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Old 06-26-2017, 05:49 AM   #61
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Yes, but I think my threshold would be a lot higher than $50M. Maybe $500M.

Doing my own trades is not the same as cleaning a 12-bedroom house. Instead of entering 500 shares into an online order, I just enter 5000 shares. Or I can break it out into many orders. Right now, I do not trade everyday, so would think I still have time to manage a portfolio 10x larger.

If I had even more, say $500M, I might be occupied with other activities that are now open to me, and lose interest in investing and outsource it to a manager. Or maybe not. I may still be too interested in the stock market to give it up to somebody else. And I need something to do when I am not traveling or doing stuff like gardening.

I will never know, because the only way I could get a big pile of money is to win the lottery, and I do not play that game.
You don't even have to break a trade into many orders. Unless you specify all or nothing for a limit order, the brokerage does it for you. If the share size is very small compared to the daily volume, it will barely affect price.

Agree the house analogy doesn't hold.
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Old 06-26-2017, 06:22 AM   #62
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Another reason for employing a financial adviser is as a safety check against doing so something really stupid. I might think I am well able to manage my finances but I have seen (or read about) plenty of cases where people go off the rails and destroy their financial security through bad decision making (including a some relatives who managed to blow multimillion dollar fortunes). Paying some small FA fees is a form of insurance for me ...


... says the man who's currently thinking about using a margin facility to buy individual shares ...
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Old 06-26-2017, 07:22 AM   #63
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I think that I would be likely to handle my own investments at pretty much any level of assets.

That said, I have used an attorney on a one time basis to help me with a Will, Trust, Living Will etc. I would invest in additional estate planning services if my estate was worth more than $5.0 million or whatever the current cut-off is for federal estate taxes but I am unlikely to get there.
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Old 06-26-2017, 08:03 AM   #64
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Many really wealthy folks do not simply invest in publicly traded securities. They invest in private equity deals and all sorts of other vehicles that may require third party involvement to get access to. YMMV, but it would surprise me if many UHNW folks were invested only in a few index funds. Warren Buffet himself certainly doesn't restrict his portfolio to Vanguard funds. I think he intended his advice for the average person, not the UHNW crowd.

In any event, this is not a "one size fits all" decision.
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Old 06-26-2017, 08:11 AM   #65
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Another reason for employing a financial adviser is as a safety check against doing so something really stupid. I might think I am well able to manage my finances but I have seen (or read about) plenty of cases where people go off the rails and destroy their financial security through bad decision making (including a some relatives who managed to blow multimillion dollar fortunes). Paying some small FA fees is a form of insurance for me ...


... says the man who's currently thinking about using a margin facility to buy individual shares ...
If you stick to broadly diversified low-cost mutual funds, rebalance only occasionally to maintain your AA, and don't use margin, it's really hard to see where the big screw ups are going to happen.....

Keep it simple.
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Old 06-26-2017, 08:13 AM   #66
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Many really wealthy folks do not simply invest in publicly traded securities. They invest in private equity deals and all sorts of other vehicles that may require third party involvement to get access to. YMMV, but it would surprise me if many UHNW folks were invested only in a few index funds. Warren Buffet himself certainly doesn't restrict his portfolio to Vanguard funds. I think he intended his advice for the average person, not the UHNW crowd.

In any event, this is not a "one size fits all" decision.
But they don't have to.

Some of them simply put it all in municipal bonds.
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Old 06-26-2017, 08:58 PM   #67
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But they don't have to.



Some of them simply put it all in municipal bonds.


Agreed, no one has to invest in anything they don't want to.

My point was that one reason people may want an FA as their portfolio grows is to access asset classes that aren't closely correlated with financial market cycles. People who have large portfolios sometimes choose to diversify their assets beyond publicly traded financial markets. Some advisors can help provide access to alternative vehicles.
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Old 06-26-2017, 09:26 PM   #68
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I know many universities and endowments and public pension funds do this, but I honestly don't see why an individual would suddenly want to get into more exotic investments simply because their nest egg was way larger. There is diversification, and there is deworsification.

I wonder how much it is financial companies hard-selling their "special" and "exclusive" services.

Universities etc. are going to hire financial services simply for CYA reasons, and often private equity doesn't work out at all, and there are plenty of underperforming hedge funds, but "everybody does it", so they fear looking foolish otherwise.

And, by the way, this stuff is way beyond Joe Blow FA's paygrade.
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Old 06-26-2017, 09:37 PM   #69
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I agree, Joe Blow FA wouldn't know much about these avenues.
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Old 06-27-2017, 07:24 AM   #70
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And, by the way, this stuff is way beyond Joe Blow FA's paygrade.
If we're talking about Joe Blow FA from the likes of E Jones, absolutely yes.

However there are FA's for UHNW folks who are quite expert and specialize in more exotic opportunities. Generally private companies with limited clientele.

Most of these guys won't even talk to you if your NW is under $100MM and generally operate in a more rarefied realm of financials that appeal to UHNW clients. Services usually include legal, philanthropic, trusts, tax and multi generational wealth management to name a few. Way over the heads of Joe Blow FA's
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Old 06-27-2017, 07:35 AM   #71
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OK - so let say you don't need to worry about it until you reach $100M.

We have the answer folks: It's at least $100M!
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Old 06-27-2017, 08:23 AM   #72
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OK - so let say you don't need to worry about it until you reach $100M.

We have the answer folks: It's at least $100M!
Sometimes I'm a little too subtle. Sorry. A lifetime deficiency of mine.

My point was that there are different levels of FA's.

Each meet certain levels of need. IMO the financial needs of someone with $1MM NW are generally different from those with $100MM.
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Old 06-27-2017, 08:49 AM   #73
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Wow.... some people seem pretty low to me.... I can manage $10 to $20 mill on my own... not a lot more work than I do now (and I am not close)...


BUT, if I won one of those super lotteries and had over $100 mill I would than hire some people... but not pay a % of NAV unless it was really low... like 25 to 50 BPs..... that is still $250 to $500K to them.... I should be able to get a lot of service for that kind of scratch.... but since you should be making anywhere between $5 and $10 mill a year in profits it becomes a minor expense to you...
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OK - so let say you don't need to worry about it until you reach $100M.

We have the answer folks: It's at least $100M!

Go back and look at post #13.... I said that a LONG time ago
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Old 06-27-2017, 09:05 AM   #74
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Do you need someone to run $100MM in an index fund? No. But there is a financial point where life can get a whole lot more complicated and a few lawyers and accountant or two become more critical in financial advisement.

Even my oft-mentioned miserly grand-dad (mid/high 8 figures), who hated paying for even a newspaper, reluctantly had a set of advisers who'd steer him in matters of estate planning, taxes and general management of his affairs.

YMMV, but to me anyone with $100MM+ who goes it alone without anyone looking over their shoulder would be out of their mind.
+1

I would say $100MM for sure, but even at much lower levels like $12-15MM, it's costing you only a tiny fraction of your yearly passive income to outsource all the obscurities of estate planning, tax optimization, and other complex issues that you probably don't want to become an expert in yourself just to save a few bucks. At $12MM, for example, your monthly passive income would be roughly $35,000. Retaining a fee-only FA for a quarterly review of your portfolio would cost only about $3,000 (assuming $100/hr for 8 hours, 4 times per year). It's hard for me to comprehend how anyone would think, at that level of net worth, this wouldn't be a wise use of money. At that level of wealth, I would certainly want at least an annual "checkup" on my portfolio by a trained professional, just like I go in to see my doctor once a year for a complete physical exam.
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Old 06-27-2017, 09:20 AM   #75
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+1

It's hard for me to comprehend how anyone would think, at that level of net worth, this wouldn't be a wise use of money. At that level of wealth, I would certainly want at least an annual "checkup" on my portfolio by a trained professional, just like I go in to see my doctor once a year for a complete physical exam.
I think a lot of people equate "FA" with some of the more popularly advertised investment firms; E. Jones, LPL, R. James and the like.

As I've noted above, there are other firms where the term FA may be a little more broader and comprehensive than some guy, 2 years out of school offering annuities on commission.

If I may borrow from Gatsby: "The (very) rich are different from you and me"
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Old 06-27-2017, 10:14 AM   #76
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OK - so let say you don't need to worry about it until you reach $100M.

We have the answer folks: It's at least $100M!
+1

Yep, the amount seems to keep growing as the discussion goes on!

I tend to agree with you on this Audrey, no need for a FA since I plan to continue to simplify as I go on (actually pretty simple now outside of the few percent in my "day at the track" portfolio).

OTOH, I think I may be switching from DIY to a CPA for taxes and believe an estate planning attorney and an elder law attorney would be worthwhile.
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Old 06-27-2017, 10:24 AM   #77
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+1

I would say $100MM for sure, but even at much lower levels like $12-15MM, it's costing you only a tiny fraction of your yearly passive income to outsource all the obscurities of estate planning, tax optimization, and other complex issues that you probably don't want to become an expert in yourself just to save a few bucks. At $12MM, for example, your monthly passive income would be roughly $35,000. Retaining a fee-only FA for a quarterly review of your portfolio would cost only about $3,000 (assuming $100/hr for 8 hours, 4 times per year). It's hard for me to comprehend how anyone would think, at that level of net worth, this wouldn't be a wise use of money. At that level of wealth, I would certainly want at least an annual "checkup" on my portfolio by a trained professional, just like I go in to see my doctor once a year for a complete physical exam.
Generally, a fee only FA is not also a top notch estate planning and tax pro.
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Old 06-27-2017, 11:52 AM   #78
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Generally, a fee only FA is not also a top notch estate planning and tax pro.
No. But the company she/he works for has those people available for you.

Like these guys: https://www.welchforbes.com/ for example
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Old 06-27-2017, 03:18 PM   #79
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Generally, a fee only FA is not also a top notch estate planning and tax pro.
Agreed, but a top notch fee-only FA would at least be able to identify possible issues in my portfolio that I might be overlooking or just be blissfully unaware of. Then they could tell me I need to consult with an estate planning specialist or tax pro. Just like the highly trained physician I see every year for my physical exam isn't a top notch endocrinologist, but he certainly could identify potential issues such as hypothyroidism and then refer me to someone for treatment.

Anecdotally, the fee-only FA I consulted several years ago asked me lots of questions about my goals (long term and short) and tax situation so that he could tailor his advice accordingly. It wasn't exactly estate planning, but I'm certain he did take my general thoughts about my future estate and potential tax scenarios into account. I wouldn't hesitate to go back to him for more detailed advice if my situation and/or goals were to change dramatically.
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Old 06-27-2017, 08:45 PM   #80
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Warren Buffet himself certainly doesn't restrict his portfolio to Vanguard funds. I think he intended his advice for the average person, not the UHNW crowd.
Don't think so: his recommendation that his non-Berkshire estate - which presumably is decently large - should be invested for his wife's benefit in Vanguard funds was pretty explicit. But I do acknowledge that while he remains alive, he doesn't practice what he preaches.
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