The 4 biggest fears about firing your financial adviser

[REWahoo]

One of the most frequent bits of advice given out on E-R.org is the value and benefit of DIY investing vs. relying on a financial adviser. This article posted on MarketWatch (yes, I know it's a financial porn site) does a great job of summarizing the common concerns many have about DIY investing and offers information on why and how DIY investing isn't rocket science.

The 4 biggest fears about taking back your money back from a financial adviser — and how to conquer them

DIY misconceptions:

1. I lack the expertise. Unless you have a complex financial situation, managing your own money requires common sense and discipline, not a Ph.D. in economics or finance. There are many books, videos and websites available that can help educate investors.

2. I don’t know how to turn an investment plan into action. Improved technology, coupled with the proliferation of low-cost index funds, have made investing simple. Many easy-to-use financial tools are available for free.

3. I don’t have the time. A few hours spent on basic investment education is time well spent. After that, it takes very little effort to put what you learn into practice.

4. I won’t have guidance if I need it. Competent, fiduciary advisers are available for onetime or occasional guidance.

 

[braumeister]

And don't forget the most important benefit of your financial advisor: that birthday card you get every year. Now you can even automate that service on your own!

https://birthdayco.com

 

[GravitySucks]

Well now I just realised my Fido guy never sent me a holiday card this year. Maybe I should check out Ameriprise.

 

[MRG]

Well now I just realised my Fido guy never sent me a holiday card this year. Maybe I should check out Ameriprise.

I got one from Fidelity corporate. Good to know since I don't have a private client representative anymore.

 

[Midpack]

And many/most FA’s will go out of their way to make you think all four are far too complex for any average investor to handle. It’s easy to make investing seem way more complicated than it needs to be. There are lots of good books, articles and websites to give DIYers confidence —- that most people never see...

 

[GravitySucks]

Well that's the deal breaker.
Imma going to move everything to Fast Eddie Jones.

I got one from Fidelity corporate. Good to know since I don't have a private client representative anymore.

 

[SumDay]

4. I won’t have guidance if I need it. Competent, fiduciary advisers are available for onetime or occasional guidance.

Exactly! We pay ours a couple hundred bucks every other year just to chat about taxes, asset allocation, withdrawals, ROTHs, our dogs... It helps me sleep, and I save 50 times that every single year by not paying someone 1%. For those thinking about jumping in, we found ours here. Full disclosure: she does NOT send me a birthday card.

 

[brett]

We fired our bank/financial adviser and our stock brokerage firm within a month of each other. It was easy.

It reminded me of the process to fire a poor employee. Without exception we wish that we had done it earlier.

Before doing it we took six-eight months searching for a replacement. We gave our bank /financial adviser a year's notice. They must have thought we were kidding because their was no change over that period.

 

[Chuckanut]

What I hear very often is "I'm not good at math". They can't add, subtract, and do simple percents? Very sad.

I figure these people are also the ones who buy state lottery tickets.

 

[OldShooter]

I think that there is a very important fifth reason and it's the reason that every salesperson, FAs included, works to be considered a friend. My most egregious example is a very poor Morgan Stanley FA who published a monthly newsletter that was like a Christmas letter. Nothing much about investing but we were told what her daughter was doing, important things in her assistant's life, and about her investment guys' kids. All kinds of news for her friends. The organization was wasting 2-4% a year due to poor performance but the board chair seemed to be in love. My reward for pointing out (repeatedly) the poor performance was that she convinced the board chair to kick both me and DW off the investment committee. This left no one who knew anything about investments.

Friends trust friends.
Friends don't ask friends hard questions.
Friends don't second-guess friends.
Friends are loyal and give business to friends.

So ... I nominate "not wanting to damage a friendship" as reason #5.

 

[capjak]

6. How do I invest the extra $500,000 windfall, I have by not having a FA?

$10,000 or 20,000 or 30,000+ a year for a 30 year retirement plus investment returns.

 

[kgtest]

What I hear very often is "I'm not good at math". They can't add, subtract, and do simple percents? Very sad.

I figure these people are also the ones who buy state lottery tickets.

+1 Bingo. I have a coworker who calculated his own raise wrong. Numbers are hard.

Step 1. Learn what asset allocation is, and what yours is.
Step 2. Determine your level of risk appetite
Step 3. Re-evaluate and re-balance over time

I always start with the basics when "friends" ask... Are you saving 15% and maxing 401k? If not, there is always room to save more sooner, that is the best advice. The sooner you save and the more you do, the easier it gets later.

A LOT of people do not trust themselves to do a whole lot. It's everywhere. FEAR.

 

[teejayevans]

I know some very smart people who use FAs...I guess you don’t know what what you don’t know. I say nothing unless they ask.

 

[brett]

We use a fee for service wealth management firm. Have done so for the past nine years. Extremely happy with the service and with the results.

I know numbers, it was my life, but I believe that I get better results by outsourcing to a group of people who are truly experts in the field. More than just investment advice.

 

[Mulligan]

Exactly! We pay ours a couple hundred bucks every other year just to chat about taxes, asset allocation, withdrawals, ROTHs, our dogs... It helps me sleep, and I save 50 times that every single year by not paying someone 1%. For those thinking about jumping in, we found ours here. Full disclosure: she does NOT send me a birthday card.

I think sometimes some people interchange the investing process with the taxes, withdrawals from IRA’s, etc. that a financial advisor can definitely assist with. So I can definitely see value in why one would pay a fee for good feedback in these money management areas.
But as far as the pure money investing process goes, I am not such a fan. Investing is the only career sector where a monkey throwing darts has proven to outperform top money managers. I havent seen any results showing monkeys out diagnosing doctors, hitting a curveball better than a professional baseball player, or weld a gas line better than a professional welder.

 

[catii]

Wife & I had to send each other Christmas cards, as we've been doing our own investing & calculations for more than 40 years. With $3MM for retirement, I guess we should add birthday cards!

 

[HFWR]

7. I’ll lose my opportunity to enjoy a gourmet dinner at Golden Corral while attending a “retirement seminar”.

 

[capjak]

7. I’ll lose my opportunity to enjoy a gourmet dinner at Golden Corral while attending a “retirement seminar”.

You are going to the wrong "retirement seminars", the ones I go to are at Ruth's Chris Steak House and include fillet mignon and salmon.

 

[Dtail]

Well now I just realised my Fido guy never sent me a holiday card this year. Maybe I should check out Ameriprise.

Card signed by Abby. Woohoo.

 

[Dtail]

Exactly! We pay ours a couple hundred bucks every other year just to chat about taxes, asset allocation, withdrawals, ROTHs, our dogs... It helps me sleep, and I save 50 times that every single year by not paying someone 1%. For those thinking about jumping in, we found ours here. Full disclosure: she does NOT send me a birthday card.

In general, I can ask the Fidelity team or my personal rep just about any question and will receive a response for the grand sum of 0 fees.

 

[The Cosmic Avenger]

+1 Bingo. I have a coworker who calculated his own raise wrong. Numbers are hard.

To be fair, I have a pretty sharp coworker who miscalculated his employee's raise percentage and almost had a fit before I corrected him. (Although in his favor, he had the wisdom to consult me before letting loose on HR for the supposedly insulting raise.) I calculate my raise percentage and the increase in gross pay every year, and I did catch a mistake once, back in the days of paper forms. I got back pay for the time they underpaid me, too!

 

[travelover]

In general, I can ask the Fidelity team or my personal rep just about any question and will receive a response for the grand sum of 0 fees.

Well yea, but no birthday card.

 

[GravitySucks]

Mine never gives answers to tax questions without qualifying the answer that he is not a CPA, if he will answer them at all.

In general, I can ask the Fidelity team or my personal rep just about any question and will receive a response for the grand sum of 0 fees.

 

[prudent_one]

Those fears sound reasonable to me. Mass media tells people investing is best left to experts. Those of us who know it can be done wisely without being a CFA have no loudspeaker to use to reach the masses (other than boards like this). I don't fault those who believe they need to pay AUM fees when they have no exposure to a DIY methodology (or are actually math-challenged, and I know a few smart people who I would urge to pay someone just to avoid a terrible math-based mistake).

On the issue of miscalculating raises, way back in the day when I was pretty new I was given a 3.5% raise but it was processed as 4.5%. I noticed the mistake in my first post-raise check. I told my manager who laughed and said I probably calculated wrong but he would have payroll check it. I was right. Although it cost me a few dollars a month for pointing it out, I was forevermore branded as a guy who was impeccably honest ("Can you believe what that guy did? Who does that? Nobody would have ever caught that.") which absolutely helped my career in the company far more than that few dollars would have helped my wallet.

I didn't know how far word had traveled in that 500-person company until one Saturday I was in the office catching up on some things when I got a call from the security desk. The CEO had called in from his weekend cabin 70 miles away, asked the security guy to look at the sign-in sheet and tell him who all was in the office on a Saturday. The CEO then asked for me. Wanted me to get the hidden key to his office, boot up his PC, and call him back. He gave me his password, told me to open a certain email and read him the phone number of the sender. When that was done the CEO said he had asked for me because he remembered hearing about my raise story and trusted me not to read other emails or poke around his office, then forget the password, and forget where the hidden key was. At that time I was just an employee with a supervisor who had a manager who had a director who had a VP and somehow the CEO knew my name.

 

[RobbieB]

Yeah Baby! Actions speak louder than words.