I have learned much from this site as it relates to the different RE approaches to both how many manage their assets and generate their income in RE. It is also clear that a majority of you all self manage your own portfolios whether it is picking mutual funds/ETFs/individual stocks and employ the strategies that work best for you to create your RE income (any combination of pensions, SS, dividends, rebalance/sell, cash buckets, alternative income investements such as real estate). Over the years I have personally gone from simple self managed no load mutual funds to becoming an "expert stock picker" in the dot com days to having my $$ managed by a big "expert" money manager for % fees to back to my present KISS method of self managing an AA with funds/ETFs at Schwab. While I am still in the accumulation mode for the next 3+ years, I am a little more passive in terms of any real frequent tinkering during the year (i.e.evaluate my AA and rebalance once a year). However, as my portfolio grows in both my taxable and tax differed accounts, I start to wonder if there is a point, $$ size of portfolio, where it is prudent to engage more professional help? I get that the same principles should generally apply whether you are manageing a $1M or $10M portfolio, but do any of you feel there is a threshold (say $5M+) where more help is warranted? I suppose I am coming at this from the angle of once the pot gets to a certain size the % swings in real $$ become larger as does the impact on taxes in taxable accounts becomes more sensitive. Do platforms like the Schwab Intellegent Investor make good sense? Do any of you meet with fee only advisors once a year to get second opinions/ideas? I have a pretty good understanding of what I am doing as it relates to investing, but it's not my day job, so I really want to make sure I am not leaving any money on the table by missing anything. Particularly curious to hear from those of you that may have a larger portfolio you are/will rely on in RE.
When more professional help/platforms make sense?
- Thread starter DawgMan
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donheff
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
I don't doubt that there are FAs who might be able to help you wring out a few extra bucks from your portfolio or help you limit losses in a downturn but how the heck do you find those gems among the rough stones? If you know enough to sort through the crowd to find a truly qualified and effective FA you can probably do as well yourself or at least come close enough that the fee won't be worth the advantages. It might seem that if you want advice on applying a particular strategy you could seek out someone with expertise in that strategy but, again, once you figure out what it takes to be such an expert you have probably learned enough to DYI. That said, consulting periodically with a carefully selected fee only advisor to go over your thinking may bring some peace of mind.
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I don't see such a threshold for someone who is comfortable managing their own portfolio. (But I don't have a billion dollars, or envision having it!) Basically, as our portfolio has grown, the swings in real dollar terms become less relevant; indeed, sometimes barely noticeable. For example, if we were forced to retire with our portfolio of 20 years ago, even a $100,000 drop would be nerve wracking. In real life, however, such a drop is irrelevant given the extra margin that we now have.
We met with an advisor once or twice in 1993 or so. Even then it was apparent that we were wasting our time.
I think there is a legitimate role for FAs in some situations. It is analogous to the reasoning by which many people - not just celebrities! - hire personal trainers and diet coaches.
Everybody already knows that one can build wealth through regular saving and investing. Likewise, we know that to lose weight we should eat less and exercise more. In neither case is it complicated.
But the data show Americans are overweight anyway. Why? I submit it isn't because we are incapable of understanding what we should do; it is because we are all humans, complete with vices and weaknesses that lead us to occasional bad decisions. Save vs spend is in essence just like celery vs cheesecake.
Whether it relates to health or finances, sometimes we just need someone to hold our hand while we try to improve our habits.
P.S. In truth, I'm a fool for cheesecake.
Everybody already knows that one can build wealth through regular saving and investing. Likewise, we know that to lose weight we should eat less and exercise more. In neither case is it complicated.
But the data show Americans are overweight anyway. Why? I submit it isn't because we are incapable of understanding what we should do; it is because we are all humans, complete with vices and weaknesses that lead us to occasional bad decisions. Save vs spend is in essence just like celery vs cheesecake.
Whether it relates to health or finances, sometimes we just need someone to hold our hand while we try to improve our habits.
P.S. In truth, I'm a fool for cheesecake.
Midpack
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
There's no threshold to me. While there are undoubtedly FA's who can guide an investor ongoing to better returns net fees at similar risk than a classic Bogle portfolio, as others have said by the time you know enough to pick a great FA, you don't need the help anymore. All indications are they're very, very hard to identify - past performance isn't a guarantee.
OTOH, there's nothing wrong with getting periodic advice (less than annual) or a second opinion on a substantial IPS change from a pro for a set fee. Though again, picking the pro is difficult. I haven't done it yet, but I've come close and I'd never rule it out entirely.
It's a minefield out there for folks who relinquish control of their investments to "pros." I assume that's the primary driver that's led most of us to educate ourselves, and find that it doesn't have to be as tough as many FA firms lead investors to believe.
OTOH, there's nothing wrong with getting periodic advice (less than annual) or a second opinion on a substantial IPS change from a pro for a set fee. Though again, picking the pro is difficult. I haven't done it yet, but I've come close and I'd never rule it out entirely.
It's a minefield out there for folks who relinquish control of their investments to "pros." I assume that's the primary driver that's led most of us to educate ourselves, and find that it doesn't have to be as tough as many FA firms lead investors to believe.
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donheff
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
I agree that FAs, trainers, and diet coaches are all equally useful -- not much. In all three cases I eventually did my own research and concluded that the vast majority are of no use and in fact often lead you astray. But I don't agree that the answers are obvious, they do take some study.
Midpack
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Except the cost of even the best personal trainers and diet coaches are trivial compare to paying 1% of net assets on a portfolio ongoing.
People also use doctors and lawyers as analogous, and there's some truth to it. But unless maybe you're very, very rich, you can learn to invest DIY. It's no where near as difficult as providing your own major healthcare or major legal advice.
bradaz2488
Recycles dryer sheets
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Given the complicated tax rules I think I would only seek professional help if I felt I needed to optimize my tax burden. Not sure how much in assets I would have to have to need that type of tax advise. I would not need a FA if I was able to build such a large portfolio on my own so I guess a good CPA..... If I get to that point of need a good CPA I'll be very happy 
ERD50
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
I think it could make sense to hire on an hourly basis or fixed fee for a specific review (probably not annually), if you have specific questions, or at least a specific area that you feel needs to be looked into to see if it can be optimized. That could be a tax situation, ROTH conversions etc.
I also agree with others that I think you'll have a hard time finding someone that can add that value - they may be out there, but how do you sort the good from the bad from the indifferent?
As far as a threshold - sure there is. For a fee based on hours, the fee will be a smaller % of a larger portfolio. But going in, you can only guess at how much they can help you in absolute dollars, and compare that to their fees.
I don't believe you can count on them to help you select better investments.
-ERD50
I also agree with others that I think you'll have a hard time finding someone that can add that value - they may be out there, but how do you sort the good from the bad from the indifferent?
As far as a threshold - sure there is. For a fee based on hours, the fee will be a smaller % of a larger portfolio. But going in, you can only guess at how much they can help you in absolute dollars, and compare that to their fees.
I don't believe you can count on them to help you select better investments.
-ERD50
Dash man
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
We don't see an asset level threshold for handing over money to a professional fund manager. We do meet with a financial advisor from USAA each year to review our plan and sometimes it's helpful. We do however believe once we feel our mental capacity begins to degrade with age, we may hand our investments over to a pro with strict instructions to not cause a large tax hit by selling equities with large capital gains. We want a tax smart manager since the majority of our assets are in taxable accounts with large gains paying great dividends. If they don't agree to that, we'll just hand over our IRAs for them to manage. Fees are lower with the more total assets under their control, but we want our substantial individual equities to pass to our kids with the stepped up cost basis upon our death.
yeah, this is a gnarly and essentially unavoidable threshold. In-laws turned to a trust company in the past 7-10 years (after 80, basically), as he no longer fully trusts himself outside of a small "play money" speculative account that they could afford to lose. Too often though, you don't realize that your capabilities are reaching the point where you can't do it anymore.
I anticipate that we'll have our sons start becoming active (aka, fully aware/disclosed) in our mid-70s or so, which might make it easier for us to let them slide in as we age... We'll see. It is always easier to critique errors of others than to avoid blissfully falling into those same errors.
If your truly became an expert stock picker, then what it the problem? Most people thought they were experts at the time. But it difficult to loose when the market just goes up.... until it doesn't.
I see nothing wrong with seeing a FA to bounce some ideas off of. In fact I'm going to do that with my Fidelity rep today. I have found him to be a good sounding board. Same with my Schwab rep. I am one who has not gone to a flat out bogglehead portfolio, but I do index mostly with low cost broad indexes... but not completely. Look at the intelligent portfolios... first do you want that much in cash? Some of things IP does is tax loss harvesting which is something you may want to do.
If you are really high net worth, a good FA may help you set up a better tax conscious portfolio.
And this is the rub. To know you have found a really good adviser... you likely need to become very well versed in the area. There are just too many sales people.
For me I'm going to talk to my Fido guy today. This one and the last one have become good at exchanging ideas beyond the provided scripts.
donheff
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Ditto the concerns about aging. I hope to get the kids involved as I get toward 80. By then it is likely that our guaranteed income streams will meet all or most of our needs so decisions on the portfolio will start being driven by the kids' long term interests. A lot depends on when we cut back on travel. Is that 80, 85? Sooner?
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W2R
Moderator Emeritus
I have never hired a FA, and have never needed one.
My opinion is that the only time an FA is advisable, is for those who just cannot easily handle math. This could be due to senility, or just due to the fact that math is something they could never quite grasp. If you can understand math, and if you can read a few books on investing, I think you can handle it. Nobody else cares about your money as much as you do.
YMMV but that is my opinion. For investing books, I really like those listed on Bogleheads: https://www.bogleheads.org/readbooks.htm
My opinion is that the only time an FA is advisable, is for those who just cannot easily handle math. This could be due to senility, or just due to the fact that math is something they could never quite grasp. If you can understand math, and if you can read a few books on investing, I think you can handle it. Nobody else cares about your money as much as you do.
YMMV but that is my opinion. For investing books, I really like those listed on Bogleheads: https://www.bogleheads.org/readbooks.htm
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Sorry, but I'm gonna stick to my guns on this. Some people would be better off with FAs. That's all there is to it.
It is irrelevant that you or I or 30 million other individuals could simply park their retirement dough in a couple of index funds and be perfectly fine. I have watched numerous friends and family members who are too intimidated by fear or ignorance or laziness or whatever to do anything to improve their financial situation. The result is that they are now facing retirement with no assets at all.
If engaging an FA will motivate them to do something, they will be better off. Even if it costs them 1%, they will end up with something. My calculator says something > nothing. End of story.
It is irrelevant that you or I or 30 million other individuals could simply park their retirement dough in a couple of index funds and be perfectly fine. I have watched numerous friends and family members who are too intimidated by fear or ignorance or laziness or whatever to do anything to improve their financial situation. The result is that they are now facing retirement with no assets at all.
If engaging an FA will motivate them to do something, they will be better off. Even if it costs them 1%, they will end up with something. My calculator says something > nothing. End of story.
I would not disagree with this at all; Vanguard PAS or a Garrett Network fee-only are among the choices I would recommend for such people.
My impression was that OP was asking whether we would consider switching to FA assistance once a certain portfolio-size threshold was met. That, to me, is a horse of a different color.
hesperus
Full time employment: Posting here.
^This ^
Don't let others sway your opinion away from an FA if you think it would be helpful, or you want to take a more passive role. If you feel that you could use a FA, do the research and find one that fits. Many on this and other forums manage their typical $1M-2M portfolio with a few stock & bond funds, and that's fine. From my perspective there's a bit of an inflated ego involved with many who have their 'anti FA' crusade hats on while they manage their own portfolio that consists of a few index and bond funds. Do what works for you.
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W2R
Moderator Emeritus
Why are you sorry? You have a personal opinion on the topic. All who have posted on the topic do. Opinions are like.... well OK, but everyone has one. It's up to the OP to read and evaluate them.
Fedup
Thinks s/he gets paid by the post
I once asked Barclays Banks, the wealth magement group in LA about this, I think the minimum is $20 million. It could be higher now. Maybe when I reach to that level, I might hand it over to some reputable firm. More help about how best to strategize regarding wealth management.
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Sojourner
Thinks s/he gets paid by the post
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Completely agree with this, and in fact this is exactly what I did about 6 years ago when I felt my investments (allocation, strategy, and mind-set) needed a thorough, objective review. I had way too much in cash and wasn't well diversified -- and I knew enough to actually know that. I found a local fee-only adviser who was great and did a really thorough job analyzing all my accounts. In the end I got a big, fat binder chock full of detailed charts, graphs, recommendation, and projections. This was all I needed to kick start me down the right path (or, a better path), and I haven't felt any need to go through that exercise again. All the advice I got 6 years ago still applies today, generally speaking.
I don't think my outlook on this will change once I hit any specific NW figure. It would be based more on whether I think my approach to AA needs another strategic tuneup, which I don't feel is highly correlated with NW.
Lsbcal
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
The issue for me is how do you have confidence in a black box investing approach? A black boxes would be a methodology that you cannot backtest to understand the risks/rewards. You don't know how the investments will be modified over time.
A black box investing approach could be from an institution or from an FA you feel confident in. But when things go south you then start asking questions of that approach because the risks/rewards were not totally understood at the start.
My own investments are selected after comparing a mix of assets to other portfolios over a long time frame, say 20 years. That is the homework one should do.
But if one is not able or willing to do this, then go ahead and find a trustworthy investment plan from Vanguard or Fido or maybe Schwab. I would be best if one could look at that selected approach of past bull/bear markets.
A black box investing approach could be from an institution or from an FA you feel confident in. But when things go south you then start asking questions of that approach because the risks/rewards were not totally understood at the start.
My own investments are selected after comparing a mix of assets to other portfolios over a long time frame, say 20 years. That is the homework one should do.
But if one is not able or willing to do this, then go ahead and find a trustworthy investment plan from Vanguard or Fido or maybe Schwab. I would be best if one could look at that selected approach of past bull/bear markets.
So, I have asked myself the same question as the OP but elected not to ask it here as the most active posters, who I have great respect for their opinion, just don't see the financial opportunity with FAs. I get how they reached that conclusion and am not debating it. However, I like the support and not interested in managing the portfolio. A low price mutual fund FA, like Schwab for example may ultimately meet my needs.
My one FA has done a good job by performing at or above the market. Another one, I am using for comparison, is not doing as well and this maybe the year I move on and likely to a robo FA.
About a year ago, I decided to experiment with a robo FA. They had a monthly promotion where their fee is all but free. (Obviously the funds have a fee). I will be doing an analysis soon. I do know their approach to tax harvesting has been a good and a learning experience for me.
I also manage some of my own investments.
So, like the OP, I am still finding my way. The good news is I am not compromising my retirement and my net worth continues to be above my projections.
My one FA has done a good job by performing at or above the market. Another one, I am using for comparison, is not doing as well and this maybe the year I move on and likely to a robo FA.
About a year ago, I decided to experiment with a robo FA. They had a monthly promotion where their fee is all but free. (Obviously the funds have a fee). I will be doing an analysis soon. I do know their approach to tax harvesting has been a good and a learning experience for me.
I also manage some of my own investments.
So, like the OP, I am still finding my way. The good news is I am not compromising my retirement and my net worth continues to be above my projections.
Danmar
Thinks s/he gets paid by the post
Excellent post. I totally agree.
Sunset
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
I think an FA is useful for some people, I have seen people do some incredibly stupid things with their retirement savings.
Example: Years after the 2008 stock decline, I was talking to a fellow employee about the 401K, at which point this person told me she had converted all the stock to cash in the 401K after the decline, and wondered since it had now gone up quite a bit if she should convert the cash back to stock.
OP should realized that once you have $5MM a 2% fee will be $100,000 per year, which is enough for many folks to retire upon, just by itself !
Example: Years after the 2008 stock decline, I was talking to a fellow employee about the 401K, at which point this person told me she had converted all the stock to cash in the 401K after the decline, and wondered since it had now gone up quite a bit if she should convert the cash back to stock.
OP should realized that once you have $5MM a 2% fee will be $100,000 per year, which is enough for many folks to retire upon, just by itself !
yeah, this is a gnarly and essentially unavoidable threshold. In-laws turned to a trust company in the past 7-10 years (after 80, basically), as he no longer fully trusts himself outside of a small "play money" speculative account that they could afford to lose. Too often though, you don't realize that your capabilities are reaching the point where you can't do it anymore.
I anticipate that we'll have our sons start becoming active (aka, fully aware/disclosed) in our mid-70s or so, which might make it easier for us to let them slide in as we age... We'll see. It is always easier to critique errors of others than to avoid blissfully falling into those same errors.
My dad pulled me in at 35...as soon as he retired and started traveling extensively. Assuming in case he got hit by a bus, since he's already won the lottery according to his portfolio lol.
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