FA tries to justify 2% fees.

[GregfromTexas]

I've learned a lot about these topics here and at the Bogleheads forum ........for free.

The knowledge is free, most is, if you take the time to study up. While in my opinion nobody should be financially illiterate, not everybody can or should know everything on the topic of investing that an adviser might learn.

But he didn't "teach" me, I knew most of this stuff (the ebanking was new info...or actually something I knew of in the back of my mind that he kicked to the front).

He did the work of assessing my portfolio and behaviors, and came up with a specific list of changes I could make with qualitative and quantitative explanations of why he thought that would be good, to be more optimal in the context of my exact situation. That was useful work. He also gave me a second opinion (in addition to my own).

With some portfolios, pointing out small tweaks that someone with a different day job might overlook can EASILY more than pay for a few hours of a professional's billing rate.

 

[ERD50]

The knowledge is free, most is, if you take the time to study up. While in my opinion nobody should be financially illiterate, not everybody can or should know everything on the topic of investing that an adviser might learn.

But he didn't "teach" me, I knew most of this stuff (the ebanking was new info...or actually something I knew of in the back of my mind that he kicked to the front).

He did the work of assessing my portfolio and behaviors, and came up with a specific list of changes I could make with qualitative and quantitative explanations of why he thought that would be good, to be more optimal in the context of my exact situation. That was useful work. He also gave me a second opinion (in addition to my own).

With some portfolios, pointing out small tweaks that someone with a different day job might overlook can EASILY more than pay for a few hours of a professional's billing rate.

Correct me if I'm wrong, but I think you are talking about paying an hourly fee for advice/plan and an occasional 'check-up'. I do think a case can be made for that, but I think most of these comments are pointed towards the 1% (or more) of assets, charged annually, and likely puts the client into high fee funds.

-ERD50

 

[GregfromTexas]

Correct me if I'm wrong, but I think you are talking about paying an hourly fee for advice/plan and an occasional 'check-up'. I do think a case can be made for that, but I think most of these comments are pointed towards the 1% (or more) of assets, charged annually, and likely puts the client into high fee funds.

-ERD50

Yes. I mentioned that in my probably too long post a few back. I will never do the 1% thing.

My point was just that I think there is a model where this profession called "Investment Adviser" makes sense. It's not that guy asking for 2%.

 

[samclem]

I've learned a lot about these topics here and at the Bogleheads forum ........for free.

True. But there's no doubt a person with limited time could get the info a lot more efficiently from a FA who had the client's info in front of them and could quickly boil things down for them. I do think this kind of service could well be worth paying for a few hours of a professional's time.
The advantage of coming to this site (and Bogleheads, Kitces, etc) is:
1) It's a lot more fun (in my opinion)
2) It is free
3) I learn about things outside my present situation, and I can help DD and friends by offering ideas.
4) I am nearly positive that there's no conflict of interest.
5) Beaver cheese info!

One problem with an FA for folks who already spend time here, at Bogleheads, etc: How can I be sure the info will actually be better than what I already know, that it will be worth paying for? Many AUM "advisors" know little beyond sales tactics and what they do know about investing seems largely to be wrong. The items GregfromTexas cites are not going to be something these "FA's" know anything about. And if I pay $2000 for some help, I want to get more than vague platitudes-- I want to see some modeling of my exact situation with the dependencies, assumptions, and sensitivities fully explained. I don't think I can just walk into a local storefront and expect that kind of help.

 

[travelover]

.........
The advantage of coming to this site (and Bogleheads, Kitces, etc) is:
1) It's a lot more fun (in my opinion)
2) It is free
3) I learn about things outside my present situation, and I can help DD and friends by offering ideas.
4) I am nearly positive that there's no conflict of interest.
5) Beaver cheese info!......

Yea, that #4 is a biggy for me.

 

[Rustward]

Many AUM "advisors" know little beyond sales tactics and what they do know about investing seems largely to be wrong.

Sam, would you mind telling us how you know this?
I mean, how do you know what "they" know and what "they" don't know?

 

[Rustward]

Rustward, with all due respect, you could choose to skip posts with 'FA' in the title. I seriously doubt you are going to change the opinions of those of us who think a lot of FAs are slimy salespeople who prey on uneducated investors.

Helen, if you believe I am trying to change anybody's opinion, you either have not read my posts or you do not understand them.

What I would like, however, is less trash-talk on this subject. We see the same set of insults directed to a group over and over. It's pretty pointless.

I came into this thread when somebody posted something about managed accounts that was not exactly true. Of course, it was negative, otherwise it would probably not have been posted.

 

[REWahoo]

What I would like, however, is less trash-talk on this subject. We see the same set of insults directed to a group over and over. It's pretty pointless.

Rather than continue to try to push that rope uphill, try this:

This...system allows you to ignore...threads, and threads started by people on your ignore list. All this content will be ignored when you are browsing the forums (you don't see threads or forums you have ignored), in search results, on New Post link or Today's Posts. It also skips them if you are using the next/previous thread links at the end of the threads.

• To ignore a ...thread... use the Thread tools drop down and select hide thread..

So now if you don't like [a particular topic], just hide it.

 

[samclem]

Sam, would you mind telling us how you know this?
I mean, how do you know what "they" know and what "they" don't know?

All I've got is the reports I've read from people who check in here, at Bogleheads, etc. Often people (or their relatives) who believe in their FA and just want a second opinion--have been sold wildly inappropriate products, and have been told nothing about how best to convert to Roths, reduce taxes in the future, etc.
Examples of the services I want (as given by GregfromTexas):

- Tax avoidance in taxable investment accounts
- Selection of retirement accounts, when to fund with pre and post tax income (e.g. Roth vs. 401K)
- College savings strategies
- Tips on where to park cash. My FAs pointing out to me that I could get 1%+ on FDIC savings using an ebank paid for his fee entirely in 1 year.
- Education on the ins and outs of annuities and applicability to my financial circumstances.
- Thoughts on macro-timing (my term) - in other words the possibly validity of adjusting portfolio asset allocation based on medium (1-3 year) term expectations based on PE ratios and interest rates.
- Ways to improve my diversification beyond some popular funds getting a smidge closer to the efficient frontier for my risk tolerance
- Some thoughts about what "risk" really means and how I might think about it differently given my specific situation.

To this I would add:
-- Optimization of taxable income to maximize ACA subsidies/reduce taxes.
-- Legacy/inheritance considerations
-- Evaluation of LTC options
and a few others.

I can tell you right now that the kid from EJ who knocked on my door last month doesn't know how to do this stuff. He knows how to sell me products--especially ones that make money for EJ. No, thanks.

All of this will take the same amount of time/talent for an FA whether I've got $200K or $2million. So, I can't understand why they would price their services as a function of assets under management, or why anyone would use an advisor who prices their services in that way. >Even< if the price came out lower, the conflicts of interest would be enough to make me steer well clear. "Well, that inflation-adjusted pension of yours is okay, but you'd probably be much better served by cashing it out and buying this Equity Indexed Annuity. The market has beaten inflation over time, it's a great bet . . ."

To know if you've got a "real" worthwhile advisor or a huckster requires enough knowledge that, by then, you could do a pretty good yourself. My impression is that, once you're that savvy you've exceeded the capability of a fair number of FAs, especially the AUM types.

 

[braumeister]

Caveat emptor

 

[HFWR]

What I would like, however, is less trash-talk on this subject. We see the same set of insults directed to a group over and over. It's pretty pointless.

For my part, no disparaging comments are directed toward FAs who actually provide investment advice, versus selling investment products. Mostly anecdotal, of course, but the latter seem to overwhelmingly outnumber the former.

Now, on to politicians, lawyers, and used-car salespeople...


Sent from my iCouch using Early Retirement Forum

 

[nun]

That said, even if you are a fairly sophisticated non-pro, there are benefits you can probably gain from paying someone who thinks about this topic all of the time. My personal belief is you are most likely to get this on a strictly "I will pay you $X for an analysis and recommendations and you will not be my broker/dealer or referring me to one". Even good people can be swayed by commissions and will tend to rationalize a bias toward things that pay them.

In my own experience using this approach, advisers have improved my perspective on things like:
- Tax avoidance in taxable investment accounts
- Selection of retirement accounts, when to fund with pre and post tax income (e.g. Roth vs. 401K)
- College savings strategies
- Tips on where to park cash. My FAs pointing out to me that I could get 1%+ on FDIC savings using an ebank paid for his fee entirely in 1 year.
- Education on the ins and outs of annuities and applicability to my financial circumstances.
- Thoughts on macro-timing (my term) - in other words the possibly validity of adjusting portfolio asset allocation based on medium (1-3 year) term expectations based on PE ratios and interest rates.
- Ways to improve my diversification beyond some popular funds getting a smidge closer to the efficient frontier for my risk tolerance
- Some thoughts about what "risk" really means and how I might think about it differently given my specific situation.

The people on this board and at Bogleheads are out liners, but the skepticism about FAs arises because many of us learn/know about the things you list (and others that you don't) and don't see much value in an FA's advice. Once you know enough to know if an FA is good or not you can basically DIY anyway. This is probably arrogant and a second pair of objective eyes might be useful, but it will be hard to convince many on here that ongoing FA advice is useful at any price.

 

[Meadbh]

Read this and weep...

While Deflategate and Chaitgate Rage, America Quietly Robs Its Elderly | Rolling Stone

 

[nun]

Read this and weep...

While Deflategate and Chaitgate Rage, America Quietly Robs Its Elderly | Rolling Stone

Well, many 401k plans are pretty terrible too. Is it any wonder that a Vanguard IRA is popular with the folks on here who DIY and know to look for the lowest fees.

 

[Clone]

Years ago my mother had a FA that was churning her stock account. He had her in an assortment of stocks, and when one would make a move up, he would make the phone call. "XYZ has made a nice run up, but I think it is probably out of steam, and would recommend that you sell XYZ and buy this other stock. I'm pretty sure it is getting ready to move." She would feel good that he had indeed picked a winner, and would allow him to churn the stock. He made the commission on both ends of the sale. Then she would ask him about the dogs. Yeah, that stock didn't seem to do much, would you like me to find you something better? Ca-Ching.

After awhile, she brought this to me and asked what I thought. She liked the guy, and he only called her with good news about the stocks that had run up. To me it was obvious he was just churning the winners, and she would invite him to churn the losers. I told her the next time he recommended selling a stock, rather than ask him what she should buy next, would be to say 'thanks for the heads-up that XYZ has run out of steam, let's sell it and send me the check. He stopped calling!