The benchmark would be what the DIY investor would have done without an advisor.
....
A lot of DIY investors do not know what they are doing. I used to be one myself.
Sure, a totally uninformed investor
might well be better off with the kind of average FA that an uninformed investor might pick.
But I think that is not a useful way to look at it - a DIY home repair analogy:
A) Say I take a totally uninformed approach to some DIY project at home. Being uninformed, I screw it up, and it ends up costing me more to have a pro fix my mistakes plus do the original job than if I just called a pro at the start.
B) I go to the Internet, and find some simple DIY approach to the project. It is within my capabilities, and has a few precautions, and armed with this knowledge I complete the DIY and save $$$$.
Now, does scenario A tell us we should not tackle DIY? Or does it say, try to learn a little first, and then see if DIY makes sense for you?
When I Googled "simple DIY retirement portfolio", the first hit was to a BogleHeads wiki on a three-fund portfolio. This isn't rocket science.
Here is what I think everybody should do: If you want to use an advisor, then use an advisor. If you want to DIY, then DIY.
But don't try to convince me that one is better than the other.
Of course anyone can do what they want. But a lot of people on this forum try to help others out, and we get help in return. And I think it is fair to say there are very few cases where an FA is going to really help someone. An uninformed person will most likely end up with an FA charging 1%, and get put in some higher fee funds.
If they are looking to draw $35,000 for themselves, at a 3.5% "SWR", then an added 1% annual fee requires ~ $1,300,000 versus $1,000,000 for DIY.
Saving an additional 30% in NW is a big deal - that is going to be tough for an FA to overcome. Or cutting spending from $35,000 down to $25,000 to support that $10,000 to the FA is a big deal. We are not talking small potatoes, and I was conservative by not adding the typical added .5%, .75% or more for the expenses on those FA recommended funds.
-ERD50