Plus if you are happy with broad market index funds how much time does it really take?

 

[heeyy_joe]

I will listen quietly to everything one has to say. Then I will reply, "hold on let me go put in my hearing aid".

 

[FinanceDude]

This "expert" Dan Moisand (author)? I have never heard of him or seen him at any large national conferences I have been to over the past 15 years. More likely a guy trying to cook up some business by writing drivel such as this.........

 

[akck]

IMHO, the CFP author of the article sounded condescending and full of himself. No way I would use him.

 

[timo2]

That is a really humorous article. First, the DIY person got to FI by being a DIYer; second, we have to do something for brain exercise; third, some families may see too much of you as it is. There is one case when I would consider one of these 'experts', and that is if my mental capabilities deteriorate too much to keep up my checking account. (which could happen).

 

[Ready]

I have never used a financial advisor and probably will not in the near future. However, I do admit that when I get into analyzing topics like tax loss harvesting and maximizing tax efficiency in general, I'm clearly not an expert on it, and I often wonder if I'm missing out on chances to reduce my taxes by not seeking professional advice.

As long as you go to a fee only planner, and you keep the analysis to a reasonable number of billable hours, I don't think you can get hurt. However, I would never agree to give anyone a percentage of my portfolio to manage for me. That seems ludicrious, and is completely inconsistent with all the research that points back to buying index funds with low expense ratios.

 

[M Paquette]

Financial advisors/planners/brokers have a big plan to try to convert all of us DIYers. This article presents a scenerio that may or may-not be realistic. Should we be more considerate and not concentrate on all of the time consuming personal finance stuff when we could be spending our limited time left on earth with family? Article assumes that by teamng up with a pro, DIYers could achieve "outperformance bonus."

Expect a call from one soon.

Converting A Do-It-Yourselfer To A Client

*SNERK*

Everybody gets an outperformance bonus! Because no financial advisor/planner/broker is below average! Yah. That and a dollar will get you a pack of beer nuts.

Oh yeah. All that time consuming personal finance stuff. The bulk of my 'time consuming personal finance stuff' is tracking and balancing my checkbook. The investments? There's an annual check of asset allocation, and sometimes, if the spreadsheet says to, there are orders to place online to do the rebalance. 15 minutes annually, plus the initial hour to code, test, and debug the spreadsheet program (so amortize that over my expected remaining lifespan, for another 3 minutes a year).

But... but... taxes! Yeah? Any significant income makes for taxes. SSA, pensions, IRA RMDs. That financial advisor/planner/broker isn't going to do my taxes for me anyway. If I'm lucky he'd forward the brokerage 1099s in a timely manner.

As a very lazy boglehead, I think I may have spent more time on this post than I spent on our non-checkbook, non-IRS finances the past year.

 

[REWahoo]

I thought this theme was executed much better in the Edward Jones TV ad.

 

[ronocnikral]

I was hoping for free dinners without the sales pitch.

I would also say the assumption is I waste no other time. Which can't be true b/c I wouldn't be here BS'ing.

 

[Midpack]

I thought the article was heavy handed against DIY, but that's how sales are conducted. OTOH I [-]caught myself[/-] got slapped down (deserved) overselling DIY here last week - thinking about forum members here vs the general population. And I have certainly known DIY investors who were/are their own worst enemies - and would have been better off using an FA.

While I have gotten (very) good results following Bernstein/Bogle for decades, I realize many people a) don't know how to invest even though it doesn't have to be that difficult, b) know how, but don't have the discipline to stay with it (especially when corrections hit, and they will), and/or c) just aren't interested. There's a need for good financial advisors/planners, though they need to be chosen with great care.

 

[frank2009]

It's just not that difficult. I don't see the added value that an FA would bring to the table. If you need one, fine. I've got a feeling most people on this board don't.

 

[samclem]

There's a need for good financial advisors/planners, though they need to be chosen with great care.

That's the rub, isn't it? By the time you know enough to pick a good one, you (almost) know enough to do the job yourself. 1% per year ain't rabbit food--for most of us it's about 25% of what we plan to withdraw during ER/R.

 

[kern44]

Sam, you are on the mark. I just dumped my FA after one year for this very reason. The fee was 30% of my withdraw. And for what? To rebalance year after year using the same cookie cutter modeling he uses on 300 other clients? Never again, I learned my lesson.

 

[walkinwood]

I do my own financial planning, but don't need to spend a lot of time on it! I'd be surprised if I spend more than 4 hours on it a month.

Now, if we count the time on this forum...

 

[clifp]

I do my own financial planning, but don't need to spend a lot of time on it! I'd be surprised if I spend more than 4 hours on it a month.

Now, if we count the time on this forum...

I if I included the time spent on the forum as financial planning, than I'd really have a job. :.

But I enjoy issues associated with financial planning.

 

[seraphim]

Same here. I started studying investment principles with a passion last February - all my money was in stable accounts and I was happy that way, but DW inherited an IRA, and while the estate was being settled I jumped into the studies. The old FA wanted to keep the account, but I had learned enough to realize I didn't trust his answers - he was hedging. He never completely answered my questions about costs. At the third meeting I advised him the money was being transferred to a Vanguard account. A very unhappy fellow. DW was a little concerned, but a year later she now understands the principles involved and is happy with the results so far. When money from our stable accounts become available after retirement - June 1st - that money will also be be transferred to the V portfolio. With the amount of money in question, V has been very happy to offer suggestions and help planning at no cost.

It's been fun to learn, but once the portfolio is established it should be very boring.
No FA...

 

[mickeyd]

A very unhappy fellow.

Of course he was.

After all, he lost the corner office, had to dis-enroll his kids from that exclusive academy (now they had to deal with public schools), had to turn in that leased Lexus, wife's botox treatment had to be put on hold, membership @ the CC had to be suspended.

Sure it was tragic for them, but how are you holding up?

 

[ERhoosier]

That's the rub, isn't it? By the time you know enough to pick a good one, you (almost) know enough to do the job yourself. 1% per year ain't rabbit food--for most of us it's about 25% of what we plan to withdraw during ER/R.

+1

Back in the 80's when stocks were smokin' & even bonds paid 7-9+%/yr, an FA could [-]skim[/-] charge 1% and not raise much of an eyebrow. In current era of much lower returns, that 1% (or more in many cases) becomes much more significant portion of overall investment income.

 

[Tyro]

I started studying investment principles with a passion last February - all my money was in stable accounts and I was happy that way, but ....

It's been fun to learn, but once the portfolio is established it should be very boring.
No FA...

1. For most, I think there is a learning curve.
2. For some, numbers is hard (and/or boring and/or a cause/source of anxiety/stress). I.e. not fun for everyone (like a Slinky® is ).

Obviously this kind of pitch isn't going to work on the vast majority of FIREes, but more likely, I think, for those contemplating which way to go. Without knowing these things, the uninitiated might be swayed by the argument that it takes a long time of hard work to understand how to do this stuff and continue to do it well yadda yadda yadda....

The noobs & fence-sitters may be the practical targets for such marketing. YMMV.

Tyro

 

[donheff]

There's a need for good financial advisors/planners, though they need to be chosen with great care.

That's the rub, isn't it? By the time you know enough to pick a good one, you (almost) know enough to do the job yourself. 1% per year ain't rabbit food--for most of us it's about 25% of what we plan to withdraw during ER/R.

+1 on both. There are a lot of people who need FAs. I have dear friends who use them who would be lost without them. On the other hand, they really don't know enough to insure they pick a good one. If they did, as Samclem says, they could DIY. There should probably be a standard, simply worded disclosure statement that describes whether the broker/FA has a fiduciary duty to you, how they get compensated, and the implications for you, but I don't see much likelihood of that. I'm not sure most people would understand even a simple disclosure statement in any event.

 

[pb4uski]

While I am a DIY apostle, I concede that there are some people out there who have done well in their careers and are savers that have amassed wealth that don't have the interest that we do in AA, tax-efficient placement of investments, optimizing taxes, etc.

They are just wired different and do need professional help. My BIL is a life insurance agent and has many clients that I think he provides a valuable service for because they would have no coherent plan without him. Similarly, I have a good childhood friend who is a stockbroker and also provides valuable service to his clients, particularly hand-holding during market downturns. My only point is that I think there is a subset of people out there who for whatever reasons don't have the aptitude or inclination to DIY and are better off with help.

P.S. Before everyone piles on, I realize the author of the article was a fee-only planner (at least as he describes himself) which is very different from my BIL and stockbroker friend.

 

[nun]

The assumption is that DIY is difficult and takes time.....what most FA's do is pretty simple and takes very little effort. Now if you are going to get into trading based on economic analysis, alternative investments, high dividend investments etc etc, that might take time.....but I'd never invest like that myself so I'm not going to pay someone to do it for me.

 

[nun]

Recently, a few new studies have quantified the benefits of working with a financial planner. According to the paper Alpha, Beta, and Now ... Gamma by David Blanchett and Paul Kaplan of Morningstar, an additional 29% of retirement income, the equivalent of an additional [/b]1.82% a year in return[/b], may be realized by using some specific planning strategies, like employing a dynamic withdrawal methodology or a tax-efficient asset location.

That additional 1.82% a year with an FA could well disappear into the FA's wallet in fees. And a "dynamic withdrawal methodology" is imposed on your IRAs by the IRS when RMD starts at 70.5

 

[Midpack]

The assumption is that DIY is difficult and takes time.....what most FA's do is pretty simple and takes very little effort.

Even as effective and simple as most lazy portfolios are, as FinanceDude pointed out in a earlier thread, many people don't have the discipline to implement such a plan, and really go off the rails during corrections. I'd venture that while most people can easily understand the mechanics of AA, passive investing, rebalancing, tax efficiency/placement, etc. - we underappreciate the discipline required to manage a portfolio. Most amateurs can't resist the urge to act, when patience would serve them better.

The mechanics and discipline are both common here, not so in the larger world (I have to be reminded periodically).

I'm a DIY investor to the core, but I have known a lot of people (young, old, smart and stupid) who were completely irrational when managing their own investments. A little information (hot tips, water cooler BS) can be dangerous, but so can too much information (CNBC).

But I still maintain there are more bad FAs than good, so it's a choice that must be made very carefully.