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Old 04-18-2016, 11:14 PM   #81
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It is especially interesting to me that people feel so strongly about this issue. i will tell you that I have received several private messages from people who read my post and said they favor using a financial advisor but they do not want to post that on this board because the general sentiment is so strongly against FAs.

This just made me laugh....
I can't get the image of several people electronically whispering to each other afraid that the mob might overhear them.....
Actually maybe it isn't funny....maybe it is really sad?
I think that a good case, or at least a case, has been made by both sides of the FA or NOT FA issue but at the end of the day the correct answer is whatever works for the person whose money it is....other than that well, whatever.
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Old 04-19-2016, 12:33 AM   #82
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I don't have use for a FA. I only caution folks who think you have to have one to be successful as if it is a requirement like a good doctor and your dentist. If you want to spend that money on a FA, have at it.

I'll spend time showing people I care about that their FA is fleecing them, my mom being the primary example. While that isn't the case for all FAs, it is true for many. Once I say my part backed up with data, and they still want to spend the money, I wish them well and am glad if they are happy.
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Old 04-19-2016, 06:27 AM   #83
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I see FAs in the same light as the writers of investing newsletters.
Some offer terrific advice, well suited to the best interests of their customers.
Others, not so much. Winnowing the wheat from the chaff in both cases is time consuming. As the saying goes, you have to kiss a lot of frogs before you find a prince.

In both cases, they have to charge a certain amount just to make a living at it.
The average FA charges considerably more than the average newsletter, mainly because the advice is more personalized and there are often other services performed as well.

Looking at results over time, a reasonable person could see performance as good or better than the FA/newsletter by simply using a broad index approach in a DIY system. OTOH, that same reasonable person could make a mess of it by making some simple mistakes (panic selling, etc., etc.).

So it all boils down to whether you're comfortable with how much you're being charged and what you get out of it. As M Paquette put it, one size does not fit all. And the real argument from the anti-FA folks is that you may be paying more than necessary. After all, 1% of AUM (or even a significant fraction of 1%) is a chunk of change.

Now, lo and behold, the industry is dealing with that problem by starting to roll out the robot-advisors with a lower fee. Problem solved for many people who honestly don't have the time or inclination to DIY.

The more difficult objection, and my personal difficulty with it, is the ongoing nature of the FA's fee structure. Once you spend some time looking at what the FA is doing for you and figuring out how it's done, it's not hard to conclude that by spending a little time each year (or even each quarter if you're particularly anal) you can get the same results on your own.

For some, that's still too much like w*rk and they are very well served by their FA. For others it may be an epiphany.
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Old 04-19-2016, 06:32 AM   #84
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It is especially interesting to me that people feel so strongly about this issue. i will tell you that I have received several private messages from people who read my post and said they favor using a financial advisor but they do not want to post that on this board because the general sentiment is so strongly against FAs.
Thanks- I feel a little better admitting I have one!
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Old 04-19-2016, 07:39 AM   #85
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I have one, they currently control 10% of my total investable net worth (they control a taxable section located at Schwab but they are not affiliated with them). Have had them for just over the last 5 years.
I think I will stop using them prior to my ER in April 2017.
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Old 04-19-2016, 07:58 AM   #86
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OK, but what I'm suggesting is it is better to 'cure' it with education (one time cure, at very no/low cost), than to 'treat' it with a hand-holding FA (at very high, recurring costs).
I guess you are saying that the money would be better spent paying a psychiatrist to undergo therapy.

I wonder if there is a big overlap between folks who do both.
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Old 04-19-2016, 09:41 AM   #87
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My toilet started leaking and the plumber said $500

Pish posh, you can get one for a hundred at home depot

But I don't know how to install it and they are heavy

Don't worry, everything is online, educate yourself

I hurt my back installing it and can't get out of bed.

Take 2 asprin and call me in the morning.

My back was better today and I got out of bed and the house was flooded

I guess you didn't get enough education
I don't see this as a useful comparison at all, and I'll explain why.

For the basics of personal investing, one could be educated in less than 15 minutes.

A few minutes of reviewing the results of studies that show that only ~ 20% of active managers manage to beat a broad index over a 5 year time period, and few of those are able to repeat it over the next 5 years. So there is no reason to believe the FA you pick will be able to bring any investment selection value to you, and is more likely to lag the broad indexes after fees.

A few more minutes showing that stocks go up and down (volatility), but historically grow over time, and bonds are more steady, but won't provide the growth potential. A few minutes to show how an AA blend can balance the two, and that a pretty broad range of AA provide a similar success rate over a retirement lifetime - it's just not that sensitive to any magic number.

A few minutes to show how something like a Retirement Target fund can take care of all this for a very low ER, and a few minutes to show how an FAs fees/expenses can eat up 1/4 or more of your retirement income.

I'll compare that to the education you need to hire an FA after this next quote:

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Originally Posted by frayne View Post
...
As far as FAs go, yes there are good ones and bad ones like in any field. I do think one of the keys to improving the overall impression/reputation is to require all FAs to accept the fiduciary responsibility.
And so... how do I find a 'good' FA? Seems to me, I need to know something before I can tell good from bad, right? I at least need to interview a few, and try to get a sense of it. That would take more than the 15 minutes I outlined above. I honestly think the effort of finding an FA is harder than DIY.

No sore back, not much to learn, very little effort. Let the computers of a low cost broad index fund or Target Retirement fund do the rebalancing for you.

Now plumbing - that's hard!

I won't go too far into this, but I wonder about the comment of getting PMs in support of FA's? What's that about? Do people feel that they are being 'bullied' over using an FA and are afraid to admit it in public? All I see is info being provided - costs, odds that the FA really has investing acumen, and options like an hourly review rather paying year in year out. Seems reasonable to me to discuss the pros/cons out in the open.

-ERD50
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Old 04-19-2016, 10:57 AM   #88
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I won't go too far into this, but I wonder about the comment of getting PMs in support of FA's? What's that about? Do people feel that they are being 'bullied' over using an FA and are afraid to admit it in public? All I see is info being provided - costs, odds that the FA really has investing acumen, and options like an hourly review rather paying year in year out. Seems reasonable to me to discuss the pros/cons out in the open.

-ERD50
Yes, the sense I get from the PMs is they believe that advocating the use of a financial advisor is not considered "socially acceptable" on this forum, and they prefer not to take flak for their views. One person referred to it as "group think" against FAs on this forum. For what it's worth, that is not the sense I get here. There are obviously people here who are extremely confident of their view that FAs are not worthwhile. But I don't think even those people bedgrudge others their right to have and express a different opinion. (And in any event as one of my professors told me years ago "just because you are certain about something, does not mean you are right.")
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Old 04-19-2016, 11:33 AM   #89
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At least OP seems open to listening to and considering the views of board members who feel strongly that FA/WMs are unnecessary. I think if someone considers the arguments against FAs and still decides he's better off with one than without one, that's fine.

What I find frustrating is people who treat their "Wealth Manager" like he's a god with supernatural powers and refuse to even listen to and consider rational arguments that they might be better off financially DIYing. [ Mod Edit] I just smile and don't discuss the subject further with them, because it's a waste of time. They're never going to change their minds no matter how much evidence to the contrary I present them with.

My sense is that OP falls into the former category and is at least listening to opposing views and considering his options.
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Old 04-19-2016, 12:30 PM   #90
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What I find frustrating is people who treat their "Wealth Manager" like he's a god with supernatural powers and refuse to even listen to and consider rational arguments that they might be better off financially DIYing.
This is what frustrates me with my mom. Her FA has "done very well for her", except that he hasn't relative to broad market indexes even before fees and expenses. Yet because I am her son, and I don't have a fancy office and a business card, she'll just continue plodding along with her FA as the second-largest annual expense she has against her portfolio behind her mortgage.

The other frustrating part is when people cherry pick results - "My FA picked XYZ stock and it's done great". Right, XYZ stock is 1/89th of your portfolio. How is the rest doing?

As long as they're informed and are happy, I've got nothing left to say.
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Old 04-19-2016, 12:45 PM   #91
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Yes, the sense I get from the PMs is they believe that advocating the use of a financial advisor is not considered "socially acceptable" on this forum, and they prefer not to take flak for their views. One person referred to it as "group think" against FAs on this forum.
Hopefully we will see a time when these forum members will throw off the yoke of repression and feel comfortable coming out of the closet to freely proclaim they pay others to invest for them.

Might be worth noting that Sarah in SC, one of the forum's moderators, is a financial advisor out there in the real world.
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Old 04-19-2016, 12:48 PM   #92
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Might be worth noting that Sarah in SC, one of the forum's moderators, is a financial advisor out there in the real world.
So... if she... weighs the same... as a duck........ She's made of wood.

And therefore...
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Old 04-19-2016, 01:10 PM   #93
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She didn't post in this thread.
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Old 04-19-2016, 01:23 PM   #94
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Do people feel that they are being 'bullied' over using an FA and are afraid to admit it in public? All I see is info being provided - costs, odds that the FA really has investing acumen, and options like an hourly review rather paying year in year out. Seems reasonable to me to discuss the pros/cons out in the open.

-ERD50
"Bullying" is a strong term and I think it's over-used these days. I will say that I feel that I have to immediately go on the defensive and make it clear that I'm not lazy, clueless, apathetic, etc. and that my financial advisor actually knows what he's talking about.

Interesting development today: I fill out lots of e-Rewards surveys, especially on financial topics (just redeemed Funny Money for a $25 Starbucks gift card). This morning's was from one of the organizations offering a financial advisor/planner designation and asked a lot of questions about my opinions of various financial planning professional categories. It included some commercials I've seen recently and wanted my opinion of those. Some of these surveys ask that you not name names, so I won't name the organization, but I thought that it was interesting that they're looking to see how much credibility particular designations (or lack thereof) carry.
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Old 04-19-2016, 01:56 PM   #95
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She didn't post in this thread.
I'm sure she will when she returns from her yacht.
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Old 04-19-2016, 02:09 PM   #96
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I'm sure she will when she returns from her yacht.
She no longer has the yacht - sold it to buy a Gulfstream G650 for those round-the-world jaunts she's always taking.
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Old 04-19-2016, 04:19 PM   #97
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"Bullying" is a strong term and I think it's over-used these days. I will say that I feel that I have to immediately go on the defensive and make it clear that I'm not lazy, clueless, apathetic, etc. and that my financial advisor actually knows what he's talking about. ... .
OK. I don't recall if you've discussed this in any detail in the past (or maybe you just prefer not to, and that's OK too), but I am interested in what people feel they are getting of value from their FA.

In general, the responses that we seem to get here, strike me personally as mostly being off the mark. Like assuming their FA is really going to provide superior returns of a simple DIY portfolio (but they've never bench marked it), assuming that a DIY portfolio takes significant time/effort/education/skill and continual monitoring - things like that.

And when people do come up with specifics (like maybe walking them through tax efficiency, ROTH conversions, lump sum vs annuitized pension choice, SS strategies, etc), it seems that might be better handled with an hourly fee for service?

Maybe selective memory on my part, but it seems like when these discussions come up, the FA user often just does not want to be challenged, insists their FA is great, and goes off in a huff. A few (see some old Ameriprise, EJ threads), did come around to realize their assumed great performance really wasn't.

I guess I'm just the curious type, and I like to have my thoughts challenged (I think someone earlier mentioned the danger of 'group think' - agreed), and I wonder if maybe I should hire an FA for some of the things I assume I'm doing OK on. So I honestly do want to hear the reasons people use them.

Lazy, clueless, apathetic? I think that some of the people coming here with an FA have maybe just never had their eyes opened up to how easy DIY can be, and don't realize a DIY will likely outperform their FA, but I wouldn't use those words to describe them. Lazy - heck, I think trying to find an FA that is a good match for me, and learning how to tell if he/she is doing any good for me is harder than any of the simple couch-potato-style portfolios!

-ERD50
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Old 04-19-2016, 04:28 PM   #98
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Yes, the sense I get from the PMs is they believe that advocating the use of a financial advisor is not considered "socially acceptable" on this forum, and they prefer not to take flak for their views. One person referred to it as "group think" against FAs on this forum. For what it's worth, that is not the sense I get here. There are obviously people here who are extremely confident of their view that FAs are not worthwhile. But I don't think even those people bedgrudge others their right to have and express a different opinion. (And in any event as one of my professors told me years ago "just because you are certain about something, does not mean you are right.")
Thanks for that. It does seem like you are listening and interested in a discussion, so that's great. Since this forum is dedicated to retirement, people here try to inform others on tips to get there and stay there. And generally, many of us see DIY (at least for the basics) as going a long way towards getting the most from what you have.

Once someone has that info, they of course can do as they please. Or challenge it, so maybe we all learn. I like to make informed decisions, and trying to help others with that helps me to re-evaluate my own thinking. It's kind of a selfish thing!

Yep, 'group think' can be a trap, but then again, if the group is right, best to go with it! But best to challenge it, it's easy to get complacent with a plan.

edit/add: I also say, while I like to be challenged, and pretty much grew up in that kind of an environment and find value in it, I guess there are others who just don't see things that way. They take any 'challenge' as being rude or mean or something? I dunno, I don't understand that, so I have trouble dealing with it. If my thinking is off, I want to be told about it, so I don't continue making the same mistake. I think that keeping it to yourself is closer to being 'mean' than offering constructive critique. Maybe those are the people who describe it as 'taking flak' for defending their position? Of course, there are good/bad ways to deliver that critique, and it's easy to maybe come across as being a hard-ass to some one who is more sensitive in that way. But in my view, there's very little 'put down' in this forum, I'd suggest people should chill and go with the flow.

-ERD50
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Old 04-19-2016, 04:59 PM   #99
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. . . , but I am interested in what people feel they are getting of value from their FA.

-ERD50

Why do you care?

Nobody has to justify their personal actions to you or anybody else.

You have been repeating yourself on this topic for several years.

Just do your own thing, and let others do their own thing.

Maybe you should go back and read the original post in this thread and answer it . . . if you have an answer. If you don't have an answer, then why post to the thread?
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Old 04-19-2016, 05:16 PM   #100
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Just do your own thing, and let others do their own thing.
YES!!

There is a difference between wanting to be challenged by enlightened two-way discussion and insisting on beating a dead horse until the other party gives up and you think you've won.

Sometimes it would be nice to listen to each others ideas and opinions and then just let it go.
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