Financial Advisor / Wealth Management

[target2019]

"Bullying" is a strong term and I think it's over-used these days. I will say that I feel that I have to immediately go on the defensive and make it clear that I'm not lazy, clueless, apathetic, etc. and that my financial advisor actually knows what he's talking about.

Interesting development today: I fill out lots of e-Rewards surveys, especially on financial topics (just redeemed Funny Money for a $25 Starbucks gift card). This morning's was from one of the organizations offering a financial advisor/planner designation and asked a lot of questions about my opinions of various financial planning professional categories. It included some commercials I've seen recently and wanted my opinion of those. Some of these surveys ask that you not name names, so I won't name the organization, but I thought that it was interesting that they're looking to see how much credibility particular designations (or lack thereof) carry.

Many conversations here go quickly in that direction. I make a quick exit.

I think the argument against FA's is correct in-general. But not always true, as in your situation.

 

[ERD50]

Sorry you two feel that way, so allow me a quick explanation and I'll bow out.

Why do you care?

Nobody has to justify their personal actions to you or anybody else.

You have been repeating yourself on this topic for several years.

Just do your own thing, and let others do their own thing.

Maybe you should go back and read the original post in this thread and answer it . . . if you have an answer. If you don't have an answer, then why post to the thread?

Of course no has to justify their actions to anyone, let alone me. And I wasn't asking them to 'justify' anything. I was asking what their reasons were, what value do they feel they get?

Part of the OP was "I have found it to be worthwhile.", so I was curious as to why that was.

"Group Think" was mentioned a while back. What better way to guard against "Group Think" than to engage with people with different views than yourself? I'm curious by nature, I ask questions, I like to learn. I can't learn if I only talk to people in agreement with me. For the record, I have never, ever put anyone on "Ignore" in this forum. I like to hear different viewpoints.

Is that so wrong?

YES!!

There is a difference between wanting to be challenged by enlightened two-way discussion and insisting on beating a dead horse until the other party gives up and you think you've won.

Sometimes it would be nice to listen to each others ideas and opinions and then just let it go.

I didn't know there were prizes, what can I 'win'? Where's the ref?

I am listening. One reason I engage in this banter is, I meet people who hear that I'm retired and manage my own money, and act like I must be some financial wizard and spend all my time following charts or something. I'm looking for ways to communicate with these people, to explain how simple the basics can be, and that they most likely don't need an FA, and (though using one is clearly their decision) picking one isn't a walk in the park either. These discussions give me some insight into how their minds might be working, and how I might best communicate that idea to them.

-ERD50

 

[RobbieB]

Just tell them what you've been saying here for the last several years.

That should do it.

 

[Lucantes]

Okay, I'll try and explain why I hired an FA 5 years ago:
The company I use has many decades of experience dealing with expats such as myself, and also more specifically with the company I work for. I provided them access to no more than 10% of my investable assets (Edited to add: My FA only buys individual stocks (currently around 30 assorted ones in the account) and there is not a significant turn-over in the stocks that are purchased.).
I wanted to have some real experience with having an FA handle part of my nest egg to see if there was any significant difference between their performance and mine (based upon the last 5 year performance they have achieved slightly better results, including all fees, than I did myself. This could be based more upon what I did wrong than what they did right. ).
They also provided a complete annual detailed analysis of my current and potential future financial situation, based upon several scenarios, which I did not feel confident doing myself at the time (I could have done it I am sure now, but didn't feel that way at the time plus I am lazy and wanted someone else to do it for me and was willing to pay for that service).
I could afford to pay for the service I wanted.
Now that it is 5 years later, and I am less than 1 year out from FIRE my thoughts have changed. I am more experienced with controlling my investments and more educated (this organization has helped significantly with that), more clear on my end goals and performance expectations (I no longer feel I need to "swing for the fence") and more confident in the future.
I will mostly likely end my relationship with my FA prior to our FIRE in April 2017, as I no longer feel I will need their services (please note to me this is no different then ending a lawn care service that I no longer need, I have no emotional attachment to the company or their representatives). YMMV.

 

[akck]

My experience with FA comes from 2 retirement portfolios. The first was invested in high front end loaded funds with high ERs. The second was invested in proprietary funds of which, most failed to beat or come close to their benchmarks badly in my opinion. One thing I do is to create a tracking portfolio of the FA funds to see how my index fund selections compare. In both cases, the new portfolios beat the old ones by 5-8% in the first 6 months. Most of the return gain is attributable to the lower ER and minimal churning of index funds.

I'll likely go with a FA if I ever lose interest in managing my accounts or if I realize I'm showing signs of dementia. My only requirement will be that the FA have an indexing philosophy and maybe improve returns with an enhanced indexing strategy.


Sent from my iPad using Early Retirement Forum

 

[Markola]

There are good FAs in the world: http://www.forbes.com/sites/baldwin...nancial-advice/?partner=yahoomag#23d380ea41b5

 

[harley]

There are good FAs in the world: Save $52,000 On Financial Advice

I don't think (hardly) anyone here would deny that, although this guy sounds like he would be interesting to know. I particularly like the award for his dachshund.

Even amongst the percentage/yr FAs there are good ones that make recommendations for the good of the customer, as opposed to for their own good. But if you read all the various threads you'll see a steady recommendation of "use charge by the hour" FAs if you are going to use one.

What most of us don't recommend, and what I used to have, are the wonderfully nice guy FAs who recommend products that enrich them far in excess of what they do for their customers. They are so nice that many of them have become family friends. It's really hard to break away from a relationship like that. If you read early posts from me you'll see it took me two or three years after realizing I could do better myself before I finally made a complete break. Surprisingly, I haven't heard from our family friend but once since then. Oh well.

I think hearing that you can do as well or better on your own is news to some people, and may lead (over time) to becoming a DIY investor. Assuming they aren't browbeaten into extreme stubbornness by feeling attacked. I really like managing my own finances. DW doesn't at all, and I've told her that if I croak first I would recommend using our Vanguard FA to keep the investments we've got set up going. With DD I used to manage her investments, but she got married. So I recommended that she and SiL use a by the hour FA, and they were very pleased with the result. I didn't happen to mention that the FAs advice was almost exactly the same as mine. Nobody likes a know-it-all.

Mostly many of us, as fairly cheap SoBs, are offended by the exorbitant amounts (in our opinions) that many FAs charge, and by the way they obscure the actual returns and how much they make. If someone who is paying all that money wants a better ROI on advice, a by the hour FA is definitely the way to go. If they are interested in managing their own finances, we just try to tell them that it's not that hard. Take your time, educate yourself, and decide what works best for you (generic you, not necessarily anybody in this thread). Good luck.

 

[target2019]

Argument against FA is same as argument against Active Funds. In both cases you might find one that does well for a period of time. Most FAs and AFs do not measure up year after year. But there are exceptions. Problem is, have you been benchmarking, and meeting or exceeding expectations (indexing)?

Some investors benefit emotionally from having the FA available. Others are opposed to the concept, and are not going to support the use of FA.

AUM agreements are not obvious in the area of what happens when you're ready to dissolve the agreement. There can be a huge tax hit, and mounds of paper work.

 

[medved]

. AUM agreements are not obvious in the area of what happens when you're ready to dissolve the agreement. There can be a huge tax hit, and mounds of paper work.

Why a huge tax hit and mounds of paper work? The huge tax hit should be an issue only if you liquidate investments. But most assets can be held with or without an advisor. (This might be an issue for DFA funds, but even there one can find a very low cost advisor for this purpose). In terms of paper work, most advisors, as far as I know, hold assets with third party custodians, so it should not be too difficult to revoke a power of attorney, if one is in place, and maintain the account individually with the custodian. What am I missing?

 

[donheff]

Interesting discussion. I get it either way. DW and I used an FA for many years and, in retrospect, left a lot of money on the table. But at the time she kept me from dumping too much into tech stocks in 1999 when I caught a case of irrational exuberance. The eye opening aspects of the 2000-2003 period, coupled with joining this forum, caused me to reassess and switch to DIY. That turned out to be easy and interesting. But I am very comfortable sitting tight during market drops (and have a pension to back me up). On the other hand, I have several friends who use FAs and report that those FAs have talked them down from the ledge during corrections (not surprisingly they don't have pensions backstopping disaster). I never try to talk them out of it although I have queried them to make sure they are using fee based FAs who are fiduciaries (they are). I also suggested to one who's rate stayed at 1% as his portfolio built up and up that he mention his concern over high fees and interest in possibly moving to VG. He was able to get his rate dropped to .5%. He still likes his FA, trusts his advice, and sleeps better for it. Far be it from me to try to talk him into DIY just before a 20% correction. That could be the end of that friendship.

That said, I don't think posters should hold back on the strong opinions they express here. There are plenty of us who like to hear well reasoned opinions that differ from our own and occasionally even budge our own thinking a millimeter or two as a result.

 

[Winemaker]

If a FA provides enough guidance and hand holding for $72,000/year makes you happy, then go for it.

I would tell that FA that I have found another FA and had a review with him. I would also tell him that he has a similar strategy, but for an amount less than the $72,000. Ask him to renegotiate his fee as you are considering a move. You'll never know unless you ask.

 

[target2019]

Why a huge tax hit and mounds of paper work? The huge tax hit should be an issue only if you liquidate investments. But most assets can be held with or without an advisor. (This might be an issue for DFA funds, but even there one can find a very low cost advisor for this purpose). In terms of paper work, most advisors, as far as I know, hold assets with third party custodians, so it should not be too difficult to revoke a power of attorney, if one is in place, and maintain the account individually with the custodian. What am I missing?

Very simple. The funds are only available within the managed account (institutional class). Funds must be liquidated and then reinvested in investor class.

 

[target2019]

If a FA provides enough guidance and hand holding for $72,000/year makes you happy, then go for it.

I would tell that FA that I have found another FA and had a review with him. I would also tell him that he has a similar strategy, but for an amount less than the $72,000. Ask him to renegotiate his fee as you are considering a move. You'll never know unless you ask.

Logically, there must be a ceiling or cap on what you'd expect to pay. $72K can buy a lot of professional time-- 480 hours @150/hr. I don't think this much time is invested in the portfolio by the FA.

My F-I-L asked his FA if they'd be paying him as investments declined in 08/09. Oh well! We did manage to get away from that one, just before the state looked into things.

 

[Idnar7]

Reasons I fired my FA:


1. I asked them whether I should take ss at 62 or withdraw from IRA and let ss amount grow. Their reply was "I would rather you spend the Government's money than your own". Which was ridiculous because IT IS my money. They didn't want me to draw down my IRA.


2. I asked whether I should convert some of my IRA to ROTH IRA. They said due to my age (58) it wouldn't be long enough to justify it. Again, don't draw down IRA.


3. Yearly churning. I had a fund they had put me in the previous year which had done very well. They said oh we are not using them anymore and moved me to something else. In the four years I was there, changes were made every year.


4. Put almost 20% of our assets in non-tradeable REITS. Purchased at $10/share which went down to $6 per share within two years. They later said they wouldn't go over 10% anymore.


5. In a year where the markets gained over 10% I gained less than 3% on a 70 equity/30 fixed portfolio.


6. Though I had 20% of my total assets in a taxable fund I managed myself, they had no interest in how I had that invested. Only concerned with what they managed.


And this FA was the head of the office. When I said I was moving my money they were absolutely stunned.

 

[jwr62]

We are looking to go to a FA.. but one that is hourly and does not do wealth management. What I have learn through talking with FA over the phone the first thing they want to know is how much you have... then they become very aggressive with getting you into their office. I feel safe with going to someone that is going to give me some feedback on the plan that we have come up with from what option to take on pension, to when and ssi and it will be interesting to see what funds he wants to put me into. When I talked with him I asked him to what funds do you like and he said Vanguard. Well he hit it right on the head with me because i am a boglehead person... Low expense ratio.

after I go and see what he is going to do for me and how much it is, I will report back to this site with the findings... Love these forums
JWR

 

[Whisper66]

.....When I talked with him I asked him to what funds do you like and he said Vanguard......after I go and see what he is going to do for me and how much it is, I will report back to this site with the findings...
JWR

Since he's suggesting Vanguard, would be very interested if you choose also to talk to Vanguard directly about their services and let us know you feelings about that comparison. (0.3% AUM if you have them fully manage your funds, could be free for just periodic discussions depending on your asset level).

 

[rodi]

My BIL is the type of guy who needs a FA. He panics and wants to go all cash regularly - fearing the sky is falling. (I try to talk him down... unfortunately, his wife reiniforces these tendencies.)

Unfortunately, he keeps running into FAs who push variable annuities. I give him analysis on why they are not a good idea... but I suspect he's converted a huge percentage of his money to VAs. Fortunately, his wife will get a smallish pension from the school district she works for - and that will supplement the annuity income. I wish he'd find a FA that doesn't push annuities - just holds his hand and tells him not to sell his portfolio.

 

[mystang52]

Even those who like FA's have to acknowledge what I think is painfully obvious. There are simply way too many "horror stories" in comparison to the the few good ones. This can't be random.
If it walks like a duck, yadda yadda yadda. At some point there has to be recognition that in general the FA is not one to be trusted, and certainly does not have the client's interest foremost in mind. Every anecdotal exception is just that - exception to the rule.

 

[braumeister]

in general the FA is not one to be trusted, and certainly does not have the client's interest foremost in mind.

I think that's a huge overgeneralization. Although I've never felt the need for an FA myself, I've done quite a lot of research online to determine whether I'm right or not.

I agree that in many cases they don't necessarily work for anyone but themselves in the long run, but my observation is that those with the CFP designation generally provide very good advice to their clients. I would think that those with the CFA designation would be able to provide pretty awesome advice, but the average CFP is pretty darn good IMHO.

The difficulty is that so many FAs are simply something silly like "Registered Client Representative" or "Certified Retirement Counselor" or the like, which means nothing and tends to muddy the waters.

 

[nash031]

In general the FA is not one to be trusted, and certainly does not have the client's interest foremost in mind. Every anecdotal exception is just that - exception to the rule.

I don't think that's true. I think my mom's FA, for example, can be trusted. He's not doing anything illegal; he's not purposefully misleading her or telling her to buy silly stuff. She doesn't do her own homework, and now that I've shown her she's spending $6,000 per year for his service, in addition to loads and expensive funds, she's still content with it. If anything there, I "blame" her.

I can't blame the FA for providing a service that's in demand, nor will I chastise anyone who decides to use a FA even after knowing how expensive they are. I personally won't do it, and wouldn't recommend it to most folks, but it's frankly none of my business!

 

[youbet]

talk to Vanguard directly about their services and let us know you feelings about that comparison. (0.3% AUM if you have them fully manage your funds, could be free for just periodic discussions depending on your asset level).

While the Vanguard "service" might be an improvement over some other sources of portfolio management help, 0.3% still seems obscenely expensive for what you get.

 

[AtlasShrugged]

Even those who like FA's have to acknowledge what I think is painfully obvious. There are simply way too many "horror stories" in comparison to the the few good ones. This can't be random.
If it walks like a duck, yadda yadda yadda. At some point there has to be recognition that in general the FA is not one to be trusted, and certainly does not have the client's interest foremost in mind. Every anecdotal exception is just that - exception to the rule.

For what it's worth, I think you're spot on. There is a mountain of evidence to support your conclusion.

 

[gerntz]

For what it's worth, I think you're spot on. There is a mountain of evidence to support your conclusion.

People with complaints are multiple times, like 10x+, more vocal than those with compliments. I base this on working at a consumer products company whose multiple $100M+/yr sales products all received 10x+ complaints over product compliments.

What's the statistical evidence, not voluntary comments, that FA's aren't worthwhile given every comment on here by nature is anecdotal? I mean what's the relative amount of money invested by DIYers than with FA's?

 

[gerntz]

The difficulty is that so many FAs are simply something silly like "Registered Client Representative" or "Certified Retirement Counselor" or the like, which means nothing and tends to muddy the waters.

What muddies the water is equating these folks with FA's.

 

[gerntz]

Even those who like FA's have to acknowledge what I think is painfully obvious. There are simply way too many "horror stories" in comparison to the the few good ones. This can't be random.
If it walks like a duck, yadda yadda yadda. At some point there has to be recognition that in general the FA is not one to be trusted, and certainly does not have the client's interest foremost in mind. Every anecdotal exception is just that - exception to the rule.

People with complaints are multiple times, like 10x+, more vocal than those with compliments. I base this on working at a consumer products company whose multiple $100M+/yr sales products all received 10x+ complaints over product compliments.

What's the statistical evidence, not voluntary comments, that FA's aren't worthwhile given every comment on here by nature is anecdotal? I mean what's the relative amount of money invested by DIYers than with FA's/WM's? How many people each year ditch their FA & go DIY vs. the number that newly select an FA? Give us some facts.

When you can provide statistical data backed conclusions, I will buy that "there has to be recognition that in general the FA is not one to be trusted, and certainly does not have the client's interest foremost in mind.". Until then, I will believe anti-FA people just have an axe to grind. I get this forum is overwhelmingly populated by DIY types, but that's no reason to defame a group as a whole.