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Financial Advisors and other things link
Old 08-07-2014, 01:59 PM   #1
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Financial Advisors and other things link

Hi guys. First time posting but have been reading the forum for years.

This is a good link about FAs and other things

http://www.dilbert.com/blog/entry/how_to_make_more_money_in_stocks/

Personally, I don't see the need for a Financial Advisor. I really don't see the value. I don't see them worth the fees. I keep it simple and low cost. What would they do better for me with my money than I can't? I don't see the difference on this principle on a large or small nest egg. I am always puzzled by people who use FAs. This is not rocket science. I do however use a tax consultant sometimes for specific things. But a FA? No thanks.
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Old 08-07-2014, 02:21 PM   #2
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The FAs I've met are nice and friendly. Last one was kinda slimy, but meal was great.
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Old 08-07-2014, 05:49 PM   #3
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I must not have the right profile somewhere. They hardly ever invite me to free dinners anymore.
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Old 08-07-2014, 06:15 PM   #4
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DW was approached by a FA a few years ago and he made recommendations on individual funds within her 401k. She also transferred her IRA to him and coaxed me to do as well. So I did- I figured no big deal - it's only 4% of the portfolio. But my 401k mix that I picked does better than our IRA's. He and another FA have been pressuring us lately to move our 401k's to them. I can't talk DW into letting me do it - she's going with with the original FA. Probably just as well - she knows nothing about investments. I'm keeping the rest of our investments under my control. Did get a free dinner from them a while ago though
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Old 08-07-2014, 06:27 PM   #5
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Wow, I wondered how this thread would progress...................
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Old 08-07-2014, 06:41 PM   #6
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A FA will send you a birthday card.
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Old 08-07-2014, 09:10 PM   #7
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Given the choice between FA's & more laws, I'll take the former.
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Old 08-07-2014, 10:44 PM   #8
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People need financial advice from somewhere. An FA may be an expensive and not particularly effective source of advice, but it is one. Another decade or so and the general public will be more informed about index investing. Even as I was switching to mutual funds, my DS was learning about stocks in school, even playing with a virtual portfolio. Pretty good for public school, and not wasted time, but I had to tell him he didn't really want to play with stocks to start out. He needed to use a mutual fund to stay diversified at first.

We're finally moving my mom from Morgan Stanley (2.7% ER managed account of value and international stocks and that's not including MS's fee) to Fidelity (Something like 1/3 each of fusvx, fsgdx, and fsevx). Mom's situation was state of the art back in the 70's I'm sure, but the new state of the art for the masses is index funds. It'll just take a while for everyone to get on the same page. Until then a good FA, fee based, should be able to steer people in the right direction. Unfortunately, with money involved, there will be plenty of not so good FA's looking to simply make a buck any way they can.
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Old 01-20-2015, 10:04 AM   #9
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Here's one person's view of financial advisers and the changes we are seeing and will see in this area:

https://secure.marketwatch.com/story...irs-2015-01-17

Quote:
So far, advisers have managed to cut their clients’ costs, without cutting their own fee. But the standard 1% fee is now under pressure, thanks to online financial advisers.
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Old 01-20-2015, 10:44 AM   #10
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Back in the "old days" I had various brokerage accounts and an account rep with supposed experts giving recommendations. These were the high commission days with "churning" the preferred method of moving the clients assets to their account. They also liked to recommend buying the stuff their large clients were trying to unload. With discount commissions, the FA with wrap fee became the preferred fleecing method but they still pushed the same trash the firm always pushed.

I moved to a discount broker as soon as I could. I delayed too long my move to Vanguard and an all index fund portfolio. I never saw any value in the supposed FA. I never once got what I would consider solid "financial advice." I only got "buy this, sell that." I have a hard time believing anything has changed. The people I know that keep their FA don't ever tell me what great pearls of wisdom they get from their FA. It's always some version of "it's too complicated to do it myself."

I can see a fee-only FA in helping someone set up a plan if they are illiterate and can't read a simple book on asset allocation and index funds. I can also see visiting a FA to set up a plan for more complicated issues like setting up a trust for a disabled child but then a CPA/lawyer would probably be better and the same with estate plans.

I know we have a couple of fee only FAs here on the forum. I'd be curious to know what added value is there for a "normal" person without something really complicated. What sort of complicated issues are best handled by a FA and not a CPA/lawyer? I keep thinking the client base for FAs being people who don't want to deal with it even though it is really pretty simple. The smarter ones use the fee-only FA and the clueless have wrap accounts.

I don't consider myself a financial expert but I don't see personal finance all that complicated. I don't think this stuff is very difficult.
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Old 01-20-2015, 11:43 AM   #11
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2B, generally agree. But AFS still sells many front end loads funds through advisors. Many FAs will still push you into class c funds with 1% 12B-1 fees, deferred sales fees and higher ERs than you can get from a discount broker. So there's still all that going on too. I think the FAs judge your knowledge and sell what's best for them if you don't question them about. So their bag of tricks is bigger with wrap accounts.

One thing that amazes me is the number of very well educated folks that get sucked in. One of my former co-w*rkers was telling me about the great money manager he had. I asked what he charged, he had no idea what he was paying! Another said she was at a full service brokerage, she didn't know what they charged her. She did say they had managed her DMs money for many years and DM was happy! Another guy with a series 7 license told me E.D. had just put him in a 6% F.E. load fund and did I think it was a good deal? I really didn't even know how to respond to him or the other 2.

All of these people worked at a financial services provider! There were always free classes on how the fund industry worked, that you were encouraged to take.

If you look at the ICI Factbook there is more money flowing into index funds and less in active. The trends for ERs is down. I don't remember any data about the advisor fees or if they even participated.

My use of the term FA does not include legitimate advisors (CFPs etc.).


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Old 01-20-2015, 12:14 PM   #12
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Originally Posted by MRG View Post
My use of the term FA does not include legitimate advisors (CFPs etc.).
Just because someone is a CFP doesn't mean they don't have wrap accounts (I think). My rant was at primarily FAs that are really salespeople selling what makes them the most. It's the old saying "The firm made money. The broker made money. Well, two our of three ain't bad."

My rant continuation is questioning what use does the typical saver, investor have for even a fee-only FA -- CFP or otherwise. Is it just for those that refuse to learn the most basic elements of personal financial planning.
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Old 01-20-2015, 12:25 PM   #13
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Originally Posted by 2B View Post
Just because someone is a CFP doesn't mean they don't have wrap accounts (I think). My rant was at primarily FAs that are really salespeople selling what makes them the most. It's the old saying "The firm made money. The broker made money. Well, two our of three ain't bad."

My rant continuation is questioning what use does the typical saver, investor have for even a fee-only FA -- CFP or otherwise. Is it just for those that refuse to learn the most basic elements of personal financial planning.
2B, my thoughts, as someone who has never used an advisor: Before actually pulling the trigger, I may set a meeting/conference up with a CFP as a check on my calculations/projections. DW is our high earner and is relying almost solely on me for making this call (although we discuss it frequently), and given that she is highly likely to outlive me, I may take advantage of the Vanguard consult just to give her some assurance. I'm likely more arrogant than the next guy about my abilities, but she only gets to make this call once and may have 50 years of retirement, with a decade or two as a widow. Plus, we are relying solely on our portfolio (still not counting on social sec.)

Even though both of us are pretty confident in my abilities, it probably is worth it to take advantage of that free flagship thingy once we slide more of our accounts over to vanguard....
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Old 01-20-2015, 12:40 PM   #14
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2B I agree I'm not sure if someone with a CFP does or doesn't use wrap accounts. Seems like if they're hourly they got compensation. But that's something I can't say for sure.

To the question of why people do it. IMHO it's fear based, if the FA has a bad year it's the FA's fault. If I'm DIY, it's hard to pass it off. But that's only a guess. The three examples I used all, of these people were well educated and worked around the fund industry. They had knowledge but passed off control to someone else, without due diligence on their part.

I guess I can understand someone who has or doesn't have the knowledge and thinks their time is more valuable elsewhere. None of these folks were in that position.

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Old 01-20-2015, 01:16 PM   #15
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There is the dilemma where one spouse/significant other is the DIY investor with the desire and knowledge to do so and the other spouse does not have the interest or confidence to also be a DIY investor. The solution of "educate the other spouse" or "leave detailed instructions behind" is not good enough in all circumstances. Investing is not something everyone wants to, or feels they can, do on their own.

In my case, I prefer to "interview" and establish a connection with a firm/advisor that passes muster on investment philosophy, low costs, appropriate method of compensation, etc. I want to keep my spouse from being overwhelmed with big choices as the survivor, potentially trusting the wrong bunch with her financial wellbeing. A connection doesn't necessarily mean having them manage our investments for an AUM percentage fee while I'm here to do so. Consultation on different items (healthcare, social security strategy, estate planning issues, analysis of my current portfolio, etc) on an hourly fee basis is a way to start that relationship and confirm that I'm on the right track. I see it as building a team of my choice my spouse can rely on if/when I'm not here to help.

I'm not disagreeing with earlier posters...all the concerns they bring up are absolutely valid. I'm just bringing up a reason why a current and satisfied DIYer might want to contact and identify potential candidates for asset management.
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Old 01-20-2015, 01:34 PM   #16
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Originally Posted by 2017ish View Post
I may take advantage of the Vanguard consult just to give her some assurance. I'm likely more arrogant than the next guy about my abilities, but she only gets to make this call once and may have 50 years of retirement, with a decade or two as a widow. Plus, we are relying solely on our portfolio (still not counting on social sec.)

Even though both of us are pretty confident in my abilities, it probably is worth it to take advantage of that free flagship thingy once we slide more of our accounts over to vanguard....
I got a "no problem" response on my proposed after tax spending from the Vanguard CFP when I got a free plan. The Vanguard CFPs are as unbiased as I think we can find as far as retirement spending goes.

Quote:
Originally Posted by MRG View Post
To the question of why people do it. IMHO it's fear based, if the FA has a bad year it's the FA's fault. If I'm DIY, it's hard to pass it off. But that's only a guess.
+1

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There is the dilemma where one spouse/significant other is the DIY investor with the desire and knowledge to do so and the other spouse does not have the interest or confidence to also be a DIY investor. The solution of "educate the other spouse" or "leave detailed instructions behind" is not good enough in all circumstances. Investing is not something everyone wants to, or feels they can, do on their own.
I had my wife participate in the discussions with the Vanguard CFP. I made sure she understands our basic AA and how the rebalancing gets done. After I retire (27 Feb 2015 ) I plan on having her rebalance in 2016. I've avoided having her do it now because I've got a major SERP payment in 1Q2015 and rolling over my 401k to Vanguard which makes it much more confusing that just shifting things within our Vanguard accounts.
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Old 01-20-2015, 02:21 PM   #17
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We used a fee-only CFP to help us with a financial plan about eight years ago. In our case it was money well-spent (once) to bring up things we were missing, such as umbrella insurance, and help with some "what if" calculations. He did recommend some simplification and consolidation of our investment funds; we took some of his advice but did not follow everything to the letter.

One of our goals when we made the financial plan was to have me retire at 50 years old. A few months ago when w*rk was becoming a real drag and I realized I would be 50 in 2015, I dug up that financial plan. It has a page with projected net worth from the year we made the plan to the end. Wouldn't you know it, our financial position now is within tens of thousands of the number projected eight years ago. That little tidbit, and running online simulators over and over gave me confidence that our overall plan is working and we will be okay when I RE later this year.


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Old 01-20-2015, 03:06 PM   #18
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DH and I worked with a FA (can't remember what his certifications were) back in the mid-90's when I was making good money in corporate sales. It was our first experience with having a good income and we wanted to invest for retirement beyond our 401ks. We didn't have any experience and relied on the FA for recommendations. He got us set up with universal life insurance policies and two limited partnerships (we had to make initial deposits and quarterly payments). It concerned me the money we were investing, so I began to try to learn and understand what we were doing (not much use of the internet then). It took about two years for me to realize that we needed to get out of policies and the limited partnerships. The limited partnerships ended up as a bust. Got a little bit of $ back, but it was an expensive lesson in not investing in what you don't understand! The FA ended up getting sued and having his license suspended several years later. I just am thankful we were young enough to recover from the mistake.
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Old 01-20-2015, 04:07 PM   #19
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2B, appreciate the thoughts; they're good ones. I'm of the same mind and both of us participate in our financial decisions.

However, the gain in knowledge, confidence, etc occurs over a period of time. I'm planning for as many possibilities as I can. If I'm around for many more years, DW may need little to no help. If I'm outta here tomorrow...she will; particularly when you add in the other financial areas...taxes, record keeping, insurance (all types), savvy doing financial biz online, real estate, estate planning...where one partner may have had a larger role through the years.

I'm not suggesting that I have a better idea. The thread lists plenty of problems with the current state of the financial industry. I wanted to point out that there may be reasons other than fear, lack of expertise or motivation, etc to try to find one of the good apples in the financial industry.

I was thinking of more that an FA...CPA, Lawyer, etc would be part of that team I mentioned. If I believe my spouse may consult or use advisor(s) after I'm gone (it'll be her choice), I'd like to be a part of the decision-making process before it's too late.

Dealing with the many aspects of our financial lives is very interesting...
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