Whether to stay with Advisor or DIY...

[WhenIsItTime]

edit/add: I missed this post, and my response applies as well -


But when it comes to the investing part, it makes sense that a DIY would be an investing 'expert' more than in any other profession.

Other professions are generally dependent upon skill, experience, specialized tools, and sometimes just plain hard work. Hiring a pro versus DIY can be a very rational decision.

But when it comes to investing (not the other decision-making stuff), the data says that skill, experience, specialized tools, and hard work are not a factor. The only specialized tool that would help is a functioning crystal ball. Otherwise, you pick an AA, invest in a few broad based index funds/ETFs, and get on with your life. You are an expert, and probably better than an expert due to likely lower ER, simplicity, and no other fees.

That said, maybe I've missed it, but it seems to me people have had trouble finding an FA to do a real professional analysis on those other things, like optimizing Roth conversions, SS timing, and other subjects that get tossed around here regularly.

another add: Also, language like "for everyone on this forum who despises FA's," is not helpful Many/most of us are presenting facts about what an FA can/cannot do, and their likely negative effect on your portfolio. That's not "hating" it's facts. Challenge the assertion, not the motivation. That kind of language gets the thread heated and sometimes shut down (like the recent Tesla thread, where anyone presenting certain facts is labeled a "hater" or "anti-Tesla")

-ERD50

My issue is how the “certain facts” are universally applied regardless and without knowing what an individual has in their portfolio that could evolve from 401k plans, ESOP’s, ESPP, inheritance, and other causes. Many folks accumulate significant wealth through concentrated holdings that can be circumstantial. These all have tax implications for example, that can also take strategy/expertise/knowledge to navigate wisely over time based on plans and goals. Thus, I’m coming from point of view that not everyone can easily get majority of holdings to 3 funds. That would have delayed my FIRE.

I do respect and appreciate your insightful posts.

I rest my case and will accept (and try to remember!) deliberate and unconscious bias (mine included) is part of life and forums.

 

[ERD50]

@ERD50, you are correct in your posts advising how to optimize total investment return. That is a fact.

But let me offer you another fact that, IMHO, you are ignoring: Not everyone is interested in optimizing investment return at the expense of other life optimizations, like not worrying about their investments. I know many smart people who know that they do not get and cannot get optimum total returns because they are using an FA. I'd suggest that you not ignore this fact. Life is a multivariable optimization problem and the best we can do is the best we can do. ...

I don't think it's a matter of me ignoring any facts, I'm just stating them.

OK, we can say it is a fact that " Not everyone is interested in optimizing investment return at the expense of other life optimizations, like not worrying about their investments. ", but I don't think that's a very useful way to state it, because it is based on some misconceptions. While it might be true for some, my point is, they could/should educate themselves (it's not hard), and they likely are in a stage of false sense of security with their advisor.

The first misconception is that "optimizing" your investments (and I'm talking investments here, not tax planning) involves compromising other areas of your life, or adding worry. It's probably less work to set up a 2-3 ETF portfolio than it is to deal with an FA. As we often say, once you have enough knowledge to know if your FA is doing the right things, you have the knowledge to do it yourself. I just don't see how an FA relieves worry - now I have to worry about my investments and my FA! If people understood that the FA has no investment magic, they'd realize they haven't really accomplished anything, they just added a layer of bureaucracy, cost, and opacity, and very likely made it worse.

So an FA might be like a placebo for some, but at the usual 1% AUM (and likely under-performance from high fee funds to make it look impressive), that's an expensive placebo.

If I try for an analogy - Let's say you know someone who swears a certain expensive gas/oil additive improves his MPG, but we know that is not true, in fact it hurts his MPG, and might damage his car over the long run. Sure, we can say it's a "fact" that he believes it, but what good is that doing him? Shouldn't we try to educate him to the actual facts?

- ERD50

 

[OldShooter]

... If I try for an analogy - Let's say you know someone who swears a certain expensive gas/oil additive improves his MPG, but we know that is not true, in fact it hurts his MPG, and might damage his car over the long run. Sure, we can say it's a "fact" that he believes it, but what good is that doing him? Shouldn't we try to educate him to the actual facts?

Sure, but not to the point of browbeating him. IMO once you've made your point several times, you are no longer "educating," you are browbeating. Also BTW, wasting your time.

 

[mikes425]

"Originally Posted by ERD50 View Post
... If I try for an analogy - Let's say you know someone who swears a certain expensive gas/oil additive improves his MPG, but we know that is not true, in fact it hurts his MPG, and might damage his car over the long run. Sure, we can say it's a "fact" that he believes it, but what good is that doing him? Shouldn't we try to educate him to the actual facts?
Sure, but not to the point of browbeating him. IMO once you've made your point several times, you are no longer "educating," you are browbeating. Also BTW, wasting your time."

Hey from OP Mike. Look, I've not disagreed at all that an FA, for an educated investor - and I think I am- is a drag on a portfolio, and am down with the whole historical argument for the simplicity and savings of DIY. What's gotten lost was the point about how an hourly fee model offers a significant advantage vs the AUM model.

I said like, five times now, that I made an impulsive choice and want to revert to the hourly arrangement OR self management entirely. However I don't see major collateral damage in paying a FA hourly to go over things, a few times a year for a 2nd opinion. Over a decade that cost comes to a small fraction of the AUM approach--and its also why only a fraction of FAs go that route. The guy was doing me a favor in that respect, since the majority of his 90 or so clients are AUM.

Now I know that in your eyes I shouldn't even pay a penny to an FA, hourly or otherwise. I know you think I 'don't get' that concept. The 'deal' in this case was that I felt i needed some active oversight with the prospect of an extraordinary year ahead - and yeah, it IS - i don't care what anybody says. We're in some dire straits on multiple levels that none of you or I have seen in a lifetime. There is no precedent for this confluence of chaos. So that being said, I'll reiterate I have no problem having some added perspective from a CFP/former fund manager during this period. Yes, after some sense of stabilization is on the horizon, I'll ask him to switch back to hourly or otherwise go it on my own. Also, there actually are some benefits of having someone to assist with rebalancing and helping with principal preservation when transitioning into more reliance on dividend vs work income and other retirement planning assistance.

As far as DIY, If Vanguard's website wasn't so un-user-friendly and primitive compared to Schwab, I'd be more motivated to move my accounts there. Presumably I'd get some guidance from them for tax-efficiently downsizing and converting this PF to a simpler smaller # of funds in a moderate- conservative allocation that would likely provide equivalent or better return. I also never disputed that performance advantage. To be clear, on an hourly basis I spent like,less than 3 grand a year - if that prior to this. I never favored the AUM model, I said I don't like it, and there are way more hourly FAs today than ten years ago, for the very reasons you've mentioned.

So, I've only been on the AUM agreement for a couple of months. Like I also said, it's not easy to just turn on this guy and say I want to switch back this quickly. It's not like he's some predator. I respect the rapport we've had over 11 years and would at least like to be diplomatic about things.

 

[ERD50]

"Originally Posted by ERD50 View Post
... If I try for an analogy - Let's say you know someone who swears a certain expensive gas/oil additive improves his MPG, but we know that is not true, in fact it hurts his MPG, and might damage his car over the long run. Sure, we can say it's a "fact" that he believes it, but what good is that doing him? Shouldn't we try to educate him to the actual facts?
Sure, but not to the point of browbeating him. IMO once you've made your point several times, you are no longer "educating," you are browbeating. Also BTW, wasting your time."

Hey from OP Mike. ....

Now I know that in your eyes I shouldn't even pay a penny to an FA, hourly or otherwise. I know you think I 'don't get' that concept. ....

I think only 2 of my posts were directly to you, the one responding to "tough crowd", just my view that it was fact based, no reason to view it as tough or not. The 2nd was about how it appeared your managed portfolio under-performed significantly.

The rest were of a more general nature to some of the general comments about investing. I think you may be reading too much into them. I never said never spend a penny on an FA - if you can find one to give good advice where you need it, why not (though as I've said, when it comes to the investing part, I just don't see any value added opportunity)?

Sure, but not to the point of browbeating him. IMO once you've made your point several times, you are no longer "educating," you are browbeating. Also BTW, wasting your time.

Well, one man's 'browbeating' is just another man's dedication and persistence!

Seriously, I've found this forum to be a wealth of knowledge, and I hate to see questionable information go unchallenged, as some may assume that means acceptance.

-ERD50

 

[Markola]

As far as DIY, If Vanguard's website wasn't so un-user-friendly and primitive compared to Schwab, I'd be more motivated to move my accounts there.

Our Vanguard advisor just alerted us that a very major upgrade to the site is coming later this summer.

 

[Brat]

I agree with Mike (back a few postings). Even my DD and her husband met with a FA a couple years ago. Their investments are complex and the FA was familiar with that. I assume he also reviewed what estate issues they might have. A good FA gives a 360 review. The FA does not trade their portfolio.

 

[mikes425]

Our Vanguard advisor just alerted us that a very major upgrade to the site is coming later this summer.

That'd be great. Seriously overdue. Schwab knows how to create an intelligent user interface- intuitive and practical. VG would be wise to follow their lead. As it is now it's clunky and limited.

 

[VanWinkle]

Our Vanguard advisor just alerted us that a very major upgrade to the site is coming later this summer.

Thanks for the info, I am looking forward to the improvements. I have
never had a problem with the current website, but I know it lags behind
some of the competition.