Financial advisors

[Lucantes]

I am one of the people who does DIY and also uses a FA.
Currently around 10% of our total investable assets are with a FA in a taxable account (Schwab but the FA is independent and charges 1% of assets managed).
31% of our total investable assets are done by me in taxable accounts (Schwab and Vanguard).
31% of our total investable assets are in tax deferred company 401K (Vanguard).
28% is a mixture of real estate (not primary home) and company lump sum pension.
I primarily set up the FA account to compare what they can do versus what I can do over time. I have used them since Nov. 2010 and their performance, including fees, has been slightly higher than mine over the same period. They do not "churn" my account and normally only hold on average around 30-40 assorted stocks at any one time. They do not actually perform that many trades during the year. They also provide me other financial services, guidance and advice.
The current arrangement works for me right now but we will retire next year and I may look at moving completely to Vanguard and self management in 2018.

 

[nash031]

I think you are saying you can't figure out a LOGICAL reason for people to hire an FA. There are lots (approximately 3 or 4 anyway) of logical reasons (which are in reality may actually be emotional reasons) that lead investors to hire an FA. I think you could see them if you kept your logical mind from interfering.

(No offense meant in the above paragraph).

Yes, plenty of reasons... Just no good ones for many or most, IMO.

 

[target2019]

https://www.cfp.net/news-events/lat...agree-advice-should-be-in-their-best-interest

Investors' use of financial advisors has risen, according to this survey.

 

[2017ish]

I just got my 401k statement in the mail a few days ago and "actually" read all the paper work that comes along with it each quarter. (about 10 pages of info) Usually I just look at the current balance/gains and toss it aside. I knew our plan fees were very low but I was surprised to see this quarter the fees were "zero". Not sure if they charge fees on an annualized basis or waive them you have reached a certain level and/or if you don't make any changes in a particular quarter. I'm going to dig out some of the old statements just out of curiosity.

Some employers (my present one included) pick up all administration and tax compliance testing fees, leaving only the underlying fund fees for the participants--and those underlying fees are not itemized on quarterly statements. Maybe your employer is doing this as well? Unlikely that they'd waive after reaching a certain level, as the third-party administrator's job is a constant baseline...

This is one of those situations in which "paternalistic" is a good label.

 

[Car-Guy]

Some employers (my present one included) pick up all administration and tax compliance testing fees, leaving only the underlying fund fees for the participants--and those underlying fees are not itemized on quarterly statements. Maybe your employer is doing this as well? Unlikely that they'd waive after reaching a certain level, as the third-party administrator's job is a constant baseline...

The main reasons I left my 401k money with my past employer was the wide range of investment options and very low plan fees. I know when I was working, I once saw the fees posted "somewhere". It was something like .0012 percent. Not zero, but pretty low. As I mentioned, my last quarterly statement the fees were zero. I've been to lazy to dig out my previous statements. Maybe it's other retiree benefit that I didn't know about.

 

[jazz4cash]

A friend of mine uses Edward Jones and he is very pleased. I have been surprised at the lack of information his FA has passed along to him in regard to general investment knowledge. I am sure many users of FAs have zero interest in what's going on behind the curtain, but my friend will often ask me a question and my internal thought is (Why don't you ask your FA, isn't that what you are paying him for?) The same type of thing happens on this board, actually.

In my friend's case, I think his DW thinks managing their finances is brain surgery and the path of least resistance for him is to assure her that he's hired a pro. The extra cost is worth it for her peace of mind.

 

[unclemick]

I think Nash fails to realize that back in the early 1980's (when I had an "FA" of sorts too) there was virtually no internet or a plethora of computers along with only a few ways to even learn the "ropes" of investing.

I remember having to go to Merrill Lynch offices during lunch just to "see" what the market was doing. I had a ML FA who helped me with an AA and made trades that I approved (or at least agreed to). It worked back then.

Now it is so easy to learn about investments, and for some of us who are old enough to have experienced the early days, it is amazing the info available with the push of a keyboard key.

I'd venture to say that in the early 1980's there were very few folks who invested purely on their own.

1966. Dean Witter Broker. Load Funds. Education is can be somewhat expensive.

heh heh heh -

 

[thepalmersinking]

You pay a Dr. And lawyer to take the complex and make it simple to understand. You pay a financial advisor to take available information and make it complex. That's how you stay hooked. It kills your returns over time. You are basically buying a friend. Get a couple of low cost index ETFs and give the rest to charity. It doesn't matter if you have $20k or $4MM in account, it's the same playbook.


Sent from my iPad using Early Retirement Forum

 

[target2019]

You pay a Dr. And lawyer to take the complex and make it simple to understand. You pay a financial advisor to take available information and make it complex. That's how you stay hooked. It kills your returns over time. You are basically buying a friend. Get a couple of low cost index ETFs and give the rest to charity. It doesn't matter if you have $20k or $4MM in account, it's the same playbook.

+1

If you find an FA who will build the plan with specific instructions how to make it play, that would be an exception. That FA would charge by the hour, or by the plan.

Another idea is to use a lower fee advisor, maybe a Schwab or Vanguard or Fidelity bot advised. Pay the fee for a year, learn the ins and outs, and then cut the cord.

Have to be careful with that last suggestion. I found that with one institution, once a management agreement is in place, your funds and investments are held in such a way that you can not just terminate the agreement and go forward. For example, the plan may use an institutional fund, and you must sell, and then buy the investor series to get an equivalent investment. You also must establish a new account to do this. So, in the specific case I mention, you have all of the tax implications of selling ALL of your investments.

 

[travelover]

You pay a Dr. And lawyer to take the complex and make it simple to understand. You pay a financial advisor to take available information and make it complex. That's how you stay hooked. It kills your returns over time. You are basically buying a friend. Get a couple of low cost index ETFs and give the rest to charity. It doesn't matter if you have $20k or $4MM in account, it's the same playbook.

A good FA will not only send you birthday cards, but will know the name of your spouse.

 

[ERD50]

You pay a Dr. And lawyer to take the complex and make it simple to understand. You pay a financial advisor to take available information and make it complex. That's how you stay hooked. It kills your returns over time. You are basically buying a friend. Get a couple of low cost index ETFs and give the rest to charity. It doesn't matter if you have $20k or $4MM in account, it's the same playbook.

Very good!

When I read the first sentence, I was assuming you were going to try to defend the complexity of all this financial stuff and the need for the FA (we sometimes hear "You wouldn't do an appendectimy on yourself, would you?").

But you made a quick turn after that set up, I like it -'You pay a financial advisor to take available information and make it complex.'.

Although, I often think lawyers fit that description as well

-ERD50

 

[Chuckanut]

A local online help group in my area has a person asking for a recommendation for a financial adviser. Apparently, this person had come into a one time windfall that was substantially more than she would could acquire even with a strong savings program.

I was amazed at the number of people who gave glowing reports about various advisers. And of course, several FA's posted their names and phone numbers so they could 'help' the person. IMHO, if a person wants to use an FA, that is their decision.

But....

Several people took a few minutes to advise a slower, do-it-yourself approach, even to the point of recommending some good books on the subject written for the masses. The reply was quick - "I am not good at math so I can't do it myself."

Groan........

 

[braumeister]

"I am not good at math so I can't do it myself."

The differential equations I have to solve when checking my index funds every month are not really that difficult.

 

[travelover]

..... "I am not good at math so I can't do it myself."

A fool and his money.......

 

[Walt34]

The differential equations I have to solve when checking my index funds every month are not really that difficult.

It's just grade school stuff, I don't know why so many folks find it so hard:

 

[pb4uski]

Yup, math is hard. Thank you NEA.