Financial advisors

[youbet]

Everyone who logs in here can do it with our advice as a starting point.

Or despite our advise............

 

[Ronstar]

My experience-

DW has her IRA through an FA
I have a small IRA through the same FA (as demanded by DW)
I have separate 401k and other separate accounts that I manage

All of my accounts that I manage get slightly better returns than the FA managed account - usually by 0.5 to 1.5%. Kinda makes sense since the FA gets 1%.

 

[MRG]

Is this it? There seem to be several but I liked this one.

Note: R-rated so perhaps NSFW - turn the volume down if you're at w*rk.

That's the one. I forgot it's NSFW. It's a pretty accurate description of what they push.

OP, if you use a FA only deal with someone working as a fiduciary, never accept someone working under suitability.

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[Tailgate]

I fired my FA years ago when I asked him why he was't retired (he was in his late 60's). His reply was "I'm not debt free". The way he said it sounded like he was buried in debt. That sealed the deal.


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[Big_Hitter]

I fired my FA years ago when I asked him why he was't retired (he was in his late 60's). His reply was "I'm not debt free". The way he said it sounded like he was buried in debt. That sealed the deal.


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holy lack of credibility batman!

 

[Car-Guy]

Before deciding on any financial advisor, you might want to watch the 2 part ABC movie (Madoff) that's airing now (last night and tonight)

And for the honest ones, I've always wonder why they are still working for a living, if they are so financially gifted.

Regarding your 401k. Do you have good investment options in your 401k? Many (not all) have a good range of investment options and very low management fees. Also, be aware of the IRS rules when moving tax deferred money from your 401k to avoid an unpleasant or unexpected tax surprise.

 

[rodi]

Another thought on 401(k) vs rolling it out.
Some 401(k)'s offer a stable value fund. This is similar to a CD - pays interest... but usually at a higher rate than current CD rates. This is something that isn't available outside 401(k)s... so if you have one, you might want to keep at least some of your money in the 401(k)... but do it based on your asset allocation that you'll figure out after doing some research, reading, and/or consulting a fee-based FA.

 

[Sarah in SC]

And for the honest ones, I've always wonder why they are still working for a living, if they are so financially gifted.

Hey I'm saving just as hard as I can to quit, just like everyone else!

 

[target2019]

We save this much by not paying someone else to manage out investments.

 

[Andy Sr]

Thanks for all your comments. Certainly changed my opinion on Financial advisors. I'm so glad that I stumbled upon this website.


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[aim-high]

There are some decent ones like Evanson and Cardiff that don't overcharge because you're loaded.

 

[athena53]

We save this much by not paying someone else to manage out investments.

That's one side of the coin. I look at return after expenses against benchmarks. If they're outperforming then the fees are well-spent. Would you choose a fund with a 0.5% expense ratio and a 5% average return after expenses over a fund with a 2% expense ratio (assuming similar investment objectives) and an average net return of 6%, just because the former has a lower expense ratio?

 

[aim-high]

That's one side of the coin. I look at return after expenses against benchmarks. If they're outperforming then the fees are well-spent. Would you choose a fund with a 0.5% expense ratio and a 5% average return after expenses over a fund with a 2% expense ratio (assuming similar investment objectives) and an average net return of 6%, just because the former has a lower expense ratio?

I'm a novice compared to most on this board so perhaps someone else can chime in as well. However, the point is the only way an FA is going to over or underperform the benchmark by so much is through active management. And statistically speaking it's less likely to find someone that over-performs consistently so year over year, the investor is better off taking what the market returns given one's allocation and keeping expenses as low as possible.

That said, if one has behavioral issues with sticking to an investment plan then one is better off finding the lowest cost FA available. There are a good number who charge a fixed fee, not AUM, and may be worth the cost to help their clients stay on the plan.

 

[target2019]

That's one side of the coin. I look at return after expenses against benchmarks. If they're outperforming then the fees are well-spent. Would you choose a fund with a 0.5% expense ratio and a 5% average return after expenses over a fund with a 2% expense ratio (assuming similar investment objectives) and an average net return of 6%, just because the former has a lower expense ratio?

I'm pretty sure this thread is about showing the OP how a core of index funds is used, rather than guiding him towards higher expense funds.

Expenses are negatively correlated to managed fund returns. That is something Bogle mentions quite a bit. I believe him.

 

[Big_Hitter]

Another thought on 401(k) vs rolling it out.
Some 401(k)'s offer a stable value fund. This is similar to a CD - pays interest... but usually at a higher rate than current CD rates. This is something that isn't available outside 401(k)s... so if you have one, you might want to keep at least some of your money in the 401(k)... but do it based on your asset allocation that you'll figure out after doing some research, reading, and/or consulting a fee-based FA.

+1 - these are generally only offered to institutional investors

 

[travelover]

.......... If they're outperforming then the fees are well-spent. Would you choose a fund with a 0.5% expense ratio and a 5% average return after expenses over a fund with a 2% expense ratio (assuming similar investment objectives) and an average net return of 6%, just because the former has a lower expense ratio?

Given two investments with equal risk, this scenario seems like a slam dunk. The problem is that I've never seem a convincing argument that the better performing managed investment can be chosen in advance. Looking backward, it happens, but only for the lucky.

 

[ERD50]

I am a financial advisor. Some people are perfectly capable of handling their own investments without the help of a financial advisor, some are not. The thing that makes managing your own investments difficult is that it isn't just money. Its your life savings, its your security and its the difference between working longer or retiring, and also living comfortably in retirement or not. It's a very emotional thing and it is hard for some people to make rational decisions about their money when the stakes regarding failure are so high. ...

Two things -

First, if making a DIY investment decision is so terribly difficult and emotional and fraught with irreversible failure, how does this same person make an intelligent, safe decision on choosing an FA? How would one even evaluate an FA, if they don't know about investing in the first place? Do they just trust them? A lot of people trusted Bernie M.

As we have said here many times, once you have learned enough to evaluate an FA, you have learned more than enough to DIY.

Second, explain what is so difficult about dumping all your money in a target retirement fund, or choosing any AA between 50/50 and 90/10 and dumping that in a an index SP500 and index Bond fund?

Don't tell everyone they can do it alone- everyone can't!

I do';t believe anyone said "everyone can". But I do';t see how anyone who was intelligent and motivated enough to earn and save a large portfolio would not be able to read a little understand that they can pick an AA and buy a couple funds and let it ride, and that there aren't any FA's with a secret sauce out there that can reliably beat the market after expenses (or maybe even before, not that it matters).

Can you share public information that shows your clients have done better, after your fees/expenses, than a couch potato or other simple DIY, low effort portfolio? I'll wait.

-ERD50

 

[ERD50]

Andy Sr, our experience has been the small fee's to our FA and CPA, are well worth it.

And how did you determine this?

-ERD50

 

[athena53]

Given two investments with equal risk, this scenario seems like a slam dunk. The problem is that I've never seem a convincing argument that the better performing managed investment can be chosen in advance. Looking backward, it happens, but only for the lucky.

I agree- I deliberately chose a simple example but the bigger the expense %, the more you have to outperform the benchmarks to justify your existence- and that can mean taking on more risk. This is something I've been watching in my own portfolio and I've gradually been shifting to products with a lower expense ratio and, in some cases, individual stocks and bonds. If I did it all at once, I'd get killed on the taxes in the taxable accounts.

 

[pb4uski]

I think ugeauxgirl has some valid points. As background, I am a devoted DIY investor and have been for years but BIL and a good friend are FAs (I don't use them but hear their war stories, especially when markets are skittish).

There are some people who are just too skittish to DIY... while it is simple to most of us these people need some hand-holding.... particularly during periods of market volatility. I know a few retirees who were DIY and bailed when things were bad, never got back in an lost out on the rally... these people are still doing fine it is just they lost a nice opportunity... a good advisor likely would have convinced them to stay the course or only moderately pare back their holdings.

There is no logical reason why everyone can't DIY... its pretty easy IMO... but a small set of people are too emotional about their money and lack the self-confidence to really do it.

We don't know enough about Andy Sr. to know which camp he falls into but I still think MOST people can DIY and those who can't/shouldn't are a small subset of the total population.

I am a financial advisor. Some people are perfectly capable of handling their own investments without the help of a financial advisor, some are not. The thing that makes managing your own investments difficult is that it isn't just money. Its your life savings, its your security and its the difference between working longer or retiring, and also living comfortably in retirement or not. It's a very emotional thing and it is hard for some people to make rational decisions about their money when the stakes regarding failure are so high. If you are not sure if you can stick with your plan if your portfolio declines in value by 25, 40 or 50%, you may want to hire some help. If you can stand the volatility, you will certainly get off cheaper doing it yourself. Financial Advisors, (like Doctors, Lawyers, Accountants, Engineers etc all have to earn a living)

Financial Advisors are accustomed to being "interviewed" by prospective clients. He/she should explain all of your options and all of the fees, and explain what you expect to get in return for your fees. Referrals are a great idea- one of the best indicators of a good financial advisor is when they advise you of something that is clearly not in their best interest- its in yours. Ask your friends which of their advisors have told them NOT to sell in a down market, have discouraged them from buying "hot stocks" they heard about on the golf course, and have steered them away from expensive products they don't need.

Y'all are a very self-sufficient bunch. Anyone who has the self-discipline to accumulate the assets you have requires intelligence and good decision-making skills. Recommending to EVERYONE that they invest on their own assumes that they have the same er, intestinal fortitude that you do- could be a mistake. Tons of investors sold out during 08-09 and will never recover from that loss. Don't tell everyone they can do it alone- everyone can't!

 

[serie1926]

"There are some people who are just too skittish to DIY... while it is simple to most of us these people need some hand-holding"

"but a small set of people are too emotional about their money and lack the self-confidence to really do it"

pb4uski, painting with a pretty broad brush there aren't you?

 

[pb4uski]

I don't think so.. why do you say that?

 

[redduck]

Was wondering what most people think of financial advisors versus leaving my money in my company 401K. There's a few people at work that are taking their funds from there 401K and transferring them over to personal financial advisors. Not sure how to find a good one. Not sure if it's a good move.

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About ten years ago, my significant other retired and moved her investments (first changing them into cash) from her employer's 401K plan (or whatever it was called) to Vanguard. It was a simple process (thank goodness, as we are simple folk). The rep at Vanguard walked us through the process (several times). Selecting the Vanguard mutual funds wasn't difficult, especially after having read various investment threads on this board. Anyhow, there have been no regrets since moving to Vanguard. And, if you should become uneasy during a financial downturn and have a need for handholding (or whatever else you might desire to be held) members of this forum can be quite helpful.

 

[mystang52]

I'm not sure what the threshold is for free FA guidance from Vanguard, Fidelity etc but it's not that high. That advice is, in my opinion, at least as good as independent FA's.
So, for those people who are "skittish" there is an excellent option beyond turning over 1% of their assets each year.

 

[serie1926]

I don't think so.. why do you say that?

Was I not clear in quoting you? Do you have first hand knowledge as an FA and the reasons folks use an FA? Have you ever utilized the services of an FA?

We do use an FA and would not consider ourselves "skittish" or need "hand holding".

Our FA and the team provide a tremendous service, and we're extremely appreciative of the service.