Should I avoid a Wealth Management Advisor?

[firewhen]

Not even sure why I am at this juncture. After a lifetime of LBYM, prudent money management and sticking with index funds at Vanguard and Fidelity, we have amassed a portfolio far in excess of what I imagined or need. Fast forward to today and after attending some seminars (probably a mistake) some guys at Merrill are trying to get me to invest with them (lower risk, better return, more diversification--we can do things the discount guys cant).
I REALLY DONT WANT TO DO THIS. I guess that says it all? But I am asking the community if I am being close minded and should be more open? On the other hand what I have done for decades has served us well, is simple and I have lived through the downdrafts of 2000 and 2008 and can take it. I guess it comes down to an active versus passive mentality. BTW I have not even asked about the fees yet though I know it won't be .04% of 1% like the index funds.

 

[Closet_Gamer]

I hope they at least gave you a good steak?

I would stay away as you're responding to a sales pitch.

If, once you've stepped away from this for a couple months, you proactively feel the need to source some advice then re-enage in the thought process.

As you've been quite disciplined/successful on your own, I can only think of three reasons to engage the advisor:

1) you think you need a neutral third party perspective on your plan...which is better done with a one-time, fee only advisor than someone with a recurring interest in soaking your portfolio for gain.

2) you really believe that you need to switch to active investing. again, why?

3) you want to set up a structure that runs itself because you don't want to do it anymore, are concerned about declining cognitive function, or know that your heirs aren't capable of self-managing it.

My $0.02. YMMV.

 

[Koolau]

Not even sure why I am at this juncture. After a lifetime of LBYM, prudent money management and sticking with index funds at Vanguard and Fidelity, we have amassed a portfolio far in excess of what I imagined or need. Fast forward to today and after attending some seminars (probably a mistake) some guys at Merrill are trying to get me to invest with them (lower risk, better return, more diversification--we can do things the discount guys cant).
I REALLY DONT WANT TO DO THIS. I guess that says it all? But I am asking the community if I am being close minded and should be more open? On the other hand what I have done for decades has served us well, is simple and I have lived through the downdrafts of 2000 and 2008 and can take it. I guess it comes down to an active versus passive mentality. BTW I have not even asked about the fees yet though I know it won't be .04% of 1% like the index funds.

I think you've answered your own question but here's one more: If ML (or whomever) loses you money, do they make it up or give up their fees? Obviously not. Whether you win or lose, THEY get their fees. Pay yourself the fees and do it yourself - like you have been doing - would be my suggestion but YMMV.

 

[Midpack]

You’ve reached FI investing for yourself, why are you inclined to change horses now? Stick with what you know and keep the considerable fees ML would get for yourself. If you want a second opinion that’s understandable, but do as suggested above “you think you need a neutral third party perspective on your plan...which is better done with a one-time, fee only advisor.”

And congrats, you’ve “won the game” - why get more aggressive and take on more risk?

 

[donheff]

Are you trolling us Firewhen? You say you exceeded all expectations doing it yourself and now you are thinking of turning your financial wellbeing over to assets under management advisors? What did they feed you at that lunch? I found a site that outlines Merrill fees and it is horrifying. .45% for a robo advisor and .85% for robo advising and a brief chat with a human. 1.5% up to $5M for a real advisor who helps you figure out your AA sans robot. 1.8% for the first $1M and 1.35% for the next $4M for managed services (they do the rebalancing). I bet these guys are experts at churning your investments into a complicated conglomerate of holdings that would cost you an arm and a leg to exit if you wanted to quit their service.

 

[braumeister]

lower risk, better return, more diversification

Since they can't prove any of that, it sounds like a used car sales pitch and best avoided.

 

[mrfeh]

Not even sure why I am at this juncture. After a lifetime of LBYM, prudent money management and sticking with index funds at Vanguard and Fidelity, we have amassed a portfolio far in excess of what I imagined or need. Fast forward to today and after attending some seminars (probably a mistake) some guys at Merrill are trying to get me to invest with them (lower risk, better return, more diversification--we can do things the discount guys cant).
I REALLY DONT WANT TO DO THIS. I guess that says it all? But I am asking the community if I am being close minded and should be more open? On the other hand what I have done for decades has served us well, is simple and I have lived through the downdrafts of 2000 and 2008 and can take it. I guess it comes down to an active versus passive mentality. BTW I have not even asked about the fees yet though I know it won't be .04% of 1% like the index funds.

You know the right answer.

 

[frayne]

IMHO it's a no brainer, stick with who you know and trust, the guy in the mirror.

 

[VanWinkle]

My DF had a Merrill Lynch account and after he passed, Wicked Stepmother asked me to handle the meetings. They had multiple high expense mutual funds including "junk" bonds, multiple individual bonds with healthy spreads for them, and individual stocks that had been churned. My advice is to stay away from their managed accounts. Check on Vanguard PAS(Personal Advisor Services) if you want a break from watching your money grow.

VW

 

[OldShooter]

... what I have done for decades has served us well, is simple and I have lived through the downdrafts of 2000 and 2008 and can take it. ...

So then, what problem are you trying to solve?

 

[HarryHawk]

I don't think there is a right or wrong answer. You can do your own taxes; if you are ever arrested, represent yourself in court; you can manage your own finances. I personally chose to (or would) hire someone to do all of the above.

To complicate matters, there are good tax, legal and financial advisors, and not so good ones. If you don't find the right folks, they aren't worth whatever they do or don't charge. I personally don't mind paying for good expertise.

It seems to me that folks who are much smarter than I (having made tons of money) pretty much all pay for good expertise. They have someone do their taxes, manage their assets, and represent them in court (when needed). I figure if they need help, so do I.

I use a financial advisor, they aren't cheap, but their results have exceeded my expectations. If they ever fail to meet my expectations, I will most certainly stop using their services. As of now, knock on wood, they have done well for me in good times and bad.

 

[levindb]

Just this morning, I read that the the Society of Actuaries back in 2012 said that a 65 year old male had 45% chance of living to age 90 and 22% chance of living to age 95.

At what age will managing managing assets become too difficult?
Have you developed a succession plan?

I am not suggesting that ML is the right solution, but someone needs to be riding shotgun so they can take over when it is time to take a break from driving yourself.

 

[OldShooter]

... I use a financial advisor, they aren't cheap, but their results have exceeded my expectations. If they ever fail to meet my expectations, I will most certainly stop using their services. As of now, knock on wood, they have done well for me in good times and bad.

I am curious because, in general, investment advisors are a drag on portfolios. Can you say a little more about what your expectations are and how you have measured whether your advisor(s) have done well for you?

 

[Chuckanut]

I

It seems to me that folks who are much smarter than I (having made tons of money) pretty much all pay for good expertise. They have someone do their taxes, manage their assets, and represent them in court (when needed). I figure if they need help, so do I.

Often these people need help because the opportunity cost of managing their financial lives is very high. IOW, they make a huge amount of money in their job, and it's cheaper to pay somebody else to do their taxes, re-balance their accounts, etc. so they can continue to work and make even bigger piles of money. If I can make $400 working an extra hour this weekend, I will gladly pay somebody $100 to mow my lawn so I have the time to earn $400.

But, most of us are not in that situation. If a person needs help managing their accounts, I would use a Robo-Advisor before a big name brokerage house or insurance company.

 

[pacergal]

OP--you stated "really don't want to do this", so Don't!
If you have done well for yourself and are comfortable taking care of the investment financials yourself, then continue.
If you are feeling a little unsure, there are fee only Financial Planners who can do a once over and recommendations.
Or if you are comfortable with random advise, for free, from internet, post your stats here or over on Bogleheads for a review. There are many very knowledgeable people at both forums.

 

[CRLLS]

Simply put, OP has had many years of accumulation managed by themself. Let's assume it was 35 years. Ask the ML advisor to show the last 35 years of their recommended portfolio performance year by year. Then look at the years that were less than SP500 or DJI market performance, whatever your benchmarks are, and check what those fees add up to with inflation. I would be willing to bet your answer will be in that number.

 

[mystang52]

Frequently, questions about FA arise here, but usually it's by someone who believes they need help and and are starting with small asset base. OP, you've won the game so why on Earth would you even consider this? Especially so since you already stated you don't want to do it.
There is nothing ML can do for you better than you've done on your own.

 

[rwdflynavy]

Yes, Avoid a money manager. You're doing great! Don't give someone a cut for worthless advice.

 

[athena53]

Yes, Avoid a money manager. You're doing great! Don't give someone a cut for worthless advice.

I agree- if it ain't broke, don't fix it.

Do give some consideration to levindb's advice, though. I'm widowed, no plans to remarry and have all the paperwork in place for my brother, a CPA, and DS, my only child, who's smart but not all that interested in managing money, to take over my finances if I lose my marbles. I've also told DS he MUST have "the talk" with me if he sees it coming. I don't want to be scammed out of money that I'll need for LTC or that he, DDIL and the kids could inherit.

 

[2017ish]

Just this morning, I read that the the Society of Actuaries back in 2012 said that a 65 year old male had 45% chance of living to age 90 and 22% chance of living to age 95.

At what age will managing managing assets become too difficult?
Have you developed a succession plan?

I am not suggesting that ML is the right solution, but someone needs to be riding shotgun so they can take over when it is time to take a break from driving yourself.

Second this. Seeing the deterioration of my savvy father-in-law in his very late 80's and early 90's has made me even more focused on "succession planning" for our financial affairs. Still in process of simplifying and documenting for DW (and our sons), and at age 62, am in no hurry to go beyond that; but in-laws have clearly benefited in the past several years from him having moved their assets to a trust company.

Merrill, or anyone marketing through seminars, is quite unlikely to be my choice though (nor would I be choosing a fee structure like that of the in-laws' trust company, which is still far better than if he had kept the tiller in his own hands)

 

[Exchme]

Nearly the entire asset management industry is built on the same lie that they can beat the market. Run away.

Every study that's been done shows that over time, advisors' performance vs. the market looks exactly like random chance - before fees. After fees, they trail the market.

The math is such that this must be so. The market returns are whatever they are and the share that is left over for the average investor's pocket is the market return minus fees. The more the fees, the lower your net return. If you look upthread you will see how ML targets 1.5%+ for management fees, but that didn't mention fund costs, I'll bet those are another 0.5%+. So let's say 2%, which is a common target for money managers to lift from your pocket each year.

If you started with a 60/40 portfolio, and didn't contribute or withdraw from it, with 8% stock and 2% bond returns, then after 20 years, those 2% costs would have taken just about 1/3 of the total value of the portfolio. After 30 years it's 44% of your potential portfolio has been lifted from your pocket to theirs. It is believing in the tooth fairy to believe they are bringing that kind of value.

But that includes the money you brought to the table. If we look at how the market gains get distributed, it's even more dire. Those 2% costs represent 48% of all the gains you would make in 20 years and 54% of your possible gains after 30 years. So of course they can make slick presentations and have professionally developed scripts, they want to party with your money.

Another way to look at it is bad luck with SORR means only a 4% withdrawal rate is safe, 2% costs means in that scenario, they get as much of retirement money as you do.

Just invest in low cost broad indices and your average return as a do it yourself investor will beat what you get from them in the long run by a huge margin.

 

[OldShooter]

Just to underline Exchme’s point about active management losing, here is the link to Dr. William Sharpe’s short paper on the subject: Sharpe on arithmetic: https://web.stanford.edu/~wfsharpe/art/active/active.htm and an interview here: https://www.ishares.com/us/insights/etf-trends/qa-with-nobel-laureate-william-f-sharpe-on-indexing

@firewhen, there have been some good points made about handling things when one begins to have a marble deficit, but remember that there are many solutions to that problem that do not involve giving ML a clear playing field to slowly take all your money. I'd suggest talking to an attorney, ideally a trusts & estates specialist. The usual suspects, Schwab and VG, offer services that might work for you. In our case, on our demise Schwab Trust will be running our money for the benefit of DS and the grands. Prior to that, both DW and I are quite able to run the money if the other develops a marble deficit.

 

[pb4uski]

Not even sure why I am at this juncture. After a lifetime of LBYM, prudent money management and sticking with index funds at Vanguard and Fidelity, we have amassed a portfolio far in excess of what I imagined or need. Fast forward to today and after attending some seminars (probably a mistake) some guys at Merrill are trying to get me to invest with them (lower risk, better return, more diversification--we can do things the discount guys cant).
I REALLY DONT WANT TO DO THIS. I guess that says it all? But I am asking the community if I am being close minded and should be more open? On the other hand what I have done for decades has served us well, is simple and I have lived through the downdrafts of 2000 and 2008 and can take it. I guess it comes down to an active versus passive mentality. BTW I have not even asked about the fees yet though I know it won't be .04% of 1% like the index funds.

What I would do is say if I put $xxx,xxx with you today, what tickers would you put me in an how much in each? If they won't tell you then walk. If they do tell you, then run a Portolio Visualizer run of their portfolio vs yours and look at things like volatility, return, drawdown, etc. and make an informed decision. Or you could give them a small amount invest and then put in more if you are happy with their results.

 

[Chuckanut]

Jn our case, on our demise Schwab Trust will be running our money for the benefit of DS and the grands. Prior to that, both DW and I are quite able to run the money if the other develops a marble deficit.

Now this interests me thought at this time I still have most of my marbles. (Ignore what what some people say. )

But, I do not have a relative I would trust to handle things in the event I did lose one to many marbles. I wish I did, but such is life. You can't choose your parents, and, as I have found out, you can't choose your children either. They are whom they are.

Can you share a bit of your thinking in choosing Schwab Trust for this job? Nothing too specific or personal.

 

[Koolau]

Since they can't prove any of that, it sounds like a used car sales pitch and best avoided.

Heh, heh, sounds more like the pitches for fireworks in Tennessee. "Biggest Boom for Your Buck" "M-80s" "Cherry Bombs" "Black Cat" LOWEST PRICES. YMMV