Financial Advisors - Ever Justified?

R

RockSplat

Dryer sheet aficionado
Joined
Sep 28, 2008
Messages
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I cut my ties with my financial advisor a year or so back. I had another friend really really want my business. Of course, eh?

So like a lot of people my portfolio took a dive. I'm only 33 but there's about $350K in there. It's going to be a while before I retire I suppose so when it takes a dive it doesn't really hurt me too bad.

I am the type that will hang on through the thick and thin. I know the market will recover when it goes down hard.

This financial advisor called me last week and asked how it was doing. He probably knew I took a hit. He said his analysists advised him in June to convert people to cash equities. He said several got out at the peak and bought back in at 10,000.

So I was thinking.... if finanical advisors are really on top of things like this with analysts are they really worth writing off? On the other hand... I am an index fund guy and LOVE vanguard. I am in the Target 2030 Index fund. I don't ever plan to change it until I get closer to retirement. If the market takes a hard hit, I am going with it because in my mind it will always recover.

Is this the right mindset to have? Is a financial advisor worth it if they are trying to time the market? By the way I used the term time the market and he didn't like it too much.. He said he was going by his analysists.

Thanks everybody.
 
He knows as much as you do about the markets. Stay in Vanguard and if you want to play with a NON-SUBSTANTIAL portion of your nest egg, either do it with Ameritrade or have him manage it if yo want...........
 
I could see using a fee only Financial Advisor in some situations but not in yours. There is no evidence from the academic literature (ie not sponsored/promoted by Wall Street) that someone can "beat" the market consistently because of skill and even if they existed how would you choose them a prior. Stick to your Target Fund and stay the course.

DD
 
June? Which June? 2006?

Markets are up 15% to 25% since last June and had been up almost 20% to 45% or more depending on the asset class.

If you are always shooting yourself in the foot, then a certain kind of financial advisors can be very helpful.
 
I think financial advisors can provide a vital service of hand-holding and spine-stiffening. They can do for those who have neither the time nor the inclination to learn how to do for themselves. As Saluki has mentioned before, they can also be invaluable in diversifying the tangled mess of someone who's been with a company for a few decades of higher salary, stock options, restricted stock, and having their 401(k) in 100% company stock.

But I think that motivated investors can shoulder a large portion of that burden by educating themselves. In addition to providing backup (and not just blind faith), they can build confidence through their knowledge. At that point they no longer need to hand over a substantial portion of their SWR to someone who's providing redundancy.

It's the same thing with taxes. Just about any ol' accountant or CPA can fill out your tax return, and most will happily make a good effort for your payment. But you can learn to do your own taxes, and you can become the leading expert on the subject of "your taxes" in a manner that a CPA could never afford the time to do. At that point you can be on the job for yourself year-round, able to make intelligent tax decisions without needing the constant presence (and payroll) of someone who may be able to provide backup but not necessarily additional assistance. In addition to saving the money paid to people to prepare your returns, you're saving even more money by making the correct decisions before tax time rolls around.

So while financial advisors can provide a valuable educational experience, I think the risks of continued co-dependence outweigh the potential rewards.
 
I posted this in another thread but see now that it belongs here:

Along this same line (or is it?) is this from Thomas Stanley's Blog this morning:

Listen to Your Analyst!

Recently, The Wall Street Journal published its annual rankings of financial analysts. ... In fact, of the 200 top high income categories, analysts consistently rank among the top five in the proportion of those who have earned incomes of $200,000 or more. Ah, but are they wealthy? Absolutely. In other words, these top ranked people are not only experts in making other people wealthy they do the same for themselves. So listen to your analysts, especially the good ones. They are excellent in transforming their income into wealth. In fact, they significantly outpace most financial consultants who are part of the same age/income cohort.
Click to expand...
 
Tigger said:
Usually I like what Stanley writes, but when I read this post it made me cringe.
Click to expand...

I am inclined to agree, except:

Think of how dumb the average person you meet is with money. Now remember that half the population is dumber than average...
 
If you have access to a time machine and go back to say 1960 and move to Omaha, I can recommend a superb investment adviser even though he is in his twenties he is quite bright.

However, if you love Vanguard and your time machine is on the fritz, than you have very inexpensive access to disciples of another great investor Jack Bogle. It is so much easier to find the next Jack Bogle than the next Warren Buffett.
 
clifp said:
If you have access to a time machine and go back to say 1960 and move to Omaha, I can recommend a superb investment adviser even though he is in his twenties he is quite bright.

However, if you love Vanguard and your time machine is on the fritz, than you have very inexpensive access to disciples of another great investor Jack Bogle. It is so much easier to find the next Jack Bogle than the next Warren Buffett.
Click to expand...

I don't think of Jack Bogle as an investor, but the pioneer of selling index funds. Compared to the risks Warren took, Mr. Bogle took very little, other than in the beginning, getting Vanguard started..........;)
 
RockSplat said:
I cut my ties with my financial advisor a year or so back. I had another friend really really want my business. Of course, eh?

So like a lot of people my portfolio took a dive. I'm only 33 but there's about $350K in there. It's going to be a while before I retire I suppose so when it takes a dive it doesn't really hurt me too bad.

I am the type that will hang on through the thick and thin. I know the market will recover when it goes down hard.

This financial advisor called me last week and asked how it was doing. He probably knew I took a hit. He said his analysists advised him in June to convert people to cash equities. He said several got out at the peak and bought back in at 10,000.

So I was thinking.... if finanical advisors are really on top of things like this with analysts are they really worth writing off? On the other hand... I am an index fund guy and LOVE vanguard. I am in the Target 2030 Index fund. I don't ever plan to change it until I get closer to retirement. If the market takes a hard hit, I am going with it because in my mind it will always recover.

Is this the right mindset to have? Is a financial advisor worth it if they are trying to time the market? By the way I used the term time the market and he didn't like it too much.. He said he was going by his analysists.

Thanks everybody.
Click to expand...

I think that since you are an index fund type of guy, then the financial advisor for you, for investing is not necessary. As an indexer, you are happy to just match the market whereas the advisor is trying to beat the market (note the word trying) for a fee. Also, if he tries but guesses wrong using your money, tough luck for you, not him.

It's easy for the advisor to call you up after the fact, during a down market, and ask "are you doing okay?" and seem empathic and wise. His analysists still seems like another word for timing to me and he's playing the role of fortune teller :LOL: .
 
I wonder how many bad decisions the guy's analyst gave him? One good call gives you something to brag about but it doesn't make for a track record.
 
If you have a complex situation I think a consultation might proof useful, but to pay
an ongoing 1% fee, no way!
TJ
 
Financial Advisors - Ever Justified?
The converse of this statement is:
Financial Advisors-Never Justified

This is clearly false, few things are never justifiable or prudent given circumstances.

So I would have to answer your question as true. Financial advisors are sometimes justified.

Ha
 
I only know I would stay clear of that advisor. The vast majority of financial advisors will not recommend market timing type moves because they know it's a losing strategy in the long run. This guy would be suspect to me because of this.
 
my finance prof said you only need an advisor if you need someone to hold your hand and say "It's going to be OK."
 
Thank you for your feedback!

I have everything set up financially such as life insurance, good amounts going to kids college, etc. I really like how Vanguard guides you in certain areas.

I don't want to spend any time monitoring or messing around with the funds, etc. and that's why I chose the Target Retirement funds. It seems to me that it's a hands-off approach which is exactly what I am looking for.

I will continue to avoid the financial advisor route and not feel bad about it.

Thanks!
 
If you have NOT been using this particular adviser recently and he is trying to get your business, then he can tell you anything he wants about how brilliant his recommendations would have been in the last few months - if only you had been paying him. Can you verify these prescient calls with actual clients? That you trust?
 
growing_older said:
If you have NOT been using this particular adviser recently and he is trying to get your business, then he can tell you anything he wants about how brilliant his recommendations would have been in the last few months - if only you had been paying him. Can you verify these prescient calls with actual clients? That you trust?
Click to expand...

I probably could if I wanted to dig further but I have always had the impression that it is unwise to try to time the market by any means. I'm no expert though, I like things to be ultra simple. After seeing the comments in this thread it seems that it's not too crazy to just try to keep course and not get distracted by news and down times. At least I hope I am on the right track. :)

Thanks!
 
When I first started investing years ago, I had the "help" :blush: of a financial advisor who put me up with a market timing strategy. Supposedly, their system would get the signals when to move in and out of the market. After having that active for a few months, I decided to end my relationship with the advisor.

Think about this way, if they could really accurately time the market, why don't every just do it and let their systems take over easily make tons of money? The answer is just because they "have a system", it doesn't mean the system works consistently, if at all.
 
Tigger said:
Usually I like what Stanley writes, but when I read this post it made me cringe.
Click to expand...

Okay, I apologise. In reading the rest of this thread, I see that Dr. Stanley was speaking of a completely different group. Anyone can call themselves a FA but only the very few are listed in the WSJ article. That is the point Dr. Stanley was making (IMHO).
 
I think everyone needs a "sounding board(s)" to confirm you're "looking at the right things", and "looking at these things right".

I can only see using an advisor (and then only fee-based) for a "big picture sounding board" strategy session.

Any advisor to help you time the market doesn't make sense.
 
Building the financial plan spreadsheet and developing the right asset allocation is a useful thing for a financial planner to do if you do not have the necessary skills. But maintaining the plan should be DIY.
 
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