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Old 08-11-2013, 07:54 AM   #41
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My only advisor is the contact at Edward Jones who helps me buy CDs. Thanks to her, I always get the best rates for the maturity needed to build a 10-year ladder. I could not find these CDs on my own because of lack of time - so my answer is 'yes' to the OP's question.

The only other advice I read is here and Bogleheads.
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Old 08-11-2013, 01:10 PM   #42
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Originally Posted by ERD50 View Post
When I Googled "simple DIY retirement portfolio", the first hit was to a BogleHeads wiki on a three-fund portfolio. This isn't rocket science.
For many of the people here that is true. But - you make some assumptions. You assume the person has a computer, knows how to do internet searches, would understand the wiki, and has the ability and willingness to follow the advice and to hold to it for the long haul.

Not everyone has a computer. Sure, the people here have one. My mother wouldn't have a clue on doing the above. She isn't stupid, but she is almost 90 and the computer revolution passed her by (no, that isn't true of everyone that age, but I know many people over the age of 80 who don't have a computer). She doesn't have internet access, doesn't know how to use a browser and couldn't do this. (40% of Americans over 65 aren't online).


Even of the people who do search online, not everyone is all that smart. No, it isn't rocket science. But, not everyone is average. Plenty of people wouldn't understand this to any degree.

Further, what about the person who would have understood it fine at age 60 but at 85 or 90 can't manage it?

Also, what about those who understand it, but can't emotionally handle it. The person who bailed out of the market in 2008 and kept everything in cash until last week and now thinks it is time to get back into the market might well have done better with an advisor.
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Old 08-11-2013, 02:56 PM   #43
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Not everyone has a computer. Sure, the people here have one. My mother wouldn't have a clue on doing the above. She isn't stupid, but she is almost 90 and the computer revolution passed her by (no, that isn't true of everyone that age, but I know many people over the age of 80 who don't have a computer). She doesn't have internet access, doesn't know how to use a browser and couldn't do this. (40% of Americans over 65 aren't online).
OT:

My mom wouldn't touch the computer, even though she has one in the house. However, she jumped on the iPad, which wasn't hers, and seems to love it. She's searching the web for Chihuahua puppies and football news. A big surprise to us. Turns out she couldn't read the computer screen well enough to use it! The iPad she can hold close enough to use comfortably. You think we would have heard complaints about this before now, but that's Mom I guess...

And on topic, she's had the same old broker at Stanley Morgan for forever. He's probably older than she is. But she's used to him, she's in OK stock investments, and she hardly ever taps her portfolio, living instead off of SS and pensions/annuities. Probably does charge too much, but it won't matter to her. If that guy ever quits, we'll probably take a shot at getting her into a simple index fund at Fidelity.
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Old 08-11-2013, 03:17 PM   #44
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For many of the people here that is true. But - you make some assumptions. You assume the person has a computer, knows how to do internet searches, would understand the wiki, and has the ability and willingness to follow the advice and to hold to it for the long haul.
....
Even of the people who do search online, not everyone is all that smart. No, it isn't rocket science. But, not everyone is average. Plenty of people wouldn't understand this to any degree.

Further, what about the person who would have understood it fine at age 60 but at 85 or 90 can't manage it?
OK sure, if someone really is just not capable, then they need some kind of help. But going back to my home project DIY analogy, I said I looked at the info, and determined "It is within my capabilities...". So there is that caveat.

But in this thread, I think we were talking about the kind of people who were trying to DIY (and maybe failed because they didn't find the "Couch Potato" or equiv), and think they can determine that their FA is doing a good job, etc. Not people who are not capable, maybe just , IMO, under-informed of the simplicity and power of B&H, a simple AA and index funds.


Quote:
Also, what about those who understand it, but can't emotionally handle it. The person who bailed out of the market in 2008 and kept everything in cash until last week and now thinks it is time to get back into the market might well have done better with an advisor.
Juts tell them to give me a call, and I'll whump some sense into their noggins!

-ERD50
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Old 08-11-2013, 04:10 PM   #45
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We are very happy with our advisor. Took us a few months to shop in order to find the right one for us. Among other things, he is a CPA (tax). We are very pleased with the results net of his firm's fee.

I have no issue paying for a service as long as the service is good and the results are at or above expectations. In our case, they are.
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Old 08-11-2013, 04:27 PM   #46
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Oh yes, I understand all that now. But at the time, it was not so simple and clear. My dad died, I inherited a bunch of money, and I was overwhelmed with dealing with my normal stresses plus all of the estate duties (I was administrator, and it was a multi-state mess, with lots of people involved and relationships to keep in balance). I knew little to nothing about investing, taxes, estates, inheritance, real estate, ctc. I really benefitted from the help.

I'm not saying it's a long-term, permanent arrangement. But for the interim between ignorance and minimal competence -- during that time of "crisis" and overwhelm -- I was supremely grateful to have someone who knew what they were talking about helping me through it.

I think advisers make sense in the situation you outlined. I also have no problems with fee only advisers and I think they would make sense in many situations. However as has been discussed before. by forum member who are financial advisers, the economics of being a fee only adviser are challenging. This means most FA charge a percent of assets under management. These typically run about 1%/year which become big money once a portfolio hits 100K and huge money once you get to $1 million+.

As ERD50 says the difference between having a regular FA and DIY is probably 20-30% larger portfolio. Since one of the common goal of the forum is to achieve financial independence as early as possible. Become a DIY investor is one of the best investment you can make.

As far as capabilities I think the are relatively modest. If you managed to pass Algebra in high school without a huge struggle and you have the patience to read a couple hundred page non fiction book you are well on your way. You'll spend 30 minutes a week reading this forum and read 2 or 3 of the books on the forum you'll have spent 40 hours or one work week.

Those 40 hours well reduce the time to FI by many years for most of us or provide 20-30% boost in income for those of us retired.
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Old 08-11-2013, 07:57 PM   #47
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....
Those 40 hours well reduce the time to FI by many years for most of us or provide 20-30% boost in income for those of us retired.
Or roughly, .....mmmmmm...... $5,000 per hour!

Ongoing, you might (optionally) spend 1 hour a month checking your portfolio, and maybe a full 8 hours of analysis and implementing a re-balance (on the high side, and all pretty much optional, and maybe better off to skip it!). So that 1% fee, divided by 20 hours is $500/hour on-going.

Of course you have to come to this realization. But I really think that if you are going to research advisors, you will stumble across this info.

-ERD50
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Old 08-12-2013, 10:02 AM   #48
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No need to take offense, but both qualifying assumptions (below) may have been lost as the thread has developed, resulting in debating the same old concepts once again? I know it is tough for DIY investors, self included as I acknowledged, to see them from another's POV? Beyond simple methodology and beyond the obvious cases - about investing discipline and folks in the middle regarding financial literacy.
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Q1 That said, many/most people might be better off with a good*** financial advisor. Though long term investing methodology isn't rocket science at all (and what most replies here address), having the discipline to stick with a plan is probably where most amateur investors fall short (and is often overlooked in replies here).
A1 Many replies focus on the methodology once again, when the discipline is often the issue with folks in the "gray area."

Quote:
Q2 Yes it's pretty easy to recognize the willfully/obviously investing novices who would be better off with an FA. I am not asking about those cases.

But in the interests of a better response, how do you recognize when/if an investor is better off with an advisor - that big gray area between the obvious yes or no? Those folks who are their own worst enemy, where "a (too) little knowledge" is dangerous?
A2 Many replies seem to use the obvious black and white cases to make a case, successful DIY vs clearly not capable of DIY, and not the gray area mentioned in post #1. Financial literacy seems to be on a continuum, not a yes-no situation in all cases. The gray area was the intended focus.
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Old 08-12-2013, 10:51 AM   #49
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Another article on the perils of selecting a financial advisor:

Quote:
We sent more than 40 trained mystery shoppers on multiple visits to more than 100 different financial service providers, including retail firms, banks, and independent advisers throughout the greater Boston area.
The sadly unsurprising results:

Quote:
First, we find that self-interest played a key role in the quality of advice provided. The majority of financial professionals were particularly supportive of investment biases that helped them maximize their commissions and fees while being less encouraging of strategies recommended by textbook finance research for maximizing returns.

Most strikingly, the professionals were particularly discouraging of low-fee investment strategies like index funds, which finance research has found to be a superior investment option. In fact, many of the financial professionals encouraged clients to move money out of low-cost index funds into higher-cost alternatives.
How to get financial advice worth your money - MarketWatch
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Old 08-12-2013, 04:19 PM   #50
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The quality of the advisor is the huge variable. In answer to the original question: There's >nobody< that is well served by paying a high fee, being put into load funds, and having their account churned.

If we assume that there's an FA / company out there that charges low rates and hews close to the Bogle/Bernstein/Ferri principles, then I'd feel good recommending that firm to anyone who didn't have the time and temperament/discipline and interest in doing things themselves. But I don't understand such people (some of whom, like my DW, are wonderful). And I wonder why they'd take our advice on the matter: having no ability on their own to judge "smart" from "stupid", they will be susceptible to every radio advertisement and "suggestion from a friend" that comes along, forevermore.

Ok to get back to your original question MidPack, I agree with SamClem.

I'd also that add that many people could benefit from a fee only FA on temporary basis when they are new to investing or they have a special situations, college savings, estate planning, new ventures like rentals, marriages, inheritances etc.

However Midpack you have to be aware that reasons you will always get resistance to FAs, is that it requires a lot of work and knowledge evaluate an FA.

ER Eddie is one of the few people on the forum in recent years that even had an objective measurement of his FA. "The FAs investment returns were better than mine". But even that is only a B- answer.

I have yet to hear a single person person say. "I know my FA is good because he has delivered positive alpha over the last 5 or 10 years."

Simply understanding Alpha (risk adjusted return) requires a high level of sophistication and requires way more work to measure Alpha than setting up a coach potato return.
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Old 08-12-2013, 05:53 PM   #51
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ER Eddie is one of the few people on the forum in recent years that even had an objective measurement of his FA. "The FAs investment returns were better than mine". But even that is only a B- answer.
Hey, I deserve at least a B.

Quote:
I have yet to hear a single person person say. "I know my FA is good because he has delivered positive alpha over the last 5 or 10 years."
Yeah, I wouldn't hold your breath on that one.


Midpack, your 2nd qualifier (grey area) is tough to address. Maybe you could compare the DIYr's returns to results from an average DIY'r, if those data are available somewhere. If he/she fell short of the average DIY'r, perhaps he/she could've benefitted from an FA. Unless the average FA results are even lower...

p.s. Although that ignores the other potential advantages of an FA, such as good advice about other areas (e.g., taxes, estate planning, whatever).
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Old 08-12-2013, 06:17 PM   #52
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I invested with an Advisor (a good friend) but had the knowledge of 25 years of investing and took note of the fees that were being generated. After 4 years I compared the results and fees with Vanguard Windsor fund and immediately fired him and moved all the funds to Vanguard Windsor. I told him it was just a "business" move and had nothing to do with our friendship. That remains to be seen. . . .
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Old 08-12-2013, 10:35 PM   #53
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Many people, except possibly the most knowledgeable DIY folks, would be better off with a good adviser. The problem is that most advisers are actually pretty poor advisers who take fees and commissions to further reduce the returns of the already sub-optimal strategies they suggest. It is all but impossible to find the "good" adviser that everyone uses to recommend the advantages of advisers. Most advisers I have talked to were very good at sales and not nearly so good with actual advice.
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