Financial Advisor / Wealth Management

gerntz said:
People with complaints are multiple times, like 10x+, more vocal than those with compliments. I base this on working at a consumer products company whose multiple $100M+/yr sales products all received 10x+ complaints over product compliments.

What's the statistical evidence, not voluntary comments, that FA's aren't worthwhile given every comment on here by nature is anecdotal? I mean what's the relative amount of money invested by DIYers than with FA's?
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Simple math and common sense provide all the evidence one needs to conclude FAs do not add value. The fact that there are so many examples to support the conclusion is icing on the cake. Many brilliant investment minds, such as Warren Buffett and John Bogle, have concluded the same thing.

But let's turn this around, where's your evidence that they add value?
 
gerntz said:
People with complaints are multiple times, like 10x+, more vocal than those with compliments. I base this on working at a consumer products company whose multiple $100M+/yr sales products all received 10x+ complaints over product compliments.

What's the statistical evidence, not voluntary comments, that FA's aren't worthwhile given every comment on here by nature is anecdotal? I mean what's the relative amount of money invested by DIYers than with FA's/WM's? How many people each year ditch their FA & go DIY vs. the number that newly select an FA? Give us some facts.

When you can provide statistical data backed conclusions, I will buy that "there has to be recognition that in general the FA is not one to be trusted, and certainly does not have the client's interest foremost in mind.". Until then, I will believe anti-FA people just have an axe to grind. I get this forum is overwhelmingly populated by DIY types, but that's no reason to defame a group as a whole.
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Agree 100% but if people realized what the FA was costing them on annual basis I'm sure the number of complaints would soar. For most there is no easy way to determine what the cost is due to the smoke and mirrors that the industry loves. If people would receive a statement at year end to show the FA's performance as compared to the benchmarks along with a bill for services rendered, I'm sure it would be an eye opener for many.
 
In many years of systems consulting, I belonged to an organization that did not permit recommendations for something you had an interest in. IOW, you were truly a consultant and affirmed that you did not benefit from what the client purchased.
 
gerntz said:
People with complaints are multiple times, like 10x+, more vocal than those with compliments. I base this on working at a consumer products company whose multiple $100M+/yr sales products all received 10x+ complaints over product compliments.

What's the statistical evidence, not voluntary comments, that FA's aren't worthwhile given every comment on here by nature is anecdotal? I mean what's the relative amount of money invested by DIYers than with FA's/WM's? How many people each year ditch their FA & go DIY vs. the number that newly select an FA? Give us some facts.

When you can provide statistical data backed conclusions, I will buy that "there has to be recognition that in general the FA is not one to be trusted, and certainly does not have the client's interest foremost in mind.". Until then, I will believe anti-FA people just have an axe to grind. I get this forum is overwhelmingly populated by DIY types, but that's no reason to defame a group as a whole.
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You could search through the forums and find lots of statistical evidence for poor comparative performance of typical FA supported results versus simple market based DIY index portfolios. But I would simply turn your question on it's head: what real evidence do you have that people using FAs do better than their peers choosing a DIY approach? The fact that most investors use FAs and that many or most of them are satisfied with those FAs, is not evidence that they are doing better than they would with a simple coach potato DIY approach. The bottom line is that there may be lots of reasons why people use or need FAs but none of those reasons speak to a DIYer who has done a modicum of research.
 
REWahoo said:
...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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And we love Sarah in SC so our bias against FAs is not that deep since we know there are some good ones out there.

I DIY because it would take me as long to select a good FA and oversee what they do as it does to select some good investments and oversee the investments. I fact, I would say I am much more comfortable in my ability to select good investments than I am with my ability to select a good FA since many of them are "all hat, no cattle".

While I probably spend more time than is necessary puttering around with our portfolio because I enjoy it and have the time, if I had to I could easily whittle the time down to less 12 hours a year.

OTOH, there certainly are people whose make-up is not compatible with DIY investing and need a FA... and if they can find a good one (and there are good ones out there) then that is an ideal solution for those people. The problem that I have is separating the wheat from the chaff when it comes to selecting FAs.
 
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I have a former work colleague who has just a big name advisory firm for some time.
Out of the blue, he calls me to explore how I manage our portfolio. Seems he finally did the math on performance over the last few years vs cost and realized he was doing a very good job funding their retirement; his not so much.
I sent him this link on the type of expenses he was paying and why his results were not keeping up. An X-ray of one affluent, educated and sophisticated investor's portfolio shows how it was chewed up by fees | RIABiz
This forensic examination is for me one of the most telling of the real shenanigans that an FA organization can get away with.
Also suggested he read a couple Rick Ferri books on asset allocation and how he could simply his investments (he professed a desire to not have to "manage all the details") and handily beat what he was current getting.
Nwsteve
 
AtlasShrugged said:
Simple math and common sense provide all the evidence one needs to conclude FAs do not add value. The fact that there are so many examples to support the conclusion is icing on the cake. Many brilliant investment minds, such as Warren Buffett and John Bogle, have concluded the same thing.

But let's turn this around, where's your evidence that they add value?
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First off, it's not common sense that making decisions alone is the better choice. You can have 10K examples of outcomes of voluntary comments and they aren't representative of the whole because they are self-selected. It's the difference between call-in polls & scientific polls. And even the latter aren't always reliable.

Why turn it around? I'm not doing the bashing based on anecdotal data. If people just said they like doing it themselves & think they can equal or beat an advisor, fine. But to condemn an industry/businesses based on opinion/judgment is uncalled for to me.
 
AtlasShrugged said:
Simple math and common sense provide all the evidence one needs to conclude FAs do not add value. The fact that there are so many examples to support the conclusion is icing on the cake. Many brilliant investment minds, such as Warren Buffett and John Bogle, have concluded the same thing.

But let's turn this around, where's your evidence that they add value?
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I wouldn't call Buffett & Bogle many. Funny how many people rely on Buffett thru Berkshire Hathaway & Bogle thru his funds for advice.
 
donheff said:
You could search through the forums and find lots of statistical evidence for poor comparative performance of typical FA supported results versus simple market based DIY index portfolios. But I would simply turn your question on it's head: what real evidence do you have that people using FAs do better than their peers choosing a DIY approach? The fact that most investors use FAs and that many or most of them are satisfied with those FAs, is not evidence that they are doing better than they would with a simple coach potato DIY approach. The bottom line is that there may be lots of reasons why people use or need FAs but none of those reasons speak to a DIYer who has done a modicum of research.
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I don't have the evidence either way. But I'm not calling DIY's low life scum as FA's are described by some DIY's here, am I?. Those that do disdain FA's ought to back it up with more than an instance here & there to generalize. When I start saying DIY's are wrong & hurting themselves, I'll have hard data. The only thing I'm speaking to is the generalized bashing of FA's here.
 
gerntz said:
I don't have the evidence either way. But I'm not calling DIY's low life scum as FA's are described by some DIY's here, am I?. Those that do disdain FA's ought to back it up with more than an instance here & there to generalize. When I start saying DIY's are wrong & hurting themselves, I'll have hard data. The only thing I'm speaking to is the generalized bashing of FA's here.
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I posted this link on another thread but would suggest it appropriately provides some your request for "hard data"
An X-ray of one affluent, educated and sophisticated investor's portfolio shows how it was chewed up by fees | RIABiz
Nwsteve
 
gerntz said:
I don't have the evidence either way. But I'm not calling DIY's low life scum as FA's are described by some DIY's here, am I?. Those that do disdain FA's ought to back it up with more than an instance here & there to generalize. When I start saying DIY's are wrong & hurting themselves, I'll have hard data. The only thing I'm speaking to is the generalized bashing of FA's here.
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I had decided to back out of this thread, since a couple posters seemed to think I was being over the top or something. But for two reasons (I'll skip the second for now), I'll rejoin.

First reason, I detected a straw-man in that quote above, and I just hate straw-men! So I took the time to re-read this entire thread (admit to some skimming, but mostly the pro-FA posts). And I didn't see a single comment calling out FA's as 'low life scum' or any such thing (even allowing for some 'poetic license'). So if you are looking for people to back up their statements with data, how about you go first - where is the 'bashing' and name calling?

Here's the closest I found:

#82 --
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.
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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.

#118
At some point there has to be recognition that in general the FA is not one to be trusted, and certainly does not have the client's interest foremost in mind.
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Well, I'm not sure that is 'bashing' even? In any financial transaction, I think it's good advice to not 'trust' the other person, but to have safeguards in place. And the caveat again "in general" - he expressed an opinion that the FA does not have the client's interest foremost in mind. That's pretty true in any business transaction (look out for #1) , so I don't see that as shocking.

And the very next two posts countered that as an over-generalization.

then post #122 did agree.

But to put that in perspective, in post #28, gerntz himself did say:
I mean every advisor I think is trying to extract as much as possible for their business model, DFA access or not. It's their livelihood. Not at all sinister.
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Not so very different, no?

My sense, when I re-read this thread, was that people mostly said that if there was something you really need help with, pay by the hour rather than a % of AUM. That's a long way from bashing and name-calling, in my book. It strikes me as just reasoned analysis of the situation. A pretty positive thing for a financial discussion forum, IMO.

-ERD50
 
Oh, there you go again ERD50... letting facts get in the way of a good rant. :D When are you going to learn?
 
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medved said:
This may be of interest to anyone who is interested in thoughts about whether an advisor can add value: https://pressroom.vanguard.com/content/nonindexed/Quantifying_Vanguard_Advisors_Alpha_3.10.2014.pdf
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But whoa... I and many others on this forum who DIY already do all of that stuff that adds value. once you've been around here a while you'll see plenty of threads on asset allocation, using low cost funds, rebalancing, staying the course in times of volatility, tax efficient placement, optimal withdrawal strategies and total return investing. None of it is rocket science.
 
medved said:
This may be of interest to anyone who is interested in thoughts about whether an advisor can add value: https://pressroom.vanguard.com/content/nonindexed/Quantifying_Vanguard_Advisors_Alpha_3.10.2014.pdf
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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.
 
Skeptic said:
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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This seems to be an example of confirmation bias. People tend to interpret information in a way that confirms their preconceptions.
 
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.
 
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.
 
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.


Have the day you deserve, and let Karma sort it out.

Sent from my iPad using Early Retirement Forum
 
medved said:
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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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".
 
youbet said:
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.
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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.
 
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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I need someone to manage my HSA, Roth (vanguard), and fiance's Roth (vanguard).

Any suggestions?
 
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