Originally Posted by
jIMOh
Financial decisions take time to research. Could be selling a house, refinancing a house, college savings strategies, tax credits for college, estate planning, tax planning, divorce settlements (and this list is longer than what I typed).
Two choices, research it yourself, or hire someone which knows the ins and outs of each of above, and has done it before.
The chances of getting an FA who is adequate in all these fields is remote, and besides, there are people who specialize in each one of these things. They are called attorneys, and they charge by the hour, not 1 % of your liver.
I do see why FA is a very appealing business for the FA. Almost no research- after all he is buying mutual funds, products that were designed to
replace custom portfolio management for the masses. So he is free to spend most of his time on business development and selling. Now if the client hopes to exist on a gross 4% from his mixed portfolio (ambitious goal under current conditions) and he gives up 1% to the FA, that means he can live on 3%, or thinks he can. Say the FA has a 50% net profit margin in his business, but he wants to live a bit better than the client. So his net profit is 1/2% of his clients assets per year. With twelve clients he nets 6% of these clients's assets, or exactly twice what the clients each make. And who bears the risk?
Not too shabby for work that requires moderate formal schooling.
And I say this with absolute respect for the FAs on the board. To make a good living on your own, without taxpayer assistance, or union or guild protection takes ability and drive.
Clients likely are like the OP. They might have had little financial experience in their lives, and they do not trust their own judgment. So it is not like the FA needs to twist their arms. Usually the spouse will do any twisting necessary.
Ha