As suggested by ERD50 in this thread, (http://www.early-retirement.org/forums/f28/fees-fees-thoughts-for-me-89489-2.html, post #28), I've taken the challenge and subjecting myself to whatever comes....
From ERD50, responses in italics
It seems to me that choosing this person is harder than DIY, so I'm curious how you would go about it, and what suggestions you have for others who are set on this path? Some considerations:
A) Do you expect the FA to:
1) Beat the market after fees/taxes/expenses?
No
2) Match the market after fees/taxes/expenses?
Yes, but....I've settled on a Small Cap/Value tilt and am giving Dimensional Funds a shot. Expect it will take a few years to know if their approach works. In the meantime, I expect to perform "close enough" to the market to not be anxious about being 0.5%-ish behind a hypothetical total market index with my current 70/30 allocation.
3) It is OK if you lag the market, you just don't want to deal with it?
May lag the market in the short term, and I expect to be able to understand why
For 1 & 2 - how do you go about determining if the FA is capable of that, in up, down and sideways markets?
Selected a RIA using DFA funds believing their small/value bias performs better over time. I'm patient.
B) Do you expect the FA to provide other advice, tax planning? Other?
Tax planning, no. General guidance that I flesh out with my CPA, yes. Very helpful guidance and a calm voice while dealing with late DW's estate. Also have been helpful with a forward look on Roth conversions, asset location, near term cash holdings, firecalc-type projections, insights on a small company I invested in. No birthday cards or holiday gifts, though
C) Do you expect the FA to just keep you from your own bad decisions, hand holding so you don't sell at the bottom? But if you want to sell at the bottom, what keeps you from firing your FA and just doing it anyhow?
Not an issue for me. Kept investing throughout the 1987, 2000-01 and 2008-09 events. Was VGD indexer before home life changed. Don't need help with that.
D) Why do you feel an ongoing AUM-charging FA serves you better than a per-hour fiduciary FA?
Don't know. I needed to do something to reduce my intellectual/emotional burden after my late wife's terminal diagnosis. Wasn't up to caring for her, managing the kids, my job and a not-insignificant amount of money. Was very helpful then, and I like being free of those decisions today, even though I know I'm not doing it the cheapest way. Money I'm willing to spend while giving DFA's small/value approach a chance to prove out.
Daily life has gotten easier in some respects since she died 4 years ago, so I'll take it back "in-house" if performance isn't at least meeting a TSM/TIntl/Bond benchmark after a few years.
So nothing there about not using an FA, just questions about how to go about finding one that meets your needs. I'll be glad to "shout down" any "pro-DIY naysayers" (and I'll need to hold my tongue as well), to keep the thread focused. I am curious about it.
Any takers? Feel free to copy/paste the above - I'd start it, but I think it would be better coming from someone who can speak directly to those topics.
---------------------------
For the curious with plenty of time on their hands, see posts 32, 35 and 46 in this thread (http://www.early-retirement.org/for...on-the-value-of-financial-advice-86203-2.html) for more detail about how I view the FA situation.
As to finding one, I would look only at Registered Investment Advisers (RIA), and avoid anyone who has an insurance license or talks about variable annuities. No active management for me, and I wouldn't pay an FA to invest at VGD, but I've been deep in this game for 30+ years.
Fees for AUM should be 1% or less, and the funds they recommend should be index/passive with fees < 0.2% generally. EM and some internationals may be higher, but still under 0.5%.
One thing I believe is glossed over by "DIY with index funds is simple" is that the people I know who preach it usually have experience doing it the other way and have learned A LOT from that experience. There is confidence that comes with understanding the lessons of those experiences. That confidence, IMO, is necessary to be successful DIY investor, and one doesn't typically get it listening the stories at the ER Pub
From ERD50, responses in italics
It seems to me that choosing this person is harder than DIY, so I'm curious how you would go about it, and what suggestions you have for others who are set on this path? Some considerations:
A) Do you expect the FA to:
1) Beat the market after fees/taxes/expenses?
No
2) Match the market after fees/taxes/expenses?
Yes, but....I've settled on a Small Cap/Value tilt and am giving Dimensional Funds a shot. Expect it will take a few years to know if their approach works. In the meantime, I expect to perform "close enough" to the market to not be anxious about being 0.5%-ish behind a hypothetical total market index with my current 70/30 allocation.
3) It is OK if you lag the market, you just don't want to deal with it?
May lag the market in the short term, and I expect to be able to understand why
For 1 & 2 - how do you go about determining if the FA is capable of that, in up, down and sideways markets?
Selected a RIA using DFA funds believing their small/value bias performs better over time. I'm patient.
B) Do you expect the FA to provide other advice, tax planning? Other?
Tax planning, no. General guidance that I flesh out with my CPA, yes. Very helpful guidance and a calm voice while dealing with late DW's estate. Also have been helpful with a forward look on Roth conversions, asset location, near term cash holdings, firecalc-type projections, insights on a small company I invested in. No birthday cards or holiday gifts, though
C) Do you expect the FA to just keep you from your own bad decisions, hand holding so you don't sell at the bottom? But if you want to sell at the bottom, what keeps you from firing your FA and just doing it anyhow?
Not an issue for me. Kept investing throughout the 1987, 2000-01 and 2008-09 events. Was VGD indexer before home life changed. Don't need help with that.
D) Why do you feel an ongoing AUM-charging FA serves you better than a per-hour fiduciary FA?
Don't know. I needed to do something to reduce my intellectual/emotional burden after my late wife's terminal diagnosis. Wasn't up to caring for her, managing the kids, my job and a not-insignificant amount of money. Was very helpful then, and I like being free of those decisions today, even though I know I'm not doing it the cheapest way. Money I'm willing to spend while giving DFA's small/value approach a chance to prove out.
Daily life has gotten easier in some respects since she died 4 years ago, so I'll take it back "in-house" if performance isn't at least meeting a TSM/TIntl/Bond benchmark after a few years.
So nothing there about not using an FA, just questions about how to go about finding one that meets your needs. I'll be glad to "shout down" any "pro-DIY naysayers" (and I'll need to hold my tongue as well), to keep the thread focused. I am curious about it.
Any takers? Feel free to copy/paste the above - I'd start it, but I think it would be better coming from someone who can speak directly to those topics.
---------------------------
For the curious with plenty of time on their hands, see posts 32, 35 and 46 in this thread (http://www.early-retirement.org/for...on-the-value-of-financial-advice-86203-2.html) for more detail about how I view the FA situation.
As to finding one, I would look only at Registered Investment Advisers (RIA), and avoid anyone who has an insurance license or talks about variable annuities. No active management for me, and I wouldn't pay an FA to invest at VGD, but I've been deep in this game for 30+ years.
Fees for AUM should be 1% or less, and the funds they recommend should be index/passive with fees < 0.2% generally. EM and some internationals may be higher, but still under 0.5%.
One thing I believe is glossed over by "DIY with index funds is simple" is that the people I know who preach it usually have experience doing it the other way and have learned A LOT from that experience. There is confidence that comes with understanding the lessons of those experiences. That confidence, IMO, is necessary to be successful DIY investor, and one doesn't typically get it listening the stories at the ER Pub
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