15 Questions To Ask When Choosing A Financial Advisor

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Random Walker
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15 Questions To Ask When Choosing A Financial Advisor

Post by Random Walker » Sun Dec 03, 2017 10:43 am

https://thecogentadvisor.com/blog/15-qu ... al-advisor

Not the most popular subject on the DIY Bogleheads site, but nonetheless a very worthwhile read. For anyone considering an advisor, this article containing 15 questions to ask a potential advisor is an excellent starting point. I recall that William Bernstein has evolved from believing most people can do it themselves to believing only very few can. I think he now believes very few have the investment knowledge, math/stats knowledge, financial history knowledge, and behavioral self control to actually do it well themselves. I myself have transitioned from DIY 2001-2009 to advisor 2009-present, and am quite content.

Dave

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Sandtrap
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Re: 15 Questions To Ask When Choosing A Financial Advisor

Post by Sandtrap » Sun Dec 03, 2017 11:04 am

Random Walker wrote:
Sun Dec 03, 2017 10:43 am
https://thecogentadvisor.com/blog/15-qu ... al-advisor

Not the most popular subject on the DIY Bogleheads site, but nonetheless a very worthwhile read. For anyone considering an advisor, this article containing 15 questions to ask a potential advisor is an excellent starting point. I recall that William Bernstein has evolved from believing most people can do it themselves to believing only very few can. I think he now believes very few have the investment knowledge, math/stats knowledge, financial history knowledge, and behavioral self control to actually do it well themselves. I myself have transitioned from DIY 2001-2009 to advisor 2009-present, and am quite content.

Dave
Good article. Agree with Bernstein. Have forwarded the link to non-Bogles (Muggles?) I know.

I think the Boglehead DIY will mentally ask only 1 question: "What kind of BMW are you going to buy after getting my account?"
j :D

dbr
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Re: 15 Questions To Ask When Choosing A Financial Advisor

Post by dbr » Sun Dec 03, 2017 1:21 pm

I don't think the dilemma is about nobody should need or take advantage of financial advice and investment management (two different things). The dilemma is about how to get it without in the first place being actually seriously ripped off or badly advised and secondly about how to get it at a price one can afford. A choice between losing a lot of money and losing really a lot of money is not a very helpful choice.

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nisiprius
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Re: 15 Questions To Ask When Choosing A Financial Advisor

Post by nisiprius » Sun Dec 03, 2017 3:12 pm

I believe that there are not many advisors, whose fee structure is appropriate for a "mass affluent" investor, that meet criterion #1, "Are you a fiduciary advisor in all our engagements (and will you agree to this in writing)?"

Some time ago I made an effort to figure out whether the people you speak to at Vanguard Personal Advisor Services, aka Vanguard Advisers, Inc. would meet this criterion. I didn't want to pretend to sign up just to find out so I tried to find out by looking at the website. I emailed Vanguard and got what I thought was an evasive answer. I basically drew a blank. I think the answer is "No; Vanguard Advisers, Inc. must meet the fiduciary standard as a firm, but the actual specific advisor you talk to doesn't necessarily." But I'm not sure. If someone can find a clear answer on the website and point us to it, that would be interesting. I don't mean to single out Vanguard here. I'm just using it as example of a firm catering to the mass affluent (as opposed to high net worth) client.

The "15 Questions" essay turns out to be a page on the website of an advisory firm. They say that "Our sole source of compensation is the fully transparent fee you pay us for the wealth management services we provide," but I haven't been able to see through their opaque website to find out what their transparent fees actually are. Anyone know?
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

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Re: 15 Questions To Ask When Choosing A Financial Advisor

Post by dbr » Sun Dec 03, 2017 3:24 pm

nisiprius wrote:
Sun Dec 03, 2017 3:12 pm
The "15 Questions" essay turns out to be a page on the website of an advisory firm. They say that "Our sole source of compensation is the fully transparent fee you pay us for the wealth management services we provide," but I haven't been able to see through their opaque website to find out what their transparent fees actually are. Anyone know?
Don't forget that the expenses on the funds they put a customer in may not be compensation to them, if they are honest about various collusive arrangements with the funds they recommend, but those expenses are still costs to the investor. One of the hazards of using FAs and investment managers is choosing investments that are too expensive.

Random Walker
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Re: 15 Questions To Ask When Choosing A Financial Advisor

Post by Random Walker » Sun Dec 03, 2017 3:48 pm

I realize the essay comes from a financial services firm, but I felt comfortable posting it because the information is very generic, very general, and representatives from different firms are referenced and quoted in the article.

Dave

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Re: 15 Questions To Ask When Choosing A Financial Advisor

Post by Bonanza77 » Sun Dec 03, 2017 9:45 pm

Fees are required to be disclosed on an advisor’s Form ADV. This particular firm included a link to its Form ADV on its website (all the way at the bottom of the page if you’re interested), which is not typical in my experience. So good for them.

Their fees are 0.90% on the first $1M AUM, 0.66% on the next $4M, 0.33% on the next $5M, and 0.20% after that.

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nisiprius
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Re: 15 Questions To Ask When Choosing A Financial Advisor

Post by nisiprius » Sun Dec 03, 2017 9:47 pm

Bonanza77 wrote:
Sun Dec 03, 2017 9:45 pm
Fees are required to be disclosed on an advisor’s Form ADV. This particular firm included a link to its Form ADV on its website (all the way at the bottom of the page if you’re interested), which is not typical in my experience. So good for them.

Their fees are 0.90% on the first $1M AUM, 0.66% on the next $4M, 0.33% on the next $5M, and 0.20% after that.
Thank you, and good for them. I learned something today: don't search for "fee" or "fees" or "fee schedule," search for "ADV."
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

SimplicityNow
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Re: 15 Questions To Ask When Choosing A Financial Advisor

Post by SimplicityNow » Mon Dec 04, 2017 11:06 am

I think all of the questions are valid and important IF you are looking for an advisor.

Of course the problem that exists is not in the questions but the answers or, as equally important, how the answers are phrased.

No one is selfless, including advisors who promote themselves as fiduciaries when they may or not be.

I agree with whoever coined the phrase that once you know enough to pick a good financial advisor you probably don't need one.

I think that there are plenty of investors who would benefit from an honest, competent advisor. I also believe that the people who need them the most are the ones most likely to select a bad one.

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goingup
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Re: 15 Questions To Ask When Choosing A Financial Advisor

Post by goingup » Mon Dec 04, 2017 11:51 am

Random Walker wrote:
Sun Dec 03, 2017 10:43 am
I recall that William Bernstein has evolved from believing most people can do it themselves to believing only very few can. I think he now believes very few have the investment knowledge, math/stats knowledge, financial history knowledge, and behavioral self control to actually do it well themselves.
That conclusion Dr. Bernstein wrote about in the Investor's Manifesto was kind of a surprise to many here. There were lots of posts about that. I can't reconcile his remarks with the philosophy of Jack Bogle and the raison d'être of Bogleheads--Investing isn't hard. Keep it simple. Keep costs low. Stay the Course.

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