Are financial advisors worth it?

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Raspberry-503
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Joined: Sat Oct 03, 2020 6:42 am

Are financial advisors worth it?

Post by Raspberry-503 »

I've got scattered assets/accounts worth about $1.5M, once active and one inactive 401k, a rollover IRA, an HSA, and about 1/3 of it in an SP500 index fund with a hefty expense ratio. I need to rebalance since that SP500 puts me overweight in the US large-cap stock, and I want to lower fees by investing mostly in EFTs.

If I had all cash right now, I would feel very comfortable building a portfolio out of a handful of EFTs for a mix of us and international stock, us and international bonds, and maybe 8-10% alternatives like Gold and real estate. My problem is that I'm worried I'm going to screw it up consolidating, especially from a tax efficiency point of view.

So I'm thinking about involving a financial advisor. as far as I know, the roboAdvisors like Betterment will not help me with the consolidation of assets into their account, and I'm not sure what value they add once it's set up. I don't need them to rebalance every year or quarterly, so I think their main value is Tax Loss Harvesting? does that make it worth the fee they are charging?

I've interviewed advisors from PersonalCapital, Vanguard and Facet Wealth. I love that PC and Facet say they know exactly what to do and transfer assets and will look at the whole portfolio over taxable and non-taxable accounts to make recommendations, but it feels like they are taking over the investment. For example, PersonalCapital has you move your assets to Pershing, and they have their own basket of stocks they manage on top of EFTs, so it feels they are setting you up to become dependent on them. And they take a 0.8% fee forever. On $1.5M that's $12K a year!

So should I find someone that I can pay once this year to help me consolidate efficiently and be on my own afterwards, or do the likes of PERsonalCapital really pay for themselves over time?
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Brianmcg321
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Re: Are financial advisors worth it?

Post by Brianmcg321 »

You don’t need an advisor necessarily.

If you just call Vanguard or Fidelity, they will handle all of the rollover/consolidation stuff for you.

Then just invest the money to your asset allocation.
Rules to investing: | 1. Don't lose money. | 2. Don't forget rule number 1.
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MillennialFinance19
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Re: Are financial advisors worth it?

Post by MillennialFinance19 »

You have already done enough research to go solo. Call VG or Fidelity and start talking to them. They’ll guide you through the consolidation process. Once you’re done with that, the folks here can give you sound fund recommendations!
For the love of God, stick to your plan!!!
Soon2BXProgrammer
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Re: Are financial advisors worth it?

Post by Soon2BXProgrammer »

I am a firm believer that most people would be better off, once they are seriously acquiring wealth to pay someone for a "financial plan"

I don't think most people need help with "investment management" (what most advisors do or all the robo's do).

Financial plans help find holes in your current strategy, and help answer the question about will I have enough, and should I be doing something different.
dbr
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Re: Are financial advisors worth it?

Post by dbr »

A properly self managed portfolio is better than an advisor properly managed portfolio which is handicapped by the extra cost and may involve unneeded complexity.

An investor who makes big mistakes on their own is much better off with an advisor who does not make big mistakes. Some investors may be in a situation where they cannot easily do their own management. It can be difficult to extract oneself from an advisor managed portfolio.

Too many advisors are not honest advisors but rather salesmen that sell the investors expensive and sometimes inappropriate investments that cost the investor a terrible penalty in excess costs and other problems, often problems that are difficult to reverse, such as bad annuities.

This forum is committed to arriving at the first condition above and avoiding the third. The second may still be valid for some people if such an advisor/investment manager can be found.
jimkinny
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Re: Are financial advisors worth it?

Post by jimkinny »

I would pay Vanguard's PAS fee of 0.3% for the transition then drop the service. I would do this only if your concerns are great enough to warrant the cost and you don't trust yourself or don't want to spend the time to learn how to handle the transition on your own.

You might want to buy a Boglehead Guide book or two (Investing/Retirement) available on Amazon. The books are convenient because they contain a lot of information in a concise package. Very inexpensive.
Last edited by jimkinny on Sat Oct 03, 2020 8:20 am, edited 1 time in total.
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Cyclesafe
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Re: Are financial advisors worth it?

Post by Cyclesafe »

Most "financial advisors" offer one-variable-at-a-time allegedly optimized cookie-cutter heuristics that approximate their way to a strategy that will invariably be foreseeably suboptimal overall in hindsight.

Stay the course with an asset allocation you can stick with through thick and thin, using low expense index funds located in either taxable or tax favorable accounts depending on your (tax, returns, inflation, etc.) expectations for the future. Monitor Bogleheads.

Stop listening to the financial noise, watch your spending (invest the residual), and don't get divorced.
"Plans are useless; planning is indispensable.” (Dwight Eisenhower) | "Man plans, God laughs" (Yiddish proverb)
Kelrex
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Re: Are financial advisors worth it?

Post by Kelrex »

Are financial advisors worth it?

Well, worth what? What value exactly are you looking to get from a service?

Advice consolidating your accounts? Advice on which financial products to buy moving forward? Tax advice? Estate planning?

Figure out exactly what you need before deciding to pay someone for their services. Many FAs know little more than how to sell mutual funds. Know what you need first, and then find someone who has the actual skills you require, if any.
Xrayman69
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Re: Are financial advisors worth it?

Post by Xrayman69 »

Kelrex wrote: Sat Oct 03, 2020 8:17 am Are financial advisors worth it?

Well, worth what? What value exactly are you looking to get from a service?

Advice consolidating your accounts? Advice on which financial products to buy moving forward? Tax advice? Estate planning?

Figure out exactly what you need before deciding to pay someone for their services. Many FAs know little more than how to sell mutual funds. Know what you need first, and then find someone who has the actual skills you require, if any.
+1. Remember when we all had to go to travel agents......
Jack FFR1846
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Re: Are financial advisors worth it?

Post by Jack FFR1846 »

It sounds like your current fear is that you won't have proper funds in the right accounts. This is by far the easiest part of investing and you can certainly do it yourself. Here's my boiled down manual:

Total US Stock fund in taxable (or even BRK/b, if you want)

Total US Stock fund, total US bond fund and international stock fund in your biggest tax advantaged account (to give you a place to rebalance).

In your other tax advantaged accounts......any of the above.

If you wish to rebalance, determine what has to happen to trigger the rebalance. Do you want to do it on your birthday? First trading day of the year? Autumnal equinox? When you go 5% away from target? Write that down. When it happens, rebalalance to target numbers.

Or don't rebalance and simply add whatever is needed with deposits to push you closer to target.

You can send that $12k check to the Bogle center for financial literacy.
Bogle: Smart Beta is stupid
livesoft
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Re: Are financial advisors worth it?

Post by livesoft »

Raspberry-503 wrote: Sat Oct 03, 2020 7:12 am...
[...]
My problem is that I'm worried I'm going to screw it up consolidating, especially from a tax efficiency point of view.

[...]
And they take a 0.8% fee forever. On $1.5M that's $12K a year!
[...]
It is very unlikely that you would screw it up yourself to the tune of $12K a year. And certainly not year after year after year after year. That is, unless you pay an advisor that amount for not doing it yourself.
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tibbitts
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Re: Are financial advisors worth it?

Post by tibbitts »

Soon2BXProgrammer wrote: Sat Oct 03, 2020 7:52 am I am a firm believer that most people would be better off, once they are seriously acquiring wealth to pay someone for a "financial plan"

I don't think most people need help with "investment management" (what most advisors do or all the robo's do).

Financial plans help find holes in your current strategy, and help answer the question about will I have enough, and should I be doing something different.
This the correct answer. This forum can help, but it's difficult to post enough information and ask every question that needs to be asked, especially with regards to some nuances in tax and estate planning. Unfortunately most "advisers" seem to be focused on the easiest piece of the equation, which is choosing investment products.
pkcrafter
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Re: Are financial advisors worth it?

Post by pkcrafter »

Raspberry-503 wrote: Sat Oct 03, 2020 7:12 am I've got scattered assets/accounts worth about $1.5M, once active and one inactive 401k, a rollover IRA, an HSA, and about 1/3 of it in an SP500 index fund with a hefty expense ratio. I need to rebalance since that SP500 puts me overweight in the US large-cap stock, and I want to lower fees by investing mostly in EFTs.

If I had all cash right now, I would feel very comfortable building a portfolio out of a handful of EFTs for a mix of us and international stock, us and international bonds, and maybe 8-10% alternatives like Gold and real estate. My problem is that I'm worried I'm going to screw it up consolidating, especially from a tax efficiency point of view.

Well, you are on an investment sight where knowledgeable members can help you untangle the mess and optimize your portfolio, so I suggest you give this a chance before involving an advisor. The first thing you need to do is post your information as suggested in this link: It may take a little work, but it will help you get an overall view of where you are.

viewtopic.php?f=1&t=6212

So I'm thinking about involving a financial advisor. as far as I know, the roboAdvisors like Betterment will not help me with the consolidation of assets into their account, and I'm not sure what value they add once it's set up. I don't need them to rebalance every year or quarterly, so I think their main value is Tax Loss Harvesting? does that make it worth the fee they are charging?

Hold off until you have utilized the information here, and then consider an advisor if needed. If you do want an advisor, hire one on an hourly basis. Not cheap, but if it helps you with a plan then it's necessary.

I've interviewed advisors from PersonalCapital, Vanguard and Facet Wealth. I love that PC and Facet say they know exactly what to do and transfer assets and will look at the whole portfolio over taxable and non-taxable accounts to make recommendations, but it feels like they are taking over the investment. For example, PersonalCapital has you move your assets to Pershing, and they have their own basket of stocks they manage on top of EFTs, so it feels they are setting you up to become dependent on them. And they take a 0.8% fee forever. On $1.5M that's $12K a year!

Sure, that's exactly what will happen if you decide to put your assets under management.

So should I find someone that I can pay once this year to help me consolidate efficiently and be on my own afterwards, or do the likes of PERsonalCapital really pay for themselves over time?

There is no substitute for learning and understanding your own financial situation.

https://www.bogleheads.org/wiki/Getting_started

Look through the links and make a new post showing your current assets and members will help you get on track.

Paul
Last edited by pkcrafter on Sun Oct 04, 2020 1:29 pm, edited 1 time in total.
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KingRiggs
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Re: Are financial advisors worth it?

Post by KingRiggs »

Would you like it if I sent you a check for $15,000? :D

Now, how about you send ME a check for $15,000? :x

Now picture sending me a check for $15,000...every year...year after year...for the rest of your life... :twisted:

Now increase that annual amount as your portfolio grows... :annoyed

This is what hiring a 1%-annual-fee advisor is like with at $1.5M portfolio. Why not invest that money (or a whole lot less) in your own financial education and keep that annual check for yourself? :moneybag
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Swansea
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Re: Are financial advisors worth it?

Post by Swansea »

A friend of mine pays a 1% annual fee to Fidelity to manage his investments. He and I have the same asset allocation, 60/40 stock/bond. I hold mostly index funds and one actively managed fund.
We compared performance over the past 10 years. We were within .1% of each other. Now if you factor in the thousands of dollars in fees that he paid, I come out ahead.
michaelingp
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Re: Are financial advisors worth it?

Post by michaelingp »

Raspberry-503 wrote: Sat Oct 03, 2020 7:12 am
So should I find someone that I can pay once this year to help me consolidate efficiently and be on my own afterwards, or do the likes of PERsonalCapital really pay for themselves over time?
I think you'll have a hard time finding someone affordable you can pay once. They mostly seem to want to have a "relationship". But that "someone" might be right here for free. If you don't value your privacy that much, just post what you currently have in which accounts, and the basis of the assets in the taxable accounts, and I would bet you that the experts here will answer all your questions. They'll also want to know a bunch of private stuff like your income, marital status, tax bracket, years to retirement, etc., but I've seen them do amazing analyses of peoples' investments.
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ruralavalon
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Re: Are financial advisors worth it?

Post by ruralavalon »

Raspberry-503 wrote: Sat Oct 03, 2020 7:12 am I've got scattered assets/accounts worth about $1.5M, once active and one inactive 401k, a rollover IRA, an HSA, and about 1/3 of it in an SP500 index fund with a hefty expense ratio. I need to rebalance since that SP500 puts me overweight in the US large-cap stock, and I want to lower fees by investing mostly in EFTs.

If I had all cash right now, I would feel very comfortable building a portfolio out of a handful of EFTs for a mix of us and international stock, us and international bonds, and maybe 8-10% alternatives like Gold and real estate. My problem is that I'm worried I'm going to screw it up consolidating, especially from a tax efficiency point of view.

So I'm thinking about involving a financial advisor. as far as I know, the roboAdvisors like Betterment will not help me with the consolidation of assets into their account, and I'm not sure what value they add once it's set up. I don't need them to rebalance every year or quarterly, so I think their main value is Tax Loss Harvesting? does that make it worth the fee they are charging?

I've interviewed advisors from PersonalCapital, Vanguard and Facet Wealth. I love that PC and Facet say they know exactly what to do and transfer assets and will look at the whole portfolio over taxable and non-taxable accounts to make recommendations, but it feels like they are taking over the investment. For example, PersonalCapital has you move your assets to Pershing, and they have their own basket of stocks they manage on top of EFTs, so it feels they are setting you up to become dependent on them. And they take a 0.8% fee forever. On $1.5M that's $12K a year!

So should I find someone that I can pay once this year to help me consolidate efficiently and be on my own afterwards, or do the likes of PERsonalCapital really pay for themselves over time?
In my opinion an investment manager, charging a percentage of assets under management (AUM), is not worth it.

For investing ideas you could simply post your financial information on Bogleheads, in this format "Asking Portfolio Questions".

Yes. You could look for a planner who can help you set up a portfolio for a one-time fee, and review annually if desired.

This service can help you locate a fee-only planner in your area: "Advice-Only Search and Screening".

Here are links you can use to try to locate a fee-only advisor:
1) www.napfa.org; and
2) www.garrettplanningnetwork.com.
Last edited by ruralavalon on Sat Oct 03, 2020 12:13 pm, edited 1 time in total.
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Leif
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Re: Are financial advisors worth it?

Post by Leif »

I did have a financial advisor. He provided his service at a low fixed cost. I hired him for 3 major reasons.

1. I wanted access for funds from DFA. They were only available through an advisor that a relationship with DFA.

2. Someone to bounce ideas around.

3. If something happened to me I wanted a backup for my spouse.

I had no problem in determining my desired AA nor asset location. I had done a lot of research. I got through the .COM bust without much problem.

However, some people, maybe even most people, and you need to be really honest on this, have difficultly when times get tough. If you fall in this category a continuing engagement with an advisor can prove to be very valuable.

Why did I leave my advisor?

1. Response to requests for ideas/action were slow.

2. Because of #1 I figured spousal help was not going to go well.

3. I found the Bogleheads an excellent place to bounce ideas.

4. Other, less expensive funds, for my desired asset categories, were becoming available.

5. Save money on the advisor fees.
Sweetbriar
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Re: Are financial advisors worth it?

Post by Sweetbriar »

Raspberry-503 wrote: Sat Oct 03, 2020 7:12 am I've got scattered assets/accounts worth about $1.5M, once active and one inactive 401k, a rollover IRA, an HSA, and about 1/3 of it in an SP500 index fund with a hefty expense ratio. I need to rebalance since that SP500 puts me overweight in the US large-cap stock, and I want to lower fees by investing mostly in EFTs.

If I had all cash right now, I would feel very comfortable building a portfolio out of a handful of EFTs for a mix of us and international stock, us and international bonds, and maybe 8-10% alternatives like Gold and real estate. My problem is that I'm worried I'm going to screw it up consolidating, especially from a tax efficiency point of view.

So I'm thinking about involving a financial advisor. as far as I know, the roboAdvisors like Betterment will not help me with the consolidation of assets into their account, and I'm not sure what value they add once it's set up. I don't need them to rebalance every year or quarterly, so I think their main value is Tax Loss Harvesting? does that make it worth the fee they are charging?

I've interviewed advisors from PersonalCapital, Vanguard and Facet Wealth. I love that PC and Facet say they know exactly what to do and transfer assets and will look at the whole portfolio over taxable and non-taxable accounts to make recommendations, but it feels like they are taking over the investment. For example, PersonalCapital has you move your assets to Pershing, and they have their own basket of stocks they manage on top of EFTs, so it feels they are setting you up to become dependent on them. And they take a 0.8% fee forever. On $1.5M that's $12K a year!

So should I find someone that I can pay once this year to help me consolidate efficiently and be on my own afterwards, or do the likes of PERsonalCapital really pay for themselves over time?

Rick Ferri CFA, was an excellent choice for us! rickferri.com
Mando19
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Re: Are financial advisors worth it?

Post by Mando19 »

I think a financial advisor is a very good idea and will save you money. A fee only advisor should cost you less than $1500/yr, they don’t touch the assets, they only give you advice.
EvelynTroy
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Re: Are financial advisors worth it?

Post by EvelynTroy »

I understand your dilemma - each person's situation is different for a whole host of reasons. Personally, I don't think a recommendation for or against employing an advisor is easy to make.
What I'll suggest won't cost you anything - is an exercise in organizing your thoughts, ideas, assets, goals, etc. The first two topics on this forum is a wonderful learning and help exercise.
It takes time to work through the suggested format to ask questions, but once completed not only will you get good advice, but you will see things clearly for yourself. At least that was my experience. In fact if you employ a good fee-only fiduciary advisor you will need to gather much of this same information anyway.

I think the above exercise is as important as developing your Investor Policy Statement (ISP). For me writing things down helps clear my head and give me a good direction.

Hope this helps. Evelyn
backpacker61
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Re: Are financial advisors worth it?

Post by backpacker61 »

OP, it seems much of your concern is about the consolidation process.

Any of the large brokerage/mutual fund houses (Charles Schwab, eTrade, Fidelity, Merrill Edge, TD Ameritrade, Vanguard) have "concierge" departments that can walk you through this and you do NOT have to sign up for any "advisory" relationship to have access to their "concierge " services. Initially, transfer "in kind" so that nothing is sold and there will be no tax consequences.

I consolidated several mutual fund accounts at, rolled over a pension lump sum to, and transferred an H&R Block brokerage account to Vanguard over the years, but have never engaged them for any sort of advisory relationship. I'm merely a generic "account holder".

The other providers listed will be similar; some may be even better at the customer service aspect.
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FoolStreet
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Re: Are financial advisors worth it?

Post by FoolStreet »

Raspberry-503 wrote: Sat Oct 03, 2020 7:12 am I've got scattered assets/accounts worth about $1.5M, once active and one inactive 401k, a rollover IRA, an HSA, and about 1/3 of it in an SP500 index fund with a hefty expense ratio. I need to rebalance since that SP500 puts me overweight in the US large-cap stock, and I want to lower fees by investing mostly in EFTs.

If I had all cash right now, I would feel very comfortable building a portfolio out of a handful of EFTs for a mix of us and international stock, us and international bonds, and maybe 8-10% alternatives like Gold and real estate. My problem is that I'm worried I'm going to screw it up consolidating, especially from a tax efficiency point of view.

So I'm thinking about involving a financial advisor. as far as I know, the roboAdvisors like Betterment will not help me with the consolidation of assets into their account, and I'm not sure what value they add once it's set up. I don't need them to rebalance every year or quarterly, so I think their main value is Tax Loss Harvesting? does that make it worth the fee they are charging?

I've interviewed advisors from PersonalCapital, Vanguard and Facet Wealth. I love that PC and Facet say they know exactly what to do and transfer assets and will look at the whole portfolio over taxable and non-taxable accounts to make recommendations, but it feels like they are taking over the investment. For example, PersonalCapital has you move your assets to Pershing, and they have their own basket of stocks they manage on top of EFTs, so it feels they are setting you up to become dependent on them. And they take a 0.8% fee forever. On $1.5M that's $12K a year!

So should I find someone that I can pay once this year to help me consolidate efficiently and be on my own afterwards, or do the likes of PERsonalCapital really pay for themselves over time?
Why not roll-in the inactive 401k and the rollover IRA into your current active 401k account and manage them altogether?
coffeeblack
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Re: Are financial advisors worth it?

Post by coffeeblack »

If you want. Pay an advisor a one time fee to develop a plan. Pay an advisor an hourly fee from that point on to help you adjust and stay with the plan as needed. Learn about investing while putting the plan in action. At some point along the way you will have less need for the advisor. In my opinion it is a good idea to have your plan reviewed once in a while by someone who has more experience than yourself. That should only cost an hourly fee.
I also think the initial plan should have a second set of eyes. That means perhaps a couple of advisors. It will still save you money because at the end of the day you will be doing the management of the plan.

In my opinion there is an exception. If you or your significant other can't or don't want to manage your plan then you can find a flat rate advisor to that for you. Lets say you are ok with managing the plan but your significant other is not. What happens if you pass? If the plan is as simple as a 3 or 4 fund portfolio, then your significant other can most likely manage it. However, if it's has 8 funds in it that need to be balanced etc. then perhaps your significant other may not want to or feel comfortable doing that. Some advisors make plans that are complicated. I believe it's important to have that conversation with them before you pay them. Ask them what their philosophy is on investing. How many funds do they plan on setting up?

Also important is some advisors who want to also manage your funds will try to put you into funds that only an advisor can have access too. DFA comes to mind. Once you are in a fund such as this and if you ever want to leave you may end up having to pay taxes once you sell the funds assets to move it to another fund such as a vanguard fund.
Mr.BB
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Re: Are financial advisors worth it?

Post by Mr.BB »

Swansea wrote: Sat Oct 03, 2020 11:18 am A friend of mine pays a 1% annual fee to Fidelity to manage his investments. He and I have the same asset allocation, 60/40 stock/bond. I hold mostly index funds and one actively managed fund.
We compared performance over the past 10 years. We were within .1% of each other. Now if you factor in the thousands of dollars in fees that he paid, I come out ahead.
What did your friend say about the cost of his advisor after you show that you were pretty much identical and he had given the adviser all that money?
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ruralavalon
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Re: Are financial advisors worth it?

Post by ruralavalon »

Here is a guide to help in deciding if you want or need an advisor: "The great paradox of using an advisor is that you must know some basics in order to evaluate the advice, and once you do, you also know enough to consider doing your own management." "Chapter 10 – On Your Own or Hire an Advisor".
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Re: Are financial advisors worth it?

Post by sschullo »

I agree with you OP that to pay $12000 a year is a lot of money!
I have paid about $12000 total for the past decade in Vanguard and TIAA, about $1000 to $1100 per year for a similar-sized portfolio.
DIY!
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9mm
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Re: Are financial advisors worth it?

Post by 9mm »

Raspberry-503 wrote: Sat Oct 03, 2020 7:12 am I've got scattered assets/accounts worth about $1.5M, once active and one inactive 401k, a rollover IRA, an HSA, and about 1/3 of it in an SP500 index fund with a hefty expense ratio. I need to rebalance since that SP500 puts me overweight in the US large-cap stock, and I want to lower fees by investing mostly in EFTs.

If I had all cash right now, I would feel very comfortable building a portfolio out of a handful of EFTs for a mix of us and international stock, us and international bonds, and maybe 8-10% alternatives like Gold and real estate. My problem is that I'm worried I'm going to screw it up consolidating, especially from a tax efficiency point of view.

So I'm thinking about involving a financial advisor. as far as I know, the roboAdvisors like Betterment will not help me with the consolidation of assets into their account, and I'm not sure what value they add once it's set up. I don't need them to rebalance every year or quarterly, so I think their main value is Tax Loss Harvesting? does that make it worth the fee they are charging?

I've interviewed advisors from PersonalCapital, Vanguard and Facet Wealth. I love that PC and Facet say they know exactly what to do and transfer assets and will look at the whole portfolio over taxable and non-taxable accounts to make recommendations, but it feels like they are taking over the investment. For example, PersonalCapital has you move your assets to Pershing, and they have their own basket of stocks they manage on top of EFTs, so it feels they are setting you up to become dependent on them. And they take a 0.8% fee forever. On $1.5M that's $12K a year!

So should I find someone that I can pay once this year to help me consolidate efficiently and be on my own afterwards, or do the likes of PERsonalCapital really pay for themselves over time?
There is almost no scenario where its better to have someone else manage your money. Sure, if you need help making a financial plan, or if you need tax advice from a CPA, sure. But it is as simple as putting your money in VTSAX and forgetting about it. He will do significantly better when compared to AUM.

Fire your financial advisor!
Swansea
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Re: Are financial advisors worth it?

Post by Swansea »

Mr.BB wrote: Sun Oct 04, 2020 12:59 pm
Swansea wrote: Sat Oct 03, 2020 11:18 am A friend of mine pays a 1% annual fee to Fidelity to manage his investments. He and I have the same asset allocation, 60/40 stock/bond. I hold mostly index funds and one actively managed fund.
We compared performance over the past 10 years. We were within .1% of each other. Now if you factor in the thousands of dollars in fees that he paid, I come out ahead.
What did your friend say about the cost of his advisor after you show that you were pretty much identical and he had given the adviser all that money?
He did not care, said he just did not want to deal with financial stuff.
Mr.BB
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Re: Are financial advisors worth it?

Post by Mr.BB »

Swansea wrote: Tue Oct 06, 2020 12:56 pm
Mr.BB wrote: Sun Oct 04, 2020 12:59 pm
Swansea wrote: Sat Oct 03, 2020 11:18 am A friend of mine pays a 1% annual fee to Fidelity to manage his investments. He and I have the same asset allocation, 60/40 stock/bond. I hold mostly index funds and one actively managed fund.
We compared performance over the past 10 years. We were within .1% of each other. Now if you factor in the thousands of dollars in fees that he paid, I come out ahead.
What did your friend say about the cost of his advisor after you show that you were pretty much identical and he had given the adviser all that money?
He did not care, said he just did not want to deal with financial stuff.
He didn't mind spending $12,000 a year? :oops:
"We are what we repeatedly do. Excellence, then, is not an act, but a habit."
BogleFan510
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Re: Are financial advisors worth it?

Post by BogleFan510 »

Hire yourself. Invest a few hours to learn on this site and set up accounts at Schwab, Fidelity or Vanguard. Treat yourself to 10k of fun spending each year and still be ahead of an advisor's portfolio. Investing is not hard.
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LilyFleur
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Re: Are financial advisors worth it?

Post by LilyFleur »

coffeeblack wrote: Sun Oct 04, 2020 12:43 pm If you want. Pay an advisor a one time fee to develop a plan. Pay an advisor an hourly fee from that point on to help you adjust and stay with the plan as needed. Learn about investing while putting the plan in action. At some point along the way you will have less need for the advisor. In my opinion it is a good idea to have your plan reviewed once in a while by someone who has more experience than yourself. That should only cost an hourly fee.
I also think the initial plan should have a second set of eyes. That means perhaps a couple of advisors. It will still save you money because at the end of the day you will be doing the management of the plan.

In my opinion there is an exception. If you or your significant other can't or don't want to manage your plan then you can find a flat rate advisor to that for you. Lets say you are ok with managing the plan but your significant other is not. What happens if you pass? If the plan is as simple as a 3 or 4 fund portfolio, then your significant other can most likely manage it. However, if it's has 8 funds in it that need to be balanced etc. then perhaps your significant other may not want to or feel comfortable doing that. Some advisors make plans that are complicated. I believe it's important to have that conversation with them before you pay them. Ask them what their philosophy is on investing. How many funds do they plan on setting up?

Also important is some advisors who want to also manage your funds will try to put you into funds that only an advisor can have access too. DFA comes to mind. Once you are in a fund such as this and if you ever want to leave you may end up having to pay taxes once you sell the funds assets to move it to another fund such as a vanguard fund.
A Schwab fiduciary helped me move the money from my mom's IRA to an inherited IRA at Schwab. I did my homework and brought him documentation of my assets held elsewhere. He asked me a lot of questions (debt, pension, etc.) and produced several iterations of a plan depending on how much capital preservation I wanted. I was not charged for any of this.

After that time, I have managed on my own, with the help of this forum (I learn a lot simply reading the threads here (you don't know what you don't know until you see a discussion on it here); I don't have to post a question to learn a lot of very useful information). I have found Schwab's 24/7 customer service to be stellar, always with knowledgeable people who speak English quite well (this gets more important the older I get). Pre-COVID, I loved having the brick and mortar office within a short drive, as I did not want to deposit large checks through the mail. Good coffee and cold soda and water, too! They also have an app for depositing checks remotely and were willing to raise the ceiling amount for a check deposit during COVID.

This is not a popular sentiment here, but I don't think everyone needs to manage their own money. Some people invest badly and emotionally, and in those cases, paying 1% a year is much better than suffering large losses, as long as the advisor is not recommending funds with large expense ratios and front-loads. (A friend just experienced this with an advisor at Merrill Lynch.)
t_man
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Re: Are financial advisors worth it?

Post by t_man »

About 2 years ago I went with a financial planner because I felt I had a large enough sum I didn't want to mess it up, now I think I want to go it alone instead. They provided some good basic investment guidance, but the money they manage has been about 7% below the 3 fund portfolio I kept for myself. I was afraid my investments were getting too large, not diverse enough and I would make mistakes doing it myself. I'm pretty sure I was wrong on all counts.

I just need to start the process of getting my money out of their accounts and into my own again. I think the 3 fund approach should work just fine for me now.
Base Hit
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Re: Are financial advisors worth it?

Post by Base Hit »

I have scattered VG funds mostly in taxable accounts. If an advisor recommends moving or consolidating these into different funds, that would trigger big capital gain taxes. So I figured I couldn't take the recommendations anyway, right?
BogleDan
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Re: Are financial advisors worth it?

Post by BogleDan »

Soon2BXProgrammer wrote: Sat Oct 03, 2020 7:52 am I am a firm believer that most people would be better off, once they are seriously acquiring wealth to pay someone for a "financial plan"

I don't think most people need help with "investment management" (what most advisors do or all the robo's do).

Financial plans help find holes in your current strategy, and help answer the question about will I have enough, and should I be doing something different.
I agree with this. Financial planners can help you with big life decisions, retirement planning and best practices, etc. For most people (although many here on bogleheads would be the exception), there is way too much education needed, and way too many ever-shifting opportunities and pitfalls for the average investor/saver to keep track of.
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dogagility
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Re: Are financial advisors worth it?

Post by dogagility »

t_man wrote: Tue Oct 06, 2020 3:29 pm About 2 years ago I went with a financial planner because I felt I had a large enough sum I didn't want to mess it up, now I think I want to go it alone instead. They provided some good basic investment guidance, but the money they manage has been about 7% below the 3 fund portfolio I kept for myself. I was afraid my investments were getting too large, not diverse enough and I would make mistakes doing it myself. I'm pretty sure I was wrong on all counts.

I just need to start the process of getting my money out of their accounts and into my own again. I think the 3 fund approach should work just fine for me now.
Welcome to the Forum, and congratulations on this realization.
All children spill milk. Learn to smile and wipe it up. -- A Farmer's Wife
tibbitts
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Re: Are financial advisors worth it?

Post by tibbitts »

BogleFan510 wrote: Tue Oct 06, 2020 3:04 pm Hire yourself. Invest a few hours to learn on this site and set up accounts at Schwab, Fidelity or Vanguard. Treat yourself to 10k of fun spending each year and still be ahead of an advisor's portfolio. Investing is not hard.
Although I'm not a fan of advisers generally you are making a gross oversimplification. A good adviser would have knowledge about social security (well, current laws of course), IRMAA, tax nuances (3.8% investment surcharge, as just one example), etc. that would take far more than a "few hours" for anyone to learn. Even running established simulations there are wide-ranging outputs that require some research and understanding to differentiate between. And then there are issues about LTC, annuities (no, not all of them are bad), pension terms and conditions... I'm not saying those are things most advisers will deal with, even if they should, but I also don't want to minimize the amount of work involved, or the odds of making a significant mistake, even when considerable effort is expended.

We tend to only think in terms of selecting funds, but that's really not most of what advisers should be about.
Swansea
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Re: Are financial advisors worth it?

Post by Swansea »

Mr.BB wrote: Tue Oct 06, 2020 3:01 pm
Swansea wrote: Tue Oct 06, 2020 12:56 pm
Mr.BB wrote: Sun Oct 04, 2020 12:59 pm
Swansea wrote: Sat Oct 03, 2020 11:18 am A friend of mine pays a 1% annual fee to Fidelity to manage his investments. He and I have the same asset allocation, 60/40 stock/bond. I hold mostly index funds and one actively managed fund.
We compared performance over the past 10 years. We were within .1% of each other. Now if you factor in the thousands of dollars in fees that he paid, I come out ahead.
What did your friend say about the cost of his advisor after you show that you were pretty much identical and he had given the adviser all that money?
He did not care, said he just did not want to deal with financial stuff.
He didn't mind spending $12,000 a year? :oops:
Nope he did not mind. Both he and his wife have generous pensions in addition to their holdings. I also think that he was gun shy because he once told me that when he invested on his own, he accumulated up to 10 years of capital loss deductions.
NotWhoYouThink
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Re: Are financial advisors worth it?

Post by NotWhoYouThink »

Swansea wrote: Thu Oct 08, 2020 7:09 am
Mr.BB wrote: Tue Oct 06, 2020 3:01 pm
Swansea wrote: Tue Oct 06, 2020 12:56 pm
Mr.BB wrote: Sun Oct 04, 2020 12:59 pm
Swansea wrote: Sat Oct 03, 2020 11:18 am A friend of mine pays a 1% annual fee to Fidelity to manage his investments. He and I have the same asset allocation, 60/40 stock/bond. I hold mostly index funds and one actively managed fund.
We compared performance over the past 10 years. We were within .1% of each other. Now if you factor in the thousands of dollars in fees that he paid, I come out ahead.
What did your friend say about the cost of his advisor after you show that you were pretty much identical and he had given the adviser all that money?
He did not care, said he just did not want to deal with financial stuff.
He didn't mind spending $12,000 a year? :oops:
Nope he did not mind. Both he and his wife have generous pensions in addition to their holdings. I also think that he was gun shy because he once told me that when he invested on his own, he accumulated up to 10 years of capital loss deductions.
It's not the fee that matters, or the taxes. It's what you have left over after paying the fees and taxes. If the advisor's portfolio came within .1% of a self-directed index fund portfolio of the same risk, then the $12,000 a year is immaterial. I'm not confident that an apples to apples comparison was done and expect the advisor's portfolio may have carried more risk or had more tax consequences, but the performance net of fees is what counts, not the fees.
lostdog
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Re: Are financial advisors worth it?

Post by lostdog »

They're only worth it if you can't control the impulse of making behavioral errors.
BogleFan510
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Re: Are financial advisors worth it?

Post by BogleFan510 »

tibbitts wrote: Tue Oct 06, 2020 5:44 pm
BogleFan510 wrote: Tue Oct 06, 2020 3:04 pm Hire yourself. Invest a few hours to learn on this site and set up accounts at Schwab, Fidelity or Vanguard. Treat yourself to 10k of fun spending each year and still be ahead of an advisor's portfolio. Investing is not hard.
Although I'm not a fan of advisers generally you are making a gross oversimplification. A good adviser would have knowledge about social security (well, current laws of course), IRMAA, tax nuances (3.8% investment surcharge, as just one example), etc. that would take far more than a "few hours" for anyone to learn. Even running established simulations there are wide-ranging outputs that require some research and understanding to differentiate between. And then there are issues about LTC, annuities (no, not all of them are bad), pension terms and conditions... I'm not saying those are things most advisers will deal with, even if they should, but I also don't want to minimize the amount of work involved, or the odds of making a significant mistake, even when considerable effort is expended.

We tend to only think in terms of selecting funds, but that's really not most of what advisers should be about.
The advise your reference is not investment advice. Tax advisors, accounting advisors, retirement planning adviors, legal estate and trust advisors...all good. Pay them a fair hourly fee and set stuff up. As a former service line leader at a Big 4 Accounting firm, I get it. But you are not responding to the OP.

Blending investment advice with these other advisory services for an AUM fee is a mistake in my opinion, often leading to over payment for these services, and frequently getting 'advice' with conflicts of interest, like recommending Annuities with high sales commissions.
marlonism
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Re: Are financial advisors worth it?

Post by marlonism »

Anybody knows if the fees that an advisor gets on a taxable account he/she looks after (on your behalf) triggers taxable events that impact your capital gains income? I reckon the fee would come out via SELL of some shares.
tibbitts
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Re: Are financial advisors worth it?

Post by tibbitts »

marlonism wrote: Thu Oct 08, 2020 12:14 pm Anybody knows if the fees that an advisor gets on a taxable account he/she looks after (on your behalf) triggers taxable events that impact your capital gains income? I reckon the fee would come out via SELL of some shares.
I don't understand the question. In my case fees came out of the cash position, which in turn was replenished with distributions (dividends, capital gains.)

I don't know what would have happened if the cash position had been insufficient.
marlonism
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Re: Are financial advisors worth it?

Post by marlonism »

tibbitts wrote: Thu Oct 08, 2020 12:16 pm
marlonism wrote: Thu Oct 08, 2020 12:14 pm Anybody knows if the fees that an advisor gets on a taxable account he/she looks after (on your behalf) triggers taxable events that impact your capital gains income? I reckon the fee would come out via SELL of some shares.
I don't understand the question. In my case fees came out of the cash position, which in turn was replenished with distributions (dividends, capital gains.)

I don't know what would have happened if the cash position had been insufficient.
Pardon my ignorance. I've never had an advisor, so no idea how the fees are structured.

Say, one has this portfolio:
Deferred : 100k
Roth: 100k
Cash: 100k
Taxable Brokerage Acct: 100k

and the fee is around 1% of total, will that approx $4k fee always come out of the Cash balance? Before I saw your reply, i would have thought it would extract 1% from each of the accounts.
tibbitts
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Re: Are financial advisors worth it?

Post by tibbitts »

marlonism wrote: Thu Oct 08, 2020 12:32 pm
tibbitts wrote: Thu Oct 08, 2020 12:16 pm
marlonism wrote: Thu Oct 08, 2020 12:14 pm Anybody knows if the fees that an advisor gets on a taxable account he/she looks after (on your behalf) triggers taxable events that impact your capital gains income? I reckon the fee would come out via SELL of some shares.
I don't understand the question. In my case fees came out of the cash position, which in turn was replenished with distributions (dividends, capital gains.)

I don't know what would have happened if the cash position had been insufficient.
Pardon my ignorance. I've never had an advisor, so no idea how the fees are structured.

Say, one has this portfolio:
Deferred : 100k
Roth: 100k
Cash: 100k
Taxable Brokerage Acct: 100k

and the fee is around 1% of total, will that approx $4k fee always come out of the Cash balance? Before I saw your reply, i would have thought it would extract 1% from each of the accounts.
I only know that it my case it was extracted quarterly from the cash account. All distributions from the various investments, stocks and bonds and funds, were directed to the cash account - but they were being spent so there would have been no reason to reinvest. I would guess that had the cash balance been insufficient there would have at least been an option to pay the fees out of other cash resources so as to avoid selling shares.

In the case of a deferred account like a 401k I can see it working as you suggest, the fees being taken directly from investments, but then there are no tax consequences.
marlonism
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Re: Are financial advisors worth it?

Post by marlonism »

tibbitts wrote: Thu Oct 08, 2020 12:43 pm
marlonism wrote: Thu Oct 08, 2020 12:32 pm
tibbitts wrote: Thu Oct 08, 2020 12:16 pm
marlonism wrote: Thu Oct 08, 2020 12:14 pm Anybody knows if the fees that an advisor gets on a taxable account he/she looks after (on your behalf) triggers taxable events that impact your capital gains income? I reckon the fee would come out via SELL of some shares.
I don't understand the question. In my case fees came out of the cash position, which in turn was replenished with distributions (dividends, capital gains.)

I don't know what would have happened if the cash position had been insufficient.
Pardon my ignorance. I've never had an advisor, so no idea how the fees are structured.

Say, one has this portfolio:
Deferred : 100k
Roth: 100k
Cash: 100k
Taxable Brokerage Acct: 100k

and the fee is around 1% of total, will that approx $4k fee always come out of the Cash balance? Before I saw your reply, i would have thought it would extract 1% from each of the accounts.
I only know that it my case it was extracted quarterly from the cash account. All distributions from the various investments, stocks and bonds and funds, were directed to the cash account - but they were being spent so there would have been no reason to reinvest. I would guess that had the cash balance been insufficient there would have at least been an option to pay the fees out of other cash resources so as to avoid selling shares.

In the case of a deferred account like a 401k I can see it working as you suggest, the fees being taken directly from investments, but then there are no tax consequences.
Ah. So that sounds like (at least) for a non-retiree, the advisor would plan to make sure there is enough amount in the Cash account for his/her fee, including selling shares from the taxable investments if the dividends from those are not enough, which then sounds like it would trigger taxable events. I would assume the advisor would make sure some money does not leave the retirement accounts and into the Cash accounts (not good for a non-retiree). So the taxable and cash accounts better be big enough to cover the 1% of the total (especially that cash/money market does not grow fast). I am assuming here the fee is different and separate from the funds' built-in expense ratio.

Anyway, I was just trying to see if having a financial advisor not only diminishes you of approx 1% annually, but also potentially hits you with more realized taxable capital gains that was not of your intentional doing but to satisfy the 1% advisor fee.

Thanks for the reply, tidbits.
coffeeblack
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Re: Are financial advisors worth it?

Post by coffeeblack »

LilyFleur wrote: Tue Oct 06, 2020 3:19 pm
coffeeblack wrote: Sun Oct 04, 2020 12:43 pm If you want. Pay an advisor a one time fee to develop a plan. Pay an advisor an hourly fee from that point on to help you adjust and stay with the plan as needed. Learn about investing while putting the plan in action. At some point along the way you will have less need for the advisor. In my opinion it is a good idea to have your plan reviewed once in a while by someone who has more experience than yourself. That should only cost an hourly fee.
I also think the initial plan should have a second set of eyes. That means perhaps a couple of advisors. It will still save you money because at the end of the day you will be doing the management of the plan.

In my opinion there is an exception. If you or your significant other can't or don't want to manage your plan then you can find a flat rate advisor to that for you. Lets say you are ok with managing the plan but your significant other is not. What happens if you pass? If the plan is as simple as a 3 or 4 fund portfolio, then your significant other can most likely manage it. However, if it's has 8 funds in it that need to be balanced etc. then perhaps your significant other may not want to or feel comfortable doing that. Some advisors make plans that are complicated. I believe it's important to have that conversation with them before you pay them. Ask them what their philosophy is on investing. How many funds do they plan on setting up?

Also important is some advisors who want to also manage your funds will try to put you into funds that only an advisor can have access too. DFA comes to mind. Once you are in a fund such as this and if you ever want to leave you may end up having to pay taxes once you sell the funds assets to move it to another fund such as a vanguard fund.
A Schwab fiduciary helped me move the money from my mom's IRA to an inherited IRA at Schwab. I did my homework and brought him documentation of my assets held elsewhere. He asked me a lot of questions (debt, pension, etc.) and produced several iterations of a plan depending on how much capital preservation I wanted. I was not charged for any of this.

After that time, I have managed on my own, with the help of this forum (I learn a lot simply reading the threads here (you don't know what you don't know until you see a discussion on it here); I don't have to post a question to learn a lot of very useful information). I have found Schwab's 24/7 customer service to be stellar, always with knowledgeable people who speak English quite well (this gets more important the older I get). Pre-COVID, I loved having the brick and mortar office within a short drive, as I did not want to deposit large checks through the mail. Good coffee and cold soda and water, too! They also have an app for depositing checks remotely and were willing to raise the ceiling amount for a check deposit during COVID.

This is not a popular sentiment here, but I don't think everyone needs to manage their own money. Some people invest badly and emotionally, and in those cases, paying 1% a year is much better than suffering large losses, as long as the advisor is not recommending funds with large expense ratios and front-loads. (A friend just experienced this with an advisor at Merrill Lynch.)
I like Schwab. I have been thinking about starting a checking account with them and get a debit card because they don't charge international exchange rates. I think you are right that some people benefit from a financial advisor. As you stated emotion can be difficult to manage sometimes. I believe even if you want a financial advisor to manage your money for life, you can find one that charges far less than 1%. Vanguard can do it for .3 so it can save a considerable amount of money.
BogleFan510
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Re: Are financial advisors worth it?

Post by BogleFan510 »

PS I also like Schwab for the reasons mentioned above. They have done good work managing a family member's assets, who is impulsive, and earned the relatively smaller fee. Their management services are not for me, but seem to be a decent value if one is looking for that kind of help. They also helped with transfers of estate assets for our family without charging. A lot of work. Our family members have been customers for over 40 years, though Ive tried Vanguard direct and most major brokers as well and have an active Fidelity acct.
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