Can someone make a living as a Boglehead financial advisor?

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Browser
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Can someone make a living as a Boglehead financial advisor?

Post by Browser »

I was sitting here mulling that if I were a younger man, I might want to consider becoming a financial advisor as my occupation. But if I were to pursue that career, I'd want to be a Boglehead advisor because those are the principles I believe are correct and ethical. However, could I make a decent living doing that? I figure that the typical run-of-the-mill financial advisor has the largest potential client base, consisting of people who are generally pretty unknowledgeable about investing and/or either don't have the will or the time to involve themselves and willing to let someone else handle their investing for them and bear the unredeemed costs therefrom. On the other hand, a Boglehead investment advisor would appeal to a different type of individual: someone who believes costs are critical and someone who probably is knowledgeable enough to be a DIY investor in the first place using a handful of index funds and B&H. How could I make a living off that client base? Is a young man/woman/s who wants to be a Boglehead investment advisor pretty much doomed before he/she starts? If so, how sad. What do you think? Is it a hopeless endeavor except for a few like Rick Ferri who manage to market to a large client base?
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Re: Can someone make a living as a Boglehead financial advis

Post by Call_Me_Op »

If you want to help someone, I would just tell them about the Bogleheads forum. If they are not interested enough to explore the forum on their own, I don't think they should be investing anyway.
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flyingaway
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Re: Can someone make a living as a Boglehead financial advis

Post by flyingaway »

How much do you plan to charge to direct a client's attention to this forum?
Miakis
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Re: Can someone make a living as a Boglehead financial advis

Post by Miakis »

A fee-based financial adviser advises clients about plenty of non-portfolio related subjects.

On the portfolio side of things, most people hitting a financial adviser up for advice probably wouldn't be ready to dive straight into Bogleheading. So it seems that the best bet would be to set clients up with portfolios that reflect a low-cost, index-based approach that are easy for them to take over and run on their own when they're ready.

The first step would be to explain your low-cost, indexing philosophy and then to let them know that you can guide them if/when they are ready to take it over.

I'm not sure what all of the costs are to register and insure oneself to be a securities adviser. You'd probably have to work a little harder to have a broader client-base in order to make a living, but it seems as though it could be done.

And while your ultimate goal may be to push your fledgling clients out of the nest, if your approach was successful, they would be appreciative and would become the source of ongoing referrals. And some clients will never be ready to leave the security of your oversight behind.
Beat The Street
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Re: Can someone make a living as a Boglehead financial advis

Post by Beat The Street »

It takes a lot of education and a lot of hours to convert clients to a Boglehead philosophy. This forum is a special group of investors, most investors do not see things the way people on this board do.

Obviously you can make a living doing it, Rick Ferri is doing it, Larry Swedroe is doing it, and a hundred others. Rick and Larry are published authors though, which helps. What value can you provide the type of client you describe to justify charging them fees?

Let's say you think a fair fee is 0.50% of the assets you manage, if you can gather $50 million under management that is $250,000 in revenue. I have seen advisors that bring in $50 million in 2 years and some don't have that after 15 years, it depends on how well you market yourself. If you charge by the hour, you will need a lot of appointments to make a living. I think charging a flat retainer fee similar to Evanson Asset Management and Cardiff Park Advisors makes a lot of sense, but again it takes time to build up a client base. Not everyone is going to hand you money because you are a low cost provider, you may be surprised how little most people consider fees when using financial planners.
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TareNeko
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Re: Can someone make a living as a Boglehead financial advis

Post by TareNeko »

I think fee based approach is better in this case. And the advise should include taxable and tax advantage space, how to allocate between them, how to transition from accumulating to being retired, tax loss harvesting, 401(k) to rIRA roll overs if you retire early, when to take SS, what are RMDs etc... More like teaching your customers what the Bogleheads wiki has, and set them up with a 3-4 fund portfolio and an IPS. Since this involves taxes which can be extraordinarily complicated, it is not very straight forward to give this advice.

Another difficulty is convincing people. I recently gave a speech at work during lunch time to show Boglehead ways to my co-workers. Some of them still think they can beat the s&p 500, because they actually beat it. It is very hard to convince them that we are riding the bull, and their method is not sustainable for 2-3 decades or when they accumulate large amounts of money.
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Re: Can someone make a living as a Boglehead financial advis

Post by Gropes & Ray »

Call_Me_Op wrote:If you want to help someone, I would just tell them about the Bogleheads forum. If they are not interested enough to explore the forum on their own, I don't think they should be investing anyway.
Most people should be investing, and most people should be investing Boglehead style. I don't think spending time on a financial forum should be a prerequisite. The best thing about this style of investing is that it really isn't much work and doesn't require in-depth knowledge.

It would be good if there were financial advisors who honestly said investing in a low cost index fund is the best method. But, in order to earn a living they would probably need to do a bit more than that, because that's about a 1 hour meeting with another thirty minutes a year to rebalance the portfolio.
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Re: Can someone make a living as a Boglehead financial advis

Post by Beat The Street »

Erhan wrote: Another difficulty is convincing people. I recently gave a speech at work during lunch time to show Boglehead ways to my co-workers. Some of them still think they can beat the s&p 500, because they actually beat it. It is very hard to convince them that we are riding the bull, and their method is not sustainable for 2-3 decades or when they accumulate large amounts of money.
This is very true. The Boglehead philosophy does not make sense to the average investor (which is why the average investor does a lot worse than us!).
“Never ask anyone for their opinion, forecast, or recommendation. Just ask them what they have—or don’t have—in their portfolio.” -Taleb
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Re: Can someone make a living as a Boglehead financial advis

Post by blueleaf »

My two cents:

- With the availability of cheap index funds and the various web-based tools available to manage them, portfolio design and management as a professional service is simply not able to deliver enough additional value ot justify anything but a tiny AUM fee. Using this business model and offering only asset management as a service, you either have: 1. very rich clients (Bernstein), 2. A huge number of clients (Ferri), or 3. Fees that are too high to justify the value that you can realisticaly expect to deliver (almost everyone else doing this).

- However, portfolio design is not the only (or the hardest or the most important) financial question for most ordinary people. The tough calls are things like: whether and when to buy a house; how much to consume and how to save (and when); how and when to shift their savings from riskier assets to safer assets; how and what kind of insurance to get, and when; how to optimize savings to reduce tax liability. Many people also struggle with setting financial goals, or collaborating with a partner/spouse on household finances.

- I think a lot of people (certainly not all, but a lot) could benefit from the advice of a trusted expert from time to time on these topics. Doing so would help not only with improved decision-making, but also with instilling a sense of confidence and control over one's financial future. Portfolio design is one area of work among many. The key skill sets for the planner include not only expertise in financial instruments (the easy part), but also client education and coaching.

- I think that the value proposition of such a service is similar to that offered by a personal tax accountant, and the relationship and pricing model should be similar. One-time fee for service, or hourly. As with tax accounting, some people need one frequently, many people every once in a while, and many people never. It all depends on their circumstances and aptitude.

- A major barrier to this model is that margins are thin, and don't allow for a lot of time spent marketing to drum up new business. Ideally, the financial planner should get most of his or her business through referrals. Either he or she could be attached to a larger organization that offers other valuable services (such as Vanguard!), or should get referrals from people in allied fields, such as accountants.

- In addition to one-one-one planning services, this type of advice could be offered in a group workshop format to improve the efficiency.


I think (hope?) AUM pricing is a dinosaur, and its days are numbered. It makes no sense to pay someone thousands of dollars every year when what you really need is a couple of hours of advice every 5 years or so, which is probably what would benefit most people. But I'd like to think there's a place for a financial planner with integrity. I know people who are making a living working this way, though it's certainly not a way that anyone's going to get rich. I also know smart, capable, responsible people who want and need this kind of information, and are realistically never going put in the time necessary to get it from Bogleheads.org.
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Re: Can someone make a living as a Boglehead financial advis

Post by technovelist »

I would say that just being able to answer SS questions correctly would be a valuable contribution, for which someone should be able to charge a reasonable fee. I'm pretty good with complex stuff, but SS is really ridiculously difficult to understand.
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Re: Can someone make a living as a Boglehead financial advis

Post by neurosphere »

Browser wrote: On the other hand, a Boglehead investment advisor would appeal to a different type of individual: someone who believes costs are critical and someone who probably is knowledgeable enough to be a DIY investor in the first place using a handful of index funds and B&H. How could I make a living off that client base? Is a young man/woman/s who wants to be a Boglehead investment advisor pretty much doomed before he/she starts? If so, how sad. What do you think? Is it a hopeless endeavor except for a few like Rick Ferri who manage to market to a large client base?
We'll, I have personal insight, as I am attempting to do just that, be a truly Boglehead advisor. I only work hourly, or for a fixed-fee (although my website advertises AUM on the off chance someone with a 50M portfolio wants to dump it into my lap :greedy ).

I'm happy to give additional details about my experience later on (not enough time now), but I really hate to do anything which seems to be self-promoting, especially on this site. And that describes one of the problems. In order to succeed with ANY advisor job (Boglehead or not), one needs to constantly market, self-promote, etc. If that's not one's strong point, no amount of education or knowledge is going to help a fledgling business off the ground.

Also, I'm attempting to do this part-time for now, and transition out of medicine into full-time advising. But I think that's a hurdle AND a benefit. I don't need for the advising work (yet) to pay the rent, so can remain pure to an hourly structure, and also only take clients who I think I can best help and I who I feel I would enjoy helping, etc. On the other hand, I find I'm doing a lot of pro-bono work (I refuse to charge friends or co-workers), and also deeply discount my rates because I really really feel bad charging folks for things I've been doing for 10+ years for "free". My wife says I need to lose that attitude FAST. :mrgreen: Also, because I have another profession available to me, I'm perhaps not as "hungry" as I would be if I were 30 years old with 3 kids, and that of course impacts the success of any business that's saturated. One has to really really work around to clock to get a business off the ground, particularly a "Boglehead" financial advisor. It's a product which is GREAT, but no one knows they need it. :(

I have dozens of anecdotes/comments from clients who have chosen not to hire me after talking to me, as well as from those who have, which illustrates what long-time Bogleheads already know: 1) people hate to write checks, 2) hate to be "on the clock, 3) are lured by those who claim they can "beat the market" 4) equate the fancy building or office with success and wealth 5) have very little grasp of the compounding of fees over time, etc. The positive feedback and referrals from existing clients is heartening, and evidence that some do "get it", but I feel it's a going to be a long-long road. Any suggestions? :D

Neurosphere
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Re: Can someone make a living as a Boglehead financial advis

Post by livesoft »

@neurosphere, whenever I see the phrase "piece of mind", I think of you. Maybe you can use that in your marketing somehow.

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Gropes & Ray
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Re: Can someone make a living as a Boglehead financial advis

Post by Gropes & Ray »

Neurosphere,

When I'm sitting in my office, hating the practice of law, I often dream that I went to medical school instead. Part of me feels a little better that maybe the grass isn't greener over there if you're looking at becoming an advisor. But the other part of me is sad.

Sorry for the off-topic post.
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Re: Can someone make a living as a Boglehead financial advis

Post by neurosphere »

livesoft wrote:@neurosphere, whenever I see the phrase "piece of mind", I think of you. Maybe you can use that in your marketing somehow.

"Get peace of mind from a piece of Neurosphere's mind."
Ha, I'll have to see how I can work that in. :) Although, honestly, I have found some success with "marital counseling". That is, when there are couples who have very different attitudes/fears/etc about money that it affects not only their financial security, but their relationship. Dealing with the psychological aspects is one area where my medical background has certainly been helpful. I feel I give couples "peace of mind" after they meet with me. Maybe that should be my niche? I think I'd have to write a book first.

Anyway, getting back to the OPs comments...

I think there are indeed many Boglehead financial advisors. They are out there. They are on these message boards occasionally as well. I don't mean the Ferri types with giant financial firms, but smaller firms or individuals whose hearts and heads are both in the right place. But as a percentage of all advisors, well, we know that they are very few and far between. I'm not sure there is as good solution to this.
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Re: Can someone make a living as a Boglehead financial advis

Post by Browser »

Thanks for your post neurosphere. Exactly what I hoped, that someone who is "walking the walk" could chime in. There are a lot more people out there who need help with their investing than know they need help, it appears. You begin to wonder if most investors get just what they deserve from their broker-advisors.
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Re: Can someone make a living as a Boglehead financial advis

Post by bschultheis »

Thanks for the comments Browser and Neurosphere.

I can tell you from personal experience that there has never been a better time, (at least in the last 35 years) to be a "Boglehead" advisor. Investors are absolutely screaming for help, wanting clarity on how to get from point A to Point B. To answer your question, yes, a person can make a living as a Boglehead advisor, and a good one at that, as a ton of advisors across the country do every day. Although there are a few Boglehead advisors who contribute greatly to this forum and also use this forum for marketing purposes, my guess is that 98 percent of Boglehead advisors are probably not even familiar with this website.

A few points to consider in pondering a career as a Boglehead Advisor. . .

1. You have to live your career with the passion you believe in. As a Boglehead advisor every day you have an opportunity to have a profoundly positive impact on the lives of others.
2. You are at the forefront of a changing industry that is beginning to value and reward financial planning and discount things like stock selection.
3. There are two ways to look at fees clients pay you. One way is to treat it as a detraction from a gross return they could have captured working alone. Another way is to look at the fee is as one of the best investments clients will make in their lifetime, because you have helped them to invest in a tax efficient way, and make the right decisions at the right time instead of the wrong decisions at the wrong time, as many investors are prone to do. i.e., you keep them from becoming a Dalbar Statistic.
4. In creating a marketing plan for your new business, the goal is to get the Boglehead message (or passive message, or DFA message, or Coffeehouse message, or whatever you want to call it message) in front of potential clients again and again and again. I have discovered (from personal experience) that the first time the message is received it sails over their head at 30,000 feet. By the 40th time, they are slapping themselves on the forehead, saying , "Why didn't I think of that 15 years ago?"
6. Nick Murray says that +60% of Investors are unhappy with their current advisor, but don't have an alternative to turn to and I believe him. YOU are the alternative!
5. The Boglehead forum is wonderful and unique, and folks are terrific as I have found from attending +6 conventions. But the Boglehead group is NOT indicative of investors in general, and for a good many investors, the solution of getting from Point A to Point B is not an internet website.

For anyone who is interested in pursuing an incredible career, I would highly encourage it. I frequently get phone calls and e mails from folks across the country who are interested in a career in financial planning (talked to 3 today), and want to know many of the questions you asked (They want to know how I square my book with my career). There is so much demand from investors needing advisors that I plan on holding a webinar in 2015 to share a few thoughts on how to get started in the business and the benefits of becoming a Boglehead Advisor.


Bill Schultheis
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Re: Can someone make a living as a Boglehead financial advis

Post by Dave55 »

Bill, If they read your book, "The Coffeehouse Investor", 30,000 feet, 40th time and 15 years will be reduced to 200 feet, 3rd time and less than a year. Thanks for that gem of a book!
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Re: Can someone make a living as a Boglehead financial advis

Post by Watty »

Is a young man/woman/s who wants to be a Boglehead investment advisor pretty much doomed before he/she starts? If so, how sad. What do you think? Is it a hopeless endeavor except for a few like Rick Ferri who manage to market to a large client base?
There are a number of possibilities for something like this;

1) Vanguard has a staff financial advisors that provide free or moderate cost financial advice.

2) There have been a number of posts with people trying to figure out how to find someone to provide financial management when;
a) They might not be able to manage their own accounts when they are older.
b) A spouse might not be able to manage the money if the survive their more knowledgeable spouse.

3) Many 401K companies have financial advisors available to help employees with their retirement accounts.
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Re: Can someone make a living as a Boglehead financial advis

Post by carolinaman »

The scope of a good financial adviser should be much broader than just merely determining the appropriate investment strategy and funds. There are lots of other things to consider: when to take SS, proper RMD strategy, tax strategies, long term care or self insure, saving for kids' college, and many, many more. A good adviser should be adept at those things and also recognize when other expert advice may be needed: i.e. CPA, estate plans, etc. Also, there are life events that cause one to reevaluate their investment plans like birth of children, retirement, loss of spouse, etc. One of the greatest values of a good financial adviser is to help provide discipline to their clients' investment plans. We all know that investors often do not stay the course, buy and sell at the wrong times, and generally need encouragement when the market gets scary like it did in 2008. Advisers can provide the encouragement and assurance investors need to avoid doing stupid things at the wrong time.

If you look at this business venture as merely providing investment recommendations, you will likely be challenged to make this a viable business. OTOH, if you look at it in a broader context similar to what I described, I think it can be a viable and enjoyable career.

Bogleheads are mostly DIY types and abhor high fees. However, there can be a lot of value in providing these services and I would not be too timid in charging a reasonable professional fee for these services. People expect to pay a high fee to attorneys and doctors. Financial advisers can provide high value and should be fairly compensated when they do.
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Re: Can someone make a living as a Boglehead financial advis

Post by aguyyo »

Making a living as a financial adviser is 95% being able to sell and 5% actually knowing what you're doing. The name of the game is getting assets under management not eeking out an extra fraction of return because you're a financial wizard.
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Re: Can someone make a living as a Boglehead financial advis

Post by bschultheis »

johnep wrote:The scope of a good financial adviser should be much broader than just merely determining the appropriate investment strategy and funds. There are lots of other things to consider: when to take SS, proper RMD strategy, tax strategies, long term care or self insure, saving for kids' college, and many, many more. A good adviser should be adept at those things and also recognize when other expert advice may be needed: i.e. CPA, estate plans, etc. Also, there are life events that cause one to reevaluate their investment plans like birth of children, retirement, loss of spouse, etc. One of the greatest values of a good financial adviser is to help provide discipline to their clients' investment plans. We all know that investors often do not stay the course, buy and sell at the wrong times, and generally need encouragement when the market gets scary like it did in 2008. Advisers can provide the encouragement and assurance investors need to avoid doing stupid things at the wrong time.

If you look at this business venture as merely providing investment recommendations, you will likely be challenged to make this a viable business. OTOH, if you look at it in a broader context similar to what I described, I think it can be a viable and enjoyable career.

Bogleheads are mostly DIY types and abhor high fees. However, there can be a lot of value in providing these services and I would not be too timid in charging a reasonable professional fee for these services. People expect to pay a high fee to attorneys and doctors. Financial advisers can provide high value and should be fairly compensated when they do.
For anyone considering becoming a Boglehead Financial Advisor, I would strongly encourage you to review the thoughtful post of johnep. His comments do a great job of articulating the changing role of providing financial advice to investors.

If you are thinking of building a business centered largely around providing investment recommendations, you are likely to fail. If your focus is in providing wisdom on financial planning/wealth management issues from A to Z, you will succeed beyond your wildest expectations - if only because there is such a demand for that.

Jason Zweig's WSJ column last weekend, centered largely around an interview with the esteemed Charlie Ellis, focused on the same.
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Re: Can someone make a living as a Boglehead financial advis

Post by MIretired »

You know? I wish there'd be ads swishing through my email in-boxes of these planners, rather than the ones I get that go immediately elsewhere. I wonder if there could be an inexpensive network that could put ads on Google and financial news sites. Like Vanguard has. And get email addresses to solicit?!?!?
You know. Selling a system, methodology, package deal. ... not a one of a kind, make you rich!! deal!!

I'm quite sure most individuals will pay a cost without better quality help.
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Re: Can someone make a living as a Boglehead financial advis

Post by bs010101 »

Question for Bill and Neurosphere... How did you build up the expertise in the non-investing areas? Mentor? Lots of reading? I have been thinking about going in this direction some day. I recently completed the CFA program which is great for the concepts but doesn't get into a lot of the specifics, particularly US-specific tax and other issues.
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Re: Can someone make a living as a Boglehead financial advis

Post by LadyGeek »

FYI - bschultheis is Bill Schultheis.

Also, be sure to note the difference between an Investment adviser and Financial planner.

"Financial advisor" is used interchangeably here, which can refer to either.
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Re: Can someone make a living as a Boglehead financial advis

Post by david99 »

I guess that the hard part is developing a large enough client base, since you would probably charge .30% or .50% to manage their money. It's too bad, because a Boglehead financial advisor could help people in so many ways --- educating them with behavioral finance issues, insurance, large purchases, financing college, social security, annuities, retirement .... I often see people making big mistakes in these areas and I just shake my head.

I guess that one way to develop a client base is to start teaching classes at your local community learning centers. It probably also helps if you write a book. I know that we have many Boglehead type books, but it probably gives you more credibility if you have a book with your name on it -- even if you just self publish.
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Re: Can someone make a living as a Boglehead financial advis

Post by TravelerMSY »

Aren't a lot of advisors struggling to make ends meet at 1% AUM? Less than that is going to be tough, especially if you're also only selling low-fee products.
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