2%+ premium for having a FA!

[FREE866]

Good grief, I'll try to have an open mind here, but to me that article is full of a lot of gobbledygook.

I guess if you have some complex situation an advisor could make sense. My situation is very simple so paying an advisor 1-2% every year equates to hundreds of thousands, possibly millions of dollars over a few decades. Not worth it to me if you have the temperament/discipline to manage your own money effectively.

 

[surprising]

I agree with what everyone is saying and manage everything myself as well. However, I also wonder- what would the mood here be like if we were 5 years into a bear market with S&P dropping 20% 5 years in a row. I am not sure if I would have the conviction to keep following my plan. I would be having all sorts of self doubt in my abilities after watching significant amount of my net worth vanish.

 

[marko]

Folks, a 1.5% AUM plus the fees their funds charge is an absolute boat anchor. Run, don't walk.

It is so darn simple it HURTS. Go to VG and buy either the SP 500, or Total Stock Index and see you in 30 years.

This is true, mostly for readers of this forum, "Where everyone here is above average".

But you might be surprised at how many eyes would completely glaze over at the words "index fund". Some people do need big-time hand holding

 

[TheWizard]

I think I agree that there are a good number of adults age 30+ who don't have much insight into basic investment methods.
They treat it as a difficult concept, same as medical issues. So, right, they need a trained professional to guide their investment strategy.

There's probably not much we could or should be doing about this, sad to say.

Hello Edward Jones!!!

 

[Dtail]

I think I agree that there are a good number of adults age 30+ who don't have much insight into basic investment methods.
They treat it as a difficult concept, same as medical issues. So, right, they need a trained professional to guide their investment strategy.

There's probably not much we could or should be doing about this, sad to say.

Hello Edward Jones!!!

No personal finance classes through college for starters. One of my retired doctor friends has no clue about investments.

 

[marko]

No personal finance classes through college for starters. One of my retired doctor friends has no clue about investments.

We had investing clubs with play money in high school and even had a broker come in a few times a year to cover and explain basics and so on. We had some sort of prize for the team who made the most money at the end of each year. IIRC, each team started out with a fake $10k and we "bought and sold" stocks, bonds etc.

Yes, this was a school where each morning kids were reading the WSJ in the school library, tracking our progress.

Based on many of my questions on this forum, it's pretty clear that I slept through most of those sessions.

 

[TheWizard]

No personal finance classes through college for starters. One of my retired doctor friends has no clue about investments.

Personal finance classes are basically a waste of time.
I certainly didn't have any.
Especially nowadays, it's child's play to get information on investing using this new Internet thing.

So the question is, do you have an interest in managing your own finances?

 

[Koolau]

Personal finance classes are basically a waste of time.
I certainly didn't have any.
Especially nowadays, it's child's play to get information on investing using this new Internet thing.

So the question is, do you have an interest in managing your own finances?

Heh, heh. Yeah. My interest in managing my own finances is called indexing. Not quite (but almost) "set and forget."

 

[Stormy Kromer]

I agree with what everyone is saying and manage everything myself as well. However, I also wonder- what would the mood here be like if we were 5 years into a bear market with S&P dropping 20% 5 years in a row. I am not sure if I would have the conviction to keep following my plan. I would be having all sorts of self doubt in my abilities after watching significant amount of my net worth vanish.

A lot of us have invested through long term downturns. I didn't open a statement for about 3 years around 2008. I kept investing and buying threw the dip. I'm sure many others here did too. I still haven't sold. We did it, you can too.

 

[marko]

A lot of us have invested through long term downturns. I didn't open a statement for about 3 years around 2008. I kept investing and buying threw the dip. I'm sure many others here did too. I still haven't sold. We did it, you can too.

Yes. That plus a big TLH opportunity

 

[target2019]

The author who provided that paper was:

Jaclyn DeJohn, CFP®
Jaclyn is the Director of Economic Analysis at SmartAsset and a CERTIFIED FINANCIAL PLANNER™. With a bachelor of arts in economics from The College of New Jersey, she evaluates data for trends that affect your financial life. As a spokesperson for SmartAsset, she has been cited by Bloomberg, CNBC, Business Insider, Fox News, The Hill and many more. Jaclyn was previously an editor for CNET Money, where she covered banking, investing, credit cards and real estate. She also served as managing editor of small business content for Bizfluent, Work.Chron and AZCentral, and as a research consultant for NAPCO Media. As a past real estate licensee and Reatlor®, Jaclyn managed contracts for residential properties, while working closely with first-time homebuyers, investors and mortgage brokers.

Seems like a nice person.

And the company is:

SmartAsset Advisors, LLC (“SmartAsset”), a wholly owned subsidiary of Financial Insight Technology, is registered with the U.S. Securities and Exchange Commission as an investment adviser. SmartAsset’s services are limited to referring users to third party advisers registered or chartered as fiduciaries (“Adviser(s)”) with a regulatory body in the United States that have elected to participate in our matching platform based on information gathered from users through our online questionnaire. SmartAsset receives compensation from Advisers for our services. SmartAsset does not review the ongoing performance of any Adviser, participate in the management of any user’s account by an Adviser or provide advice regarding specific investments.

We do not manage client funds or hold custody of assets, we help users connect with relevant financial advisors.

The website reminds me of the trade publications that would find their way into companies back in the day.

At this age I'm sure the author knows much more than I do. But a few tik-toks would have worked for me...

 

[marko]

I agree with what everyone is saying and manage everything myself as well. However, I also wonder- what would the mood here be like if we were 5 years into a bear market with S&P dropping 20% 5 years in a row. I am not sure if I would have the conviction to keep following my plan. I would be having all sorts of self doubt in my abilities after watching significant amount of my net worth vanish.

I think it was Buffett who said that "the stock market is the only market where everyone runs for the exits when the prices go down". A 20% drop? TLH and bargain hunting time!

We all survived (and many of us profited from) the debacle of 2008. If anything, that experience made me a lot more a believer in the "long term".

 

[VanWinkle]

I learned the lesson of tax loss harvest and buy more in 2008 and 2020. Those tax lots in my brokerage have the largest gains even over those 8-10 years earlier. It wasn't easy in 2008, but was a little easier in 2020. Experience pays off.

 

[Scuba]

This article describes how some/most folks get a premium for having an AUM Financial Advisor, from 2% to 2.7% extra every year, compared to doing it alone!
So we've had it wrong all along!

The Value of a Financial Advisor: What's It Really Worth?

This model aims to quantify the value of a financial advisor by using assumptions that most accurately reflect reality for the majority of

smartasset.com

This article was linked to from a weekly Kitces newsletter that I receive...

The best way to test this out, which I have done, is to give an FA part of your portfolio while managing the other part yourself for at least a year or two. I did this, and the FA and I did about the same before fees, but after fees the FA portfolio was consistently lower than mine, so I now self-manage everything.

 

[jazz4cash]

Checkout Barry Ritholtz’ Masters In Business podcast interview of Charles Ellis. He describes the playing field shift from insider knowledge and expensive research to public knowledge and cheap computing. Ritholtz has great stuff even though he is an asset manager.

Rethinking Investing with Greenwich Associates' Charles Ellis

Podcast Episode · Masters in Business · 02/21/2025 · 52m

podcasts.apple.com

 

[Stormy Kromer]

The best way to test this out, which I have done, is to give an FA part of your portfolio while managing the other part yourself for at least a year or two. I did this, and the FA and I did about the same before fees, but after fees the FA portfolio was consistently lower than mine, so I now self-manage everything.

I started with a FA in 1997. In 2008 I stopped investing new money with them and started on my own with VG. I have wooped them 2 to 1. I have the statements to prove it. All I did was start investing in VG Total Stock market for my equities and VG Balanced fund for my fixed income. The FA had me in about two dozen managed funds that didn't do near as well. This is long term of 15years so it wasn't a flash in the pan.

I will challenge any FA that a monkey can woop them net of taxes and expenses like the barefoot monkey in the Disney movie with Kurt Russell. I'll even tell them what the monkey will invest in ahead of time. VG SP 500. See you in 10 years. The FA will give you 100 reasons why their portfolio of confusing funds is safer, better diversified, more complicated so dummies can't do it....the monkey will beat them, net with the most money after taxes. Plus, they'll have more fun.