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Old 04-23-2016, 08:04 PM   #141
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This may be of interest to anyone who is interested in thoughts about whether an advisor can add value: https://pressroom.vanguard.com/conte..._3.10.2014.pdf
A pretty unconvincing breakdown to me. Fully half of the claimed value of professional financial advice is said to be due to "behavioral coaching", by which they mostly mean suppressing clients' ignorant inclination to buy high and sell low. But they must not be very good at that coaching if clients have to keep paying for it annually. Most of the rest of the claimed value comes from one-time set-up things.
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Old 04-23-2016, 08:15 PM   #142
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A pretty unconvincing breakdown to me. Fully half of the claimed value of professional financial advice is said to be due to "behavioral coaching", by which they mostly mean suppressing clients' ignorant inclination to buy high and sell low. But they must not be very good at that coaching if clients have to keep paying for it annually. Most of the rest of the claimed value comes from one-time set-up things.
This seems to be an example of confirmation bias. People tend to interpret information in a way that confirms their preconceptions.
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Old 04-23-2016, 08:20 PM   #143
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Not really... you'll find plenty of threads that encourage folks to develop a written investment policy statement and then stay the course with their statement and be disciplined when markets get skittish.
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Old 04-23-2016, 08:20 PM   #144
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Vanguard study is quantifying possible value adding. Not saying it is always true. Since they have paid advisors, it's appropriate that there be guidelines and studies.
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Old 04-24-2016, 05:55 AM   #145
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In general, I think that paying a % of assets is foolish, and I worked for a private family office that managed $ for a single family. My salary and bonus depended on the AUM. (I didn't do the investment management, I was on the tax and planning side. ) I saw clients with $100k+ in assets use the resources of our office to a level that was abusive, and clients with $10mm+ get their tax returns prepared and didn't want much more. Those with the smarts tended to keep a portion of their assets outside of our office and kept their fee down.

In my situation, I have a friend with whom I have worked for nearly 30 years. He has two fee structures, commission based and %of AUM. I have referred many people to him since he has always had the client's interest at heart. The "proof" I offer is his income. I prepared his tax return (no profit in it for me, just helping a friend) for years, and we talk often about our situations. At one point, he was nearly fired because his fee income was "too low". He pointed out that he had a very high AUM, and it was growing very fast with almost no loss of accounts whereas others had high fee income and an incredible turnover ratio. The office changed its philosophy to put the client's interest first (this was almost 25 years ago) and recognize that the income for the firm will come eventually. This is why I have recommended them to others over the years, and haven't had any complaints.

Not all FAs are good by any stretch of the imagination, but also not all are self centered either. This forum is heavily populated with DIY which is fine. My DW needs the help that my friend will provide, so when I am gone, she will likely use the AUM model to let her sleep better.


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Old 04-24-2016, 06:22 AM   #146
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This seems to be an example of confirmation bias. People tend to interpret information in a way that confirms their preconceptions.
It sounds like a marketing pitch for their services, which is exactly what it is. They assume you are doing things wrong and show how they can fix it. But since I'm already rebalancing, for example, there is 35 bps that doesn't apply. Another 45 bps for already using low cost funds. And so on.

Still, I'm going to read this again more closely and try to honestly evaluate whether I am doing everything "right".
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Old 04-24-2016, 07:03 AM   #147
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This is one of those cases where you need to get outside of the box and stop thinking of everyone and their personal situation being you and yours.
I'm not a fan of % fee based advisors even a little but there is a lot of truth to the fact that they might be right for a lot of people.

My brother uses an FA that charges a fee. For years I've nudged him that he's getting pounded in terms of fees as a % of his returns. But he likes the knowledge of knowing someone professional is handling this.

During the big market swoon last August, we happened to be together and he let me listen on speaker to what his guy had to say about the situation. He didn't say anything I didn't get from reading RealClearMarkets for 30 mins that morning.

The trick, however, is that I like this stuff and read RCM everyday regardless of what's going on. I have over the years become highly financially educated and comfortable with my (mostly passive) decisions because I enjoy the topic. My brother would rather spend his leisure time reading about how to fix up an old car.

I wouldn't trust a car where I fixed the brakes myself. That's how he feels about his portfolio.
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Old 04-24-2016, 12:08 PM   #148
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A friend of mine inherited some money from his relative who had her money managed by an FA (% fee based with requirement of 500K or more - Morgan Stanley affiliated). He decided to have his inheritance (plus his rollover IRA) managed by the same guy. When my friend had his accountant do the taxes, the tax account was surprised that the fees on my friend's new account was very low (no loads, and no fees except for the tax deductible annual fee) and asked for the contact information of his FA - She wanted to invest with him. (According to my friend, the tax accountant told him that an FA like this is very rare.) I guess my friend lucked out especially because he has no idea how to invest. He said although it wasn't as much, he still made money last year via his FA. He is very happy about it.
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Old 04-25-2016, 07:42 PM   #149
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I need someone to manage my HSA, Roth (vanguard), and fiance's Roth (vanguard).

Any suggestions?
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Old 04-25-2016, 08:24 PM   #150
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Look in the mirror. That's the guy. Nobody cares more about your money than him.
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Old 04-25-2016, 08:30 PM   #151
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Look in the mirror. That's the guy. Nobody cares more about your money than him.
I agree with you, but I don't have the time to figure out the most effective investments.

I have my Roth, 401k, and soon HSA. Just need someone to manage it. I'd rather hire a professional that is trustworthy.
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Old 04-25-2016, 08:35 PM   #152
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I agree with you, but I don't have the time to figure out the most effective investments.

I have my Roth, 401k, and soon HSA. Just need someone to manage it. I'd rather hire a professional that is trustworthy.
Based on some of the posts on this thread, that is an oxymoron like giant shrimp or military intelligence
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Old 04-25-2016, 08:39 PM   #153
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I'd rather hire a professional that is trustworthy.
Catch 22: In order to know your professional is trustworthy, you'll need to understand the basics of investing and monitor his/her performance against appropriate benchmarks. To do that you'll have to determine what those benchmarks are, and by the time you've learned that you'll have the knowledge you need to manage your own investments.

Since you'll be doing the work anyhow, why pay for a professional - who you may not learn is trustworthy until after they've underperformed?
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Old 04-25-2016, 08:44 PM   #154
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I agree with you, but I don't have the time to figure out the most effective investments.

I have my Roth, 401k, and soon HSA. Just need someone to manage it. I'd rather hire a professional that is trustworthy.
IMO it is harder and more time consuming to find a trustworthy FA (and monitor them to make sure that they remain trustworthy) than it is to select the right investments. Since you have no taxable accounts you don't need to worry about tax efficient placement... you can just buy a target date fund or Wellesley or Wellington or a balanced fund depending on your risk appetite. Easy peasy.
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Old 04-26-2016, 07:16 AM   #155
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Catch 22: In order to know your professional is trustworthy, you'll need to understand the basics of investing and monitor his/her performance against appropriate benchmarks. To do that you'll have to determine what those benchmarks are, and by the time you've learned that you'll have the knowledge you need to manage your own investments.

Since you'll be doing the work anyhow, why pay for a professional - who you may not learn is trustworthy until after they've under performed?
This is the crux of it for me. Of course, another option is to just pay the FA and trust them knowing they are "professionals" who have your best interest at heart and know way more about investing that you ever will.
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Old 04-26-2016, 09:09 AM   #156
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I also have never used a FA but apparently you have a great deal of comfort with this one. The issue seems to be the amount charged and your prior DIY performance in a volatile market. What would really concern me is paying 0.6% on the fixed income part of the portfolio because of existing low interest rates. Assuming this portion of your assets is focused primarily on tax free muni bond funds (or even taxable bond funds), would it be possible to negotiate a lower rate on this part of your portfolio. If such funds are paying 2-3% then his/her fee is 20-30% of your return. Perhaps you stay at 0.6% for equities but lower substantially the fee on your fixed rate portion. I understand that this can be done by splitting your account into separate accounts each having a different fee ratio. Not a perfect answer but their is justification for the reduction.
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Old 04-26-2016, 09:56 AM   #157
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If I had 12.5 million, I would be using an advisor too.
Really? I don't. I figure if you have enough time and interest to post regularly here you have enough time and interest to do it yourself. Not to mention being "frugal"
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Old 04-26-2016, 10:21 AM   #158
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#82 --

OK, 'fleecing' them (but that wasn't an assumption, it was to be shown after taking some time) - and an immediate caveat that it doesn't apply to all.
Ha! You mentioned my "fleecing" quote. Not meant to bash FAs as a whole at all, as you detected.

Specifically, my mom's FA charges her 1% AUM upfront, but also gets "kickbacks" from some of the funds he has her in, which come from the proceeds of those funds; has her in funds with front end loads up to 6.5%; has her in other funds with ERs well in excess of 1%.

All of that, and he has underperformed the S&P 500 Index in every year they've been using him.

It's all disclosed in the fancy 60-page reports he produces for her every quarter, but it's obvious she either doesn't review them or doesn't understand them.

I reviewed records and reports for four quarters and presented them to her, but she told me, "Well, he does well for us." Despite all temptations to continue the discussion, I recognized she was comfortable with losing tens of thousands of dollars every year for whatever reason, and I've left it alone recognizing that there's pride involved here as well, and few mothers are ever going to listen to sons in such sensitive matters because the perception is that the elder (should) know(s) better.

Interestingly, she told me this weekend via text that she thinks I should trust my investments to people who do this all day every day because when she tried self-managing, she had a co-worker with an MBA tell her when to buy and sell in her 401K, but even that was too stressful for her. And that guy had an MBA, by the way!

My wife said, "I have an MBA, but that doesn't make me an investment whiz."

Clearly, I was adopted.
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Old 04-26-2016, 10:32 AM   #159
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I reviewed records and reports for four quarters and presented them to her, but she told me, "Well, he does well for us."
I suspect that what people mean when they say such things is"

"He/she does better than I can do, since I don't want to do it."

It's a bad idea to try and force a square peg into a round hole. The results are almost always disappointing.
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Old 04-26-2016, 10:36 AM   #160
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Really? I don't. I figure if you have enough time and interest to post regularly here you have enough time and interest to do it yourself. Not to mention being "frugal"

Yeah, really. I said I would hire an advisor if I had 12.5 million is because I don't need that much money and I have no heir to want to leave money to so I'd rather pay 1% or whatever fee and spend my time doing other fun things than spending time DIYing my finance FOR SURE. I will definitely review what the FA is doing but I will definitely not spending as much time as I am now.


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