Do Advisers Add $$$ Value?

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Rick Ferri
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Do Advisers Add $$$ Value?

Post by Rick Ferri » Sat Jun 30, 2018 7:48 pm

The most overused cliche in the investment advice industry is “We add value”. This is just ambiguity; it doesn’t mean anything. When I ask 1000 advisers to quantify “value added” I get 1000 different answers. What does it mean?

When I can’t define what something means, I’ll reverse the question and first define what it doesn’t mean. For example, I do not believe an adviser’s “value added” means “money added” or “return added”. I believe market returns are there for the taking by do-it-yourself (DIY) investors and clients of advisers. There is no special value added only for advised clients.

I bring this up because I’m in a big debate on Twitter with another advisor who claims that if he gives portfolio advice to someone one time it’s different then the portfolio he would create and manage for that person under an ongoing asset management fee. He claims if the person is doing it themselves they should have a lower allocation to stocks and no factor tilt because DIY investors are not capable of managing a more sophisticated portfolio and will not stay diciplined.

I asked this advisor to reference acedemic studies that quantify “adviser alpha” showing a measurable difference in return between DIY investors and advised clients net of all costs. He has yet to provide any hard data.

Has anyone come across a study, research paper or quantifiable data that shows advised clients earn higher returns than DIY investors? If so, please post it here. Thank you.

PS. Independent thoughts on this issue are also encouraged.
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Re: Do Advisers Add $$$ Value?

Post by Nate79 » Sat Jun 30, 2018 8:36 pm

Are you speaking of the general population as DIY investor or Boglehead regular posters? I've got relatives that wouldn't know the difference between a 401k vs IRA or what an index fund is. Where CDs and savings accounts is where their extra money goes. For them if they had a good advisor who taught them, put them in good funds, convinced them to invest a certain percentage, as well as kept them from selling out at the bottom of 2009 then they absolutely add value.

An advisor who keeps they clients money invested in 2009, rebalanced and kept them from selling out earned a lifetime of investment fees. An advisor is someone who is not a salesman, does't churn their accounts, does not put them in high fee funds, and educates their clients.

This describes the normal person out there in 'merica who could get value from an advisor.

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Re: Do Advisers Add $$$ Value?

Post by livesoft » Sat Jun 30, 2018 8:40 pm

Didn't Vanguard put out a "value-added" white paper?

https://investor.vanguard.com/financial ... l-planning

has the buzz words.

And here's the PDF linked on that page: https://www.vanguard.com/pdf/ISGAA.pdf
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Re: Do Advisers Add $$$ Value?

Post by jfn111 » Sat Jun 30, 2018 8:42 pm

Nate79 wrote:
Sat Jun 30, 2018 8:36 pm
Are you speaking of the general population as DIY investor or Boglehead regular posters? I've got relatives that wouldn't know the difference between a 401k vs IRA or what an index fund is. Where CDs and savings accounts is where their extra money goes. For them if they had a good advisor who taught them, put them in good funds, convinced them to invest a certain percentage, as well as kept them from selling out at the bottom of 2009 then they absolutely add value.

An advisor who keeps they clients money invested in 2009, rebalanced and kept them from selling out earned a lifetime of investment fees. An advisor is someone who is not a salesman, does't churn their accounts, does not put them in high fee funds, and educates their clients.

This describes the normal person out there in 'merica who could get value from an advisor.
I agree with you but I haven't meet that advisor yet.

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Re: Do Advisers Add $$$ Value?

Post by Rick Ferri » Sat Jun 30, 2018 8:44 pm

Nate79,

You’re speaking about a good, honest adviser. If someone with no knowledge is fortunate enough to find such a person or firm then I agree with you. Unfortunately, relative to the populations of advisers and investors, there are as many bad advisers as there are bad investors.

I’ll also add that most bad advisers haven’t read the Vanguard white paper and really don’t know what their job should be.

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Re: Do Advisers Add $$$ Value?

Post by AlwaysWannaLearn » Sat Jun 30, 2018 10:12 pm

.....
Last edited by AlwaysWannaLearn on Wed Jul 18, 2018 10:37 pm, edited 2 times in total.

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Re: Do Advisers Add $$$ Value?

Post by neurosphere » Sat Jun 30, 2018 10:24 pm

Rick Ferri wrote:
Sat Jun 30, 2018 7:48 pm
Has anyone come across a study, research paper or quantifiable data that shows advised clients earn higher returns than DIY investors? If so, please post it here. Thank you.

PS. Independent thoughts on this issue are also encouraged.
Hi Rick! I don't have an answer for you, other than Vanguard certainly promotes the concept of an "advisor's alpha": https://www.vanguard.com/pdf/ISGAA.pdf

In my opinion, this is probably a marketing tool to convince advisors that Vanguard is not "anti-advisor" and encourage advisors to use/recommend Vanguard's products/accounts. In my opinion, an advisor can add "alpha" not from ongoing portfolio management, but from education. I have talked to people who ask me "now that I make too much for a Roth IRA, what should I do?" who have never heard of a backdoor Roth and are eligible and can benefit from it. Is that "alpha?". I guess it goes back to the distinction between financial planning and investment management. What is an advisor providing, and to which realm is the alpha referring?

I'm biased, because I do a few hours of paid advising here and there (although half of my time is devoted to not-for-profit and pro-bono work). But I like to say that financial planning can be hard, but investment advice can be easy. With respect to portfolios, a brief quarterly "check-in" is usually enough, except perhaps in very rough patches where an advisor might interject and see if there is a tax-loss-harvesting opportunity. But such things are usually easy enough to educate the client on "look at your vanguard cost basis, and if you see 'red' greater than $X or Y% in any specific lot, then you should TLH, and give me a call if you need help with that", etc.

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Re: Do Advisers Add $$$ Value?

Post by averagedude » Sat Jun 30, 2018 10:29 pm

I think the biggest value that an advisor gives to their clients is to keep them from selling stocks at the bottom of bear markets. If you are a member of bogleheads and believe in their philosophy, you don't need to pay someone thousands of dollars for this advice.
Last edited by averagedude on Sat Jun 30, 2018 11:07 pm, edited 1 time in total.

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Re: Do Advisers Add $$$ Value?

Post by neurosphere » Sat Jun 30, 2018 10:36 pm

averagedude wrote:
Sat Jun 30, 2018 10:29 pm
I think the biggest value that an advisor gives to their clients is to keep them from selling stocks at the bottom of bear markets. If you are a member of bogleheads and believe in their philosophy, you don't need to pay someone thousands of dollars for this advise.
I do think there is SOME validity to this. But part of it can be mitigated up front. I give financial lectures where I tell young(ish) people "assume you will lose 40-50% of your portfolio value 2-3 times in your life". And when that happens, the plan is to stick to the plan. The plan already factors such things into the plan. One does not need an advisor charging 1% AUM for 60 years just to be available in case there is a correction to say "we have a plan for this already".

I'm a physician. I don't charge my patients every day to ask them "are you ok today? What about today? Now? Still ok?" Instead it's "hey, if something comes up call me or make an appointment to see me". :D
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Re: Do Advisers Add $$$ Value?

Post by Robert T » Sun Jul 01, 2018 6:14 am

.
Costs matter (no matter what anyone tells you), they are guaranteed. A 1% advisor fee can account for 25% of your withdrawal rate. Putting it another way, in this case, for every $100 you withdraw, $25 goes to the pocket of the advisor, $75 goes to you. Perhaps you speak to the advisor once a year, even once per quarter, or less than once per year for less than 1 hour. In my humble opinion this is outrageously expensive.

Ex-ante claims of returns ‘alpha’, no matter how confidently and repeatedly stated, are often proven wrong (even before advisor fees) and were never really credible claims in the first place.

Earlier experience of family members with financial advisors was terrible. Dishonest, non-transparent, high fees, huge subtraction of value from some active investments, and difficult to exit the relationship. A bad experience. There is a huge range in the quality of financial advisors.

Not saying all financial advisors are bad, there are good advisors but perhaps in the minority. I wish there were more good advisors, or rather that the minimum standard was much higher, so the value subtracted (in the case of family members) was much lower. For someone who knows very little about investments, also doesn’t have much chance of selecting a good advisor. IMO nothing substitutes for (at least some) personal financial education – an investment with high returns.

Do your own due diligence, don’t rely on marketing hype. Tread carefully.

Robert
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Re: Do Advisers Add $$$ Value?

Post by aristotelian » Sun Jul 01, 2018 6:28 am

Robert T wrote:
Sun Jul 01, 2018 6:14 am
.
Costs matter (no matter what anyone tells you), they are guaranteed. A 1% advisor fee can account for 25% of your withdrawal rate. Putting it another way, in this case, for every $100 you withdraw, $25 goes to the pocket of the advisor, $75 goes to you. Perhaps you speak to the advisor once a year, even once per quarter, or less than once per year for less than 1 hour. In my humble opinion this is outrageously expensive.

Ex-ante claims of returns ‘alpha’, no matter how confidently and repeatedly stated, are often proven wrong (even before advisor fees) and were never really credible claims in the first place.
Exactly. Even if "adviser alpha" is true, it should be in excess of the fees they charge, otherwise you are just treading water with the "less sophisticated" three fund portfolio or all-in-one fund. I highly, highly doubt that any complicated factor tilt portfolio is worth an extra 1% every year. If it is, that means the adviser is taking a lot of risk to achieve that extra alpha, and with the client assuming all of the risk and the adviser getting most of the compensation. Your "sophisticated" factor tilting portfolio would need to have an extra 2-3% higher expected return which I highly doubt.

Also, the adviser mentioned in the OP seems to misconstrue the argument for tilting. It is not to generate alpha. The "Larry Portfolio" was designed to reduce volatility, not to increase return.

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Re: Do Advisers Add $$$ Value?

Post by Taylor Larimore » Sun Jul 01, 2018 6:47 am

Bogleheads:

When selecting an advisor, a good question to ask is: "Can you beat the market?" If the answer is "Yes" -- find another advisor.

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

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Re: Do Advisers Add $$$ Value?

Post by livesoft » Sun Jul 01, 2018 6:53 am

Taylor Larimore wrote:
Sun Jul 01, 2018 6:47 am
Bogleheads:

When selecting an advisor, a good question to ask is: "Can you beat the market?" If the answer is "Yes" -- find another advisor.

Best wishes.
Taylor
What if you asked, "Can you beat the benchmark?" instead?
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Re: Do Advisers Add $$$ Value?

Post by Beat The Street » Sun Jul 01, 2018 6:56 am

https://www.ifa.com/about/value-of-ifa/

This cites some studies, not sure how legitimate they are.
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Re: Do Advisers Add $$$ Value?

Post by midareff » Sun Jul 01, 2018 7:15 am

Robert T wrote:
Sun Jul 01, 2018 6:14 am
.
Costs matter (no matter what anyone tells you), they are guaranteed. A 1% advisor fee can account for 25% of your withdrawal rate. Putting it another way, in this case, for every $100 you withdraw, $25 goes to the pocket of the advisor, $75 goes to you.
Robert
.
Says it all AFAIC. ... and then there is the Buffetism.. doing nothing strikes us as intelligent action.

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Re: Do Advisers Add $$$ Value?

Post by columbia » Sun Jul 01, 2018 7:25 am

midareff wrote:
Sun Jul 01, 2018 7:15 am
Robert T wrote:
Sun Jul 01, 2018 6:14 am
.
Costs matter (no matter what anyone tells you), they are guaranteed. A 1% advisor fee can account for 25% of your withdrawal rate. Putting it another way, in this case, for every $100 you withdraw, $25 goes to the pocket of the advisor, $75 goes to you.
Robert
.
Says it all AFAIC. ... and then there is the Buffetism.. doing nothing strikes us as intelligent action.

Worse yet: an adviser taking a 1% fee AND placing clients in actively managed funds with ERs north of 1%. I doubt that it would be difficult to find that scenario on Monday, were one to make a few calls to local professionals.

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Re: Do Advisers Add $$$ Value?

Post by midareff » Sun Jul 01, 2018 7:29 am

columbia wrote:
Sun Jul 01, 2018 7:25 am
midareff wrote:
Sun Jul 01, 2018 7:15 am
Robert T wrote:
Sun Jul 01, 2018 6:14 am
.
Costs matter (no matter what anyone tells you), they are guaranteed. A 1% advisor fee can account for 25% of your withdrawal rate. Putting it another way, in this case, for every $100 you withdraw, $25 goes to the pocket of the advisor, $75 goes to you.
Robert
.
Says it all AFAIC. ... and then there is the Buffetism.. doing nothing strikes us as intelligent action.

Worse yet: an adviser taking a 1% fee AND placing clients in actively managed funds with ERs north of 1%. I doubt that it would be difficult to find that scenario on Monday, were one to make a few calls to local professionals.
A friend decided to use her son's financial advisor who put her "safe" money in all individual issue junk bonds. This was 2006, so if you would have guessed that in the next couple of years everyone of them would default you would be right. Another friend had an advisor who had trading rights and churned her account to zilch. Swim carefully, there are many sharks in the water and not enough Ricks, Larrys and Bills.

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Re: Do Advisers Add $$$ Value?

Post by neilpilot » Sun Jul 01, 2018 7:30 am

Doesn't the 2018 tax change reduce or eliminate the ability to deduct advisory management fees? If so, then any percentage of value added has been further eroded.

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Re: Do Advisers Add $$$ Value?

Post by afan » Sun Jul 01, 2018 7:51 am

The most reliable and profitable way for an advisor to make money is by charging an percent of AUM. This provides a steady return of high fees. Given how little work is involved in managing a portfolio, the advisor can generate fees of thousands to tens of thousands of dollars per hour. No wonder they love this model.

They have no chance, other than luck, of beating the market on a risk adjusted basis before fees. Even very good luck will rarely have them beating the market on a risk adjusted basis after all costs.

The alternative, not nearly as profitable, is the advice only model. Clients come to the advisor when they have questions, pay some far lower hourly rate, and pay nothing again unless another question arises.

Such an advisor might provide significant value across many dimensions of clients' financial lives. The advisor might never have a reason to discuss investments with such clients. An advisor like that could add a lot of value. But they would have to work for it.

Even Vanguard uses the indefensible model of charging by assets rather than by effort. A $3M portfolio does not require any more work than a $1M portfolio.

It worse than just overcharging for investment services. By focussing on investments rather than advice, the advisor diverts attention from their true potential value. Why slave to understand subtle details of financial planning when you are being paid for doing nothing?

Advice only planners are selling their expertise and have incentives to increase and demonstrate their knowledge. AUM managers who provide advice "for free" have no need to learn or keep up to date. As long as the market does well they keep most of their clients.
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Re: Do Advisers Add $$$ Value?

Post by goblue100 » Sun Jul 01, 2018 8:07 am

Rick Ferri wrote:
Sat Jun 30, 2018 7:48 pm

PS. Independent thoughts on this issue are also encouraged.
I have to agree with Nate79. There are a lot of uninformed, uninterested(which is amazing to me, but true) 401k investors. One that I work with was talking about how little he knew about the different fund options. I offered to help set up his new elections and move his old funds. I don't recall what he had, but I think most of it was in money market fund or some other extremely safe, low return fund. I helped him move to something close to a 3 fund. I suspect if we could look at his old holdings compared to the new allocation, I helped him better capture the market return. Not sure I generated "alpha".

So to come back to Nate79's comment, there are a lot of investors out there that could benefit by a low cost asset allocation check with someone who knows what they are doing and who wouldn't abuse the account. Those people are hard to find because they can't make much money, I suspect.
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Re: Do Advisers Add $$$ Value?

Post by bsteiner » Sun Jul 01, 2018 8:16 am

goblue100 wrote:
Sun Jul 01, 2018 8:07 am
... there are a lot of investors out there that could benefit by a low cost asset allocation check with someone who knows what they are doing and who wouldn't abuse the account. Those people are hard to find because they can't make much money, I suspect.
I agree as to both points. There are a few such people, but not very many. Some have reverted to charging a percentage of assets because they weren't able to attract enough clients on a time basis. Vanguard's 0.3% (lower for amounts over $5 million) might also be a good choice for those investors, especially those with smaller accounts who might pay more than 0.3% on a time basis.

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Re: Do Advisers Add $$$ Value?

Post by SGM » Sun Jul 01, 2018 8:47 am

I have had casual conversations with a number of financial advisors and I am convinced that most of them know less about investing than experienced BHs. Some comments by these advisors were wrong, selfish or uninformed. One told me that Roth conversions would only help heirs. He also insisted that delaying SS was a stupid move regardless of an individuals situation. Another recommended non-traded REITs.

Another wanted to sell equity indexed annuities with huge fees.


A friend was advised to do the file and suspend and restricted application for a spousal benefit two years after the law was put into effect preventing this strategy.

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Re: Do Advisers Add $$$ Value?

Post by Beat The Street » Sun Jul 01, 2018 8:56 am

SGM wrote:
Sun Jul 01, 2018 8:47 am
I have had casual conversations with a number of financial advisors and I am convinced that most of them know less about investing than experienced BHs. Some comments by these advisors were wrong, selfish or uninformed. One told me that Roth conversions would only help heirs. He also insisted that delaying SS was a stupid move regardless of an individuals situation. Another recommended non-traded REITs.

Another wanted to sell equity indexed annuities with huge fees.


A friend was advised to do the file and suspend and restricted application for a spousal benefit two years after the law was put into effect preventing this strategy.
The law did not prevent the strategy for everyone, only those below a certain age when the rules were changed.
“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: Do Advisers Add $$$ Value?

Post by DetroitRick » Sun Jul 01, 2018 9:10 am

While I've never used an advisor, and don't think they would value for me, I do believe they can and do. Unfortunately, I can only see proof in the form of individual observations - not in aggregated or averaged studies. So I doubt those studies really exist, but I have not done a thorough search. I will bet, that with a lot of legwork, individual cases studies could be assembled to point to those instances where value exists (before and afters).

I've had the dubious experience of helping 5 close friends and family, and observing (fairly closely) the experiences of a few more. It caused me to change my position that anybody can DIY this stuff. People have limitations on time, ability, interest, intellect, patience and more.

The value that the advisors could, should, and in a few rare instances did give (not all to many of my examples, unfortunately) included:

- Developing and implementing a good diversification plan (I can't begin to explain how many people just glaze over at the thought of really thinking about this - but just look at how important it is). Not just the plan, but also the deep understanding, including pitfalls and future transitions that go well beyond the current year. I find this stuff often summed up in sentences (from investors) like "I hate bonds", "international is too risky", "I don't know when I will need my money", and "isn't this all just one big gamble?". As they then decide to pick investments without any diversification plan" (no risk there :oops: ).
- Acting as a control on folks that feel they have to react to every big development and follow every trend in the market (think people that wanted to liquidate in 2008-9, and even 2010), E.G., a trusted and competent advisor can be a sounding board to prevent immediate investment in every hot investing tip, and in liquidation that these people grab onto.
- Helping control those that view investing as an offshoot of Vegas - again, looking for that big, sure thing (the "I don't care about the SP500, I know that "biotech company 'xyz' is going to kill it in the next year" crowd).
- Designing, monitoring and executing an orderly withdrawal plan (whether in retirement, or prior, for big life changes). I'm convinced this simple plan is a rarity out there in the real world.
- Making sure that tax efficiency is considered waaaayyyyy prior to current year 1040 time
- Helping to separate good/bad, useful/useless new investment vehicles for clients. Lots of examples of both, and it's a minefield for those that can't do the legwork. I can separate a lot of investors into 2 groups: #1. Every new development since 1950 is stupid and useless, and #2 This new development will revolutionize investing. Advisors COULD bring a sane middle ground. Think back to when ETF's first starting becoming popular. Or defined maturity bond funds. Or new indices.

So absolutely I think advisors could bring value to many people. But where people don't know what they don't know, finding the good ones takes time. I don't think big statistical studies will ever prove it - too many bad advisors and bad customers will be in those averages. I really believe you can best prove the point via the time-consuming process of assembling case studies. Studies that dissect advisor and customer behavior long term. It doesn't matter to me if there are 1000 lousy advisors doing business around me, only that I can direct a friend to one good one.

Interesting search you are on, and I'll have to check that Twitter feed. I love your opponent's generalizations on DIY investors - we aren't capable of complexity and won't stay disciplined. Well, we are a big and diverse group, I call BS on those two claims. Some can, some can't.
Last edited by DetroitRick on Sun Jul 01, 2018 1:51 pm, edited 1 time in total.

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Re: Do Advisers Add $$$ Value?

Post by Rick Ferri » Sun Jul 01, 2018 9:44 am

My Twitter feed is @Rick_Ferri

I think “value added” is in the eyes of the beholder. It cannot be quantified because there is no way to define it and measure it universally.
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Re: Do Advisers Add $$$ Value?

Post by deltaneutral83 » Sun Jul 01, 2018 10:13 am

Obviously there is value if they keep you in the market when you can't stop your leg from tapping in a 30%+ bear market. We have BH who continue to post for an 11% decline about nerves. And will continue to do so. This is the added value advisors bring but it's also in their best interest financially to keep you in the market as well as your own.

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Re: Do Advisers Add $$$ Value?

Post by JPH » Sun Jul 01, 2018 10:25 am

Rather than "do they add value?" perhaps the question should be "do they an anything of value?"
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Re: Do Advisers Add $$$ Value?

Post by nedsaid » Sun Jul 01, 2018 12:03 pm

Rick Ferri wrote:
Sun Jul 01, 2018 9:44 am
My Twitter feed is @Rick_Ferri

I think “value added” is in the eyes of the beholder. It cannot be quantified because there is no way to define it and measure it universally.
Rick, I think Vanguard claimed that "advisor alpha" was about three percent a year. In light of what I have seen, that is probably achievable, people do some pretty crazy things out there left to their own devices. When you go to a place like Edward Jones or Ameriprise, the fee drag alone can take away most all of that, your all-in fees can run 2% to 3%. A lower cost advisor using index funds can cut the all in fees to perhaps 1%. But even the most expensive advisors will get diversification into the portfolio. The advisor alpha is mostly helping clients to avoid behavioral errors. Perhaps a bit more can be squeezed out with factor tilting and tax-loss harvesting.

But you are correct, the "value added" or "advisor alpha" is almost impossible to quantify. Plus advisors are human too. I think it was Dan Solin who admitted to panic during the 2008-2009 bear market even though he knew better. Controlling emotions are difficult for advisors too.
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Re: Do Advisers Add $$$ Value?

Post by Random Walker » Sun Jul 01, 2018 12:07 pm

I think the question “Do advisors add value?” Is a near meaningless question on a population basis. It is a very important question for each individual investor. The reason is that the potential value added depends on the individual investor’s unique personal circumstance: knowledge, behavior, interest, value of alternative uses of time, etc. I think William Bernstein has written that by the time an investor knows enough to choose an advisor wisely, he can probably do the investing on his own.

I was DIY all VG 2001-2009, then took advantage of big tax loss harvesting opportunity in 2009 to switch to the advisor DFA route. The decision was based on more efficient portfolio, access to tax managed value funds and core funds, better tax loss harvesting than I thought I’d do on my own, extra layer of protection between me and my money to avoid behavioral errors, and stuff that I didn’t even know that I didn’t know.

So far I’m very happy with the decision, but I can’t necessarily quantify the value added. The costs I think are pretty easy to measure. My all VG portfolio had a weighted ER of about 0.15%. My current AUM fee is 0.5% + average ER of passive funds 0.4% = 0.9%. So in total, my extra cost compared to my DIY VG approach is about 0.75%. I’ve experienced all the above values added and a few unexpected ones. Before I took on the advisor I guesstimated those value adds by pretty much conservatively pulling numbers out of thin air. The potential positives added up to way more than the < 1% certain costs. Perhaps the biggest value added for me can’t be quantified at all. I’m highly interested in investing and enjoy this board tremendously. But all the time I spend on it is recreational; I’m not searching for portfolio tweaks, second guessing decisions, etc. Having the advisor, I believe, has actually freed me up to enjoy the board more.

People sometimes ask me to compare my advisor portfolio to my DIY VG portfolio. Short answer is that it’s impossible to do. Two totally different alternative histories and only one of them is known. My overall asset allocation has changed in ways I couldn’t have imagined in 2009, and I’ve taken a lot of equity risk off the table. Would I have done that on my own? I don’t know. One substantial DIY mistake could cost several years of AUM fees.

Dave

P.S. a big part of my decision in 2009 incorporated tax loss harvesting and tax deductibility of AUM fees. Circumstances have changed since then. I’ve read that TLH, done right, can add about 0.5-0.7% annualized. Done right implies individual lot basis and HIFO accounting. I didn’t think I was compulsive enough to do this and at the time VG didn’t keep track of individual lots. I think average cost basis was used. Now I believe VG does keep track of individual lots. Now my AUM fees are no longer tax deductible. Despite these changes, still very happy with the advisor route I’ve chosen. A lot of that derives from making asset allocation decisions based on Monte Carlo Simulation.

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Re: Do Advisers Add $$$ Value?

Post by noco-hawkeye » Sun Jul 01, 2018 12:21 pm

I think in most cases a good adviser's biggest value is avoiding mistakes. This would include:
  • Picking the right product for the right situation. To be more clear, maybe the advisor says "You can get the vanguard ETF for slightly lower fees", or maybe they help get a lower fee 529 picked, or help watch out for situations that impact taxes etc. Someone who can help explain the advantage of a roth vs more 401k contributions for an investor - etc. (this is similar to what Nate79 was getting at)
  • Keeping emotions in check
  • Bringing up different points of view or things to consider.


I think it's not really an upside value that an adviser would help with - it's more of prevention of something really stupid. (Yes, I know - there are lots of advisors that do stupid things and I am being very idealistic).

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Re: Do Advisers Add $$$ Value?

Post by thx1138 » Sun Jul 01, 2018 1:32 pm

Rick Ferri wrote:
Sat Jun 30, 2018 7:48 pm
I bring this up because I’m in a big debate on Twitter with another advisor who claims that if he gives portfolio advice to someone one time it’s different then the portfolio he would create and manage for that person under an ongoing asset management fee. He claims if the person is doing it themselves they should have a lower allocation to stocks and no factor tilt because DIY investors are not capable of managing a more sophisticated portfolio and will not stay diciplined.
I've heard more than one advisor state they spend more time managing people than managing portfolios. It sounds like this guy is saying the same thing in a different way. He assumes, probably correctly on average, that anyone bothering to talk to him in the first place is likely to lack the discipline to deal with a high equity AA or an even more volatile tilted equity portion. The population of folks than can handle that kind of portfolio are unlikely to be talking to him in the first place.

So from his perspective the population of investors he advises is essentially self selected to on average have lower trading discipline than those who would DIY instead. This isn't necessarily the behavior of the population at large, but it probably is the behavior of the population likely to talk to him. In that context his approach seems pretty sound - if he is going to be around to babysit them they can run an AA with higher expected returns and higher volatility. If he isn't going to be around to babysit them then likely their best returns going forward are going to come from an AA that despite having lower expected returns is less likely to result in bad trading behavior that could really tank the returns.

He may even think this is actually true of all investors because he is only exposed to those he interacts with and that self selects for those likely to need him. Consider police officers - many tend to have very low trust of others precisely because their job selects for them spending their day interacting with the least trustworthy people in the population. To them the world is untrustworthy because the world they see in fact is but that's only because the rest of the population is calling them specifically to come interact with the most untrustworthy people around. To the rest of us outside their profession we are mostly exposed to trustworthy folks and have a very different perception of the trustworthiness of the general population.

All us here on the bogleheads forum spend our days interacting with the most disciplined investors around all self selected to be exactly that by their very presence on this forum. Meanwhile the typical advisor is experiencing a completely different self selected population.
I asked this advisor to reference acedemic studies that quantify “adviser alpha” showing a measurable difference in return between DIY investors and advised clients net of all costs. He has yet to provide any hard data.

Has anyone come across a study, research paper or quantifiable data that shows advised clients earn higher returns than DIY investors? If so, please post it here. Thank you.
If anyone even tried such a study it would be invalid before it began because of the effects discussed above. The two populations (advisor vs. DIY) would be self biased.

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Re: Do Advisers Add $$$ Value?

Post by Sharpematt » Sun Jul 01, 2018 2:02 pm

Some do, and some don’t. In general it depends on your needs, and what level of effort you’re willing to put into your financial situation.

Many of the folks on Bogleheads have an unfair characterization of an advisor as someone who is primarily there just to set an asset allocation. By nature this forum attracts do-it-yourselfers which creates a skewed conversation. For example these are things that good advisors provide at no charge in addition to setting your AA:

-Trust and Estate planning
-Education account advice and selection
-Referrals to service providers; specifically CPAs and attorneys
-Access to unique private equity deals. PE has returned better than any stock market on a net basis over long timeframes.
-OTC hedging on large single name equity positions
-block trading algorithms for selling volume disruptive sized lots
-custom bond ladders with actual advice on the issuer
-tax loss harvesting
-FAR better service (they know your situation and will proactively work with your CPA at tax time to take you out of the loop entirely if you request it). Also, you have their personal cell not a 800 number with a random contact from another state.
-Access to unique private events that are designed for clients to share business ideas and grow their network with very valuable contacts. Access to private commercial real estate deals is a big one that comes to mind.
-One contact for all issues. For example you can call someone and say find me the best rate on a 7 year ARM. You can also call that person and say I need to be a durable power of attorney on my mothers account. One person tasked with making your requests happen. No call transfers. No wait time. No sitting on hold. No calls to follow up and see if it actually happened.
-Custom reporting that fits your specific desires. You can say here's an Excel file of my personal balance sheet I created. I'd like you to populate this monthly and email it to me. No discount broker would ever do that.
-the ability to quickly create, open, and fund entity accounts in a time crunch.
-tailored lending using odd collateral such as art or aircraft
-structured products
-tools to chart your realistic burn rate. These get far more in depth than just “30 times your annual spending amount”

Most people don’t need these options, but you’d be surprised how many wealthy people DO need this. It’s the same reason they don’t mow their own lawns just because it’s cheaper and simple. It’s not a coincidence that high net worth people with $10mm + don’t just plop their money into a three fund portfolio. Their situation not only warrants, but requires a qualified advisor.

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Re: Do Advisers Add $$$ Value?

Post by Wakefield1 » Sun Jul 01, 2018 2:06 pm

Sharpematt wrote:
Sun Jul 01, 2018 2:02 pm
Some do, and some don’t. In general it depends on your needs, and what level of effort you’re willing to put into your financial situation.

Many of the folks on Bogleheads have an unfair characterization of an advisor as someone who is primarily there just to set an asset allocation. By nature this forum attracts do-it-yourselfers which creates a skewed conversation. For example these are things that good advisors provide at no charge in addition to setting your AA:

-Trust and Estate planning
-Education account advice and selection
-Referrals to service providers; specifically CPAs and attorneys
-Access to unique private equity deals. PE has returned better than any stock market on a net basis over long timeframes.
-OTC hedging on large single name equity positions
-block trading algorithms for selling volume disruptive sized lots
-custom bond ladders with actual advice on the issuer
-tax loss harvesting
-FAR better service (they know your situation and will proactively work with your CPA at tax time to take you out of the loop entirely if you request it). Also, you have their personal cell not a 800 number with a random contact from another state.
-Access to unique private events that are designed for clients to share business ideas and grow their network with very valuable contacts. Access to private commercial real estate deals is a big one that comes to mind.
-One contact for all issues. For example you can call someone and say find me the best rate on a 7 year ARM. You can also call that person and say I need to be a durable power of attorney on my mothers account. One person tasked with making your requests happen. No call transfers. No wait time. No sitting on hold. No calls to follow up and see if it actually happened.
-Custom reporting that fits your specific desires. You can say here's an Excel file of my personal balance sheet I created. I'd like you to populate this monthly and email it to me. No discount broker would ever do that.
-the ability to quickly create, open, and fund entity accounts in a time crunch.
-tailored lending using odd collateral such as art or aircraft
-structured products
-tools to chart your realistic burn rate. These get far more in depth than just “30 times your annual spending amount”

Most people don’t need these options, but you’d be surprised how many wealthy people DO need this. It’s the same reason they don’t mow their own lawns just because it’s cheaper and simple. It’s not a coincidence that high net worth people with $10mm + don’t just plop their money into a three fund portfolio. Their situation not only warrants, but requires a qualified advisor.
Good luck finding such a good (no,great) advisor at an affordable price

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Re: Do Advisers Add $$$ Value?

Post by Sharpematt » Sun Jul 01, 2018 2:11 pm

Wealthy people aren’t looking for cheap. They are looking for quality and value. Mercedes aren’t cheap. Country Clubs aren’t cheap. These are people looking for someone to uncomplicate their lives and provide meaningful advice on complex issues.

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Re: Do Advisers Add $$$ Value?

Post by livesoft » Sun Jul 01, 2018 2:53 pm

I have what I think is an interesting relationship with a very good financial advisor. They don't have a relationship with me though. A friend of mine asked me about their financial advisor, so I checked them out. I was also shown the account statements for the past 6 months. I also get e-mails shared between advisor and client sent to me out-of-band.

So I have seen what an excellent financial advisor can do for someone. My friend is very very lucky to have ended up with this firm, but even so my friend just doesn't trust them. So is this advisor adding value?
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Re: Do Advisers Add $$$ Value?

Post by garlandwhizzer » Sun Jul 01, 2018 3:55 pm

It's hard to paint this picture with a broad brush, stating categorically that all investors should have an advisor or that all investors should not have an advisor. Those whose investment decisions are driven by wide emotional swings and therefore likely to sell at the bottom or buy at the top might well benefit from an advisor. Those who have little knowledge of and refuse to teach themselves areas like asset allocation, tax planning, estate planning, risk management aligned to their own personal situation, etc., may benefit from having a good advisor, although I suspect it may be difficult to find a good advisor.

Having said that, I will share some rather painful personal experience I had 30 - 35 years ago. I had not one but several Investment advisors/financial advisors who sold me inappropriate products that invariably produced high commissions for them, invariably produced low returns for me, much less than the market as a whole, sometimes with illiquid products like limited partnerships one of which was a high commission real estate limited partnership that turned out to be an outright scam losing all its value, and another of which went bankrupt due to too much leverage. It became clear to me that the underlying goal of all these investment professionals was to generate hefty income for themselves with a steady stream of smooth talking. My financial outcome was much less critical to them. I completely gave up on all so called investment professionals and financial advisors and determined that I would educate myself in the fields of investing and financial planning and make my own decisions. One thing I knew I had that my advisors lacked was a maximal level of motivation to produce optimum results for myself, rather than for them. My investment results immediately improved and have continued to improve ever since. Financial education is more than just reading some of the many excellent books on the topic. Experience in also essential IMO. I have made some mistakes along the way as have all honest investors without exception. The key is to learn from those mistakes. IMO a seasoned investor is one who has already made all possible mistakes but has learned from them instead of giving up.

For those who are inexperienced and starting this process of taking over the reins and running the financial ship themselves, I suggest starting with a 3 fund portfolio and reading some of Bogle's books. It's a no-brainer place to start and a solid place to stay over any long time frame.

Garland Whizzer

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Re: Do Advisers Add $$$ Value?

Post by nedsaid » Sun Jul 01, 2018 4:08 pm

Sharpematt wrote:
Sun Jul 01, 2018 2:02 pm
Some do, and some don’t. In general it depends on your needs, and what level of effort you’re willing to put into your financial situation.

Many of the folks on Bogleheads have an unfair characterization of an advisor as someone who is primarily there just to set an asset allocation. By nature this forum attracts do-it-yourselfers which creates a skewed conversation. For example these are things that good advisors provide at no charge in addition to setting your AA:

-Trust and Estate planning
-Education account advice and selection
-Referrals to service providers; specifically CPAs and attorneys
-Access to unique private equity deals. PE has returned better than any stock market on a net basis over long timeframes.
-OTC hedging on large single name equity positions
-block trading algorithms for selling volume disruptive sized lots
-custom bond ladders with actual advice on the issuer
-tax loss harvesting
-FAR better service (they know your situation and will proactively work with your CPA at tax time to take you out of the loop entirely if you request it). Also, you have their personal cell not a 800 number with a random contact from another state.
-Access to unique private events that are designed for clients to share business ideas and grow their network with very valuable contacts. Access to private commercial real estate deals is a big one that comes to mind.
-One contact for all issues. For example you can call someone and say find me the best rate on a 7 year ARM. You can also call that person and say I need to be a durable power of attorney on my mothers account. One person tasked with making your requests happen. No call transfers. No wait time. No sitting on hold. No calls to follow up and see if it actually happened.
-Custom reporting that fits your specific desires. You can say here's an Excel file of my personal balance sheet I created. I'd like you to populate this monthly and email it to me. No discount broker would ever do that.
-the ability to quickly create, open, and fund entity accounts in a time crunch.
-tailored lending using odd collateral such as art or aircraft
-structured products
-tools to chart your realistic burn rate. These get far more in depth than just “30 times your annual spending amount”

Most people don’t need these options, but you’d be surprised how many wealthy people DO need this. It’s the same reason they don’t mow their own lawns just because it’s cheaper and simple. It’s not a coincidence that high net worth people with $10mm + don’t just plop their money into a three fund portfolio. Their situation not only warrants, but requires a qualified advisor.
Very wealthy people have unique situations and often need unique advice. People who have been successful in business and in life have no problems getting referrals and no problem finding skilled professionals who can solve their problems. They don't necessarily need an advisor who can do all of this for them as quite often they have contacts or contacts with people who have contacts. Business is all about relationships.

Yes, they get the great service but the price tag for all of that can be high. Not sure anyone needs structured products. Private equity can be quite profitable, Mitt Romney made a fortune doing this, the question is how far up the food chain do you have to be to get the best deals? Same question with real estate. A person wealthy by Boglehead standards, worth a few million dollars, might not be a big enough client to get the best private equity or private real estate deals. Boglehead rich might be a pittance for very large firms.

No advisor, no matter how knowledgeable, knows everything about everything. For example, portfolio management is different from being a financial planner. An investment firm might not have expertise in banking products. A financial planner might know a lot about estate planning but would need to utilize the expertise of estate attorneys to execute the details. A planner or advisor might know a lot about insurance but may or may not have the licenses.

If you invest with an investment firm that might be a subsidiary of a large bank, you would have access to a lot of products under one roof but that doesn't guarantee you will get the best rate. There is a lot of pressure within these organizations to do cross-selling, Wells Fargo and the trouble they got into is a good example. It also doesn't guarantee that what you are sold is in your best interest. You also wind up with a lot of fees.

I would also question the amount of trading that I have seen. No evidence that lots of trading adds to performance, to the contrary, this tends to depress results as turnover relates to fee drag and incorrect sell/buy decisions. The more you trade, the more you will see the "Nedsaid effect" which pretty much says that what you sell will outperform what you buy to replace at a ratio of 2:1 or even 3:1. Professional investors are not immune to this. Lower turnover tends towards higher returns. Don't know why rich people need portfolio turnover any more than less heeled folks.

Richer people can get access to hedge funds. There are such funds that have been successful and wildly so but most are disappointments. There is a lot of academic research on this. So you can get into a hedge fund but can you get into the right hedge fund? Can you really get into the better private equity and private real estate deals? Yale and Harvard Endowments can but most endowments trying this have underperformed the plain vanilla 60% stock/40% bond balanced funds.

So yes, being wealthy has its advantages. Hopefully this means access to the best managers, advisors, investment products, professional contacts, and deals. But it ain't necessarily so. Just ask Kareem Abdul-Jabbar. Not everyone has had positive experience with wealth managers.

Not telling wealthy people not to get advisors. They need advice. They have problems that the average Joe and Jane don't have. They have a lot more wealth. I am just saying there are pitfalls to Wealth Management just as there is with everything else.
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Re: Do Advisers Add $$$ Value?

Post by livesoft » Sun Jul 01, 2018 5:38 pm

garlandwhizzer wrote:
Sun Jul 01, 2018 3:55 pm
Financial education is more than just reading some of the many excellent books on the topic. Experience in also essential IMO. I have made some mistakes along the way as have all honest investors without exception. The key is to learn from those mistakes. IMO a seasoned investor is one who has already made all possible mistakes but has learned from them instead of giving up.
I think a seasoned investor can also be one who has already seen all possible mistakes without committing those mistakes and has learned from them. This can be a reason for people to read more threads than they would normally have read.
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Re: Do Advisers Add $$$ Value?

Post by Fallible » Sun Jul 01, 2018 5:56 pm

This from Jason Zweig may not directly answer your question, but it comes close:

"While some financial advisers who cater to individual investors are willing to calculate and report their own average historical returns, the vast majority still don’t—and probably won’t until investors smarten up and start demanding it."

http://jasonzweig.com/financial-adviser ... r-numbers/

My guess is that those investors who do "smarten up and start demanding" are those capable of DIY.
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Re: Do Advisers Add $$$ Value?

Post by 9-5 Suited » Sun Jul 01, 2018 6:07 pm

I find it generally fascinating that this industry has been able to normalize an ongoing percentage fee for advice. Think of all the professionals who advise or help us on a regular basis and how absolutely, utterly absurd it would be if one of them requested a never ending percentage of your financial assets as payment.

I guess it developed because this industry happens to be focused on the portfolio as the topic of the advice, so the connection somehow seems more natural than it is. Hopefully more and more people realize this over time and start paying for their advice in other ways.

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Re: Do Advisers Add $$$ Value?

Post by NotWhoYouThink » Sun Jul 01, 2018 7:05 pm

Since I have an MBA, I can confidently state that the answer is "It depends." That is the answer to any business school question.

Some advisors can help some clients. Many, maybe most people will make a complete mess of their finances if left to their own devices. Honest advisors working for companies that do enough research to recommend overly complicated portfolios that are not necessarily terrible can help most of these people do better than they would do on their own. Even net of fees.

People who spend a lot of time on this forum, even if only for a few months, can and probably will do better on our own than with advisors. So there are very few advisors than can add value for us.

Some advisors are charismatic and charming and build great relationships with clients that they steal from shamelessly. Not quite Bernie Madoff, but bad enough.

So it depends. But I don't know how to design a study to show all of that.

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Re: Do Advisers Add $$$ Value?

Post by Rick Ferri » Sun Jul 01, 2018 8:32 pm

I was an adviser for 30 years and will pick up the role again after a non-compete is over with my former firm. The first seven years as an adviser was spent trying to find ways to beat the markets. My “Aha! moment” occurred after the portfolios were not keeping up, and reading Jack’s first book, “Bogle on Mutual Funds” explained why. I turned to indexing and never looked back.

Here is my point, once I got index religion, I never told a client or prospect that they were not capable of managing a portfolio by themselves or that any portfolio I managed for them would do better than a portfolio they managed for themselves.

My idea was to provide all the intellectual property for free in books and articles, and provide a reasonably priced portfolio management service for those who didn’t want to do it themselves or perhaps were overseeing money under some legal entity where the portfolio had to be managed professionally.

The “value added” was not excess return or a reduction in risk over what an individual self-managing could do. It was peace of mind and time management. Those who did not want to do it, or had no time to do it, or were required to hire someone to do it could have hired me.

I started this conversation because a adviser told me he had no faith in do-it-yourself investors and he was sure he would earn higher returns. “Performance alpha” is what he is selling. He sells the idea he will outperform you, so you should hire him.

I did not agree and asked the opinion of the Bogleheads.

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Re: Do Advisers Add $$$ Value?

Post by nisiprius » Sun Jul 01, 2018 9:00 pm

averagedude wrote:
Sat Jun 30, 2018 10:29 pm
I think the biggest value that an advisor gives to their clients is to keep them from selling stocks at the bottom of bear markets. If you are a member of bogleheads and believe in their philosophy, you don't need to pay someone thousands of dollars for this advice.
This is often asserted, but I wonder if it is true. Advisor Dan Solin acknowledged in 2013, in a Bloomberg article entitled "Smart Money, Dumb Ideas," that he personally "panic-sold" in 2008. What is significant is that he said in so many words that he did the opposite of what he was advising his clients to do. However, he does not say whether his clients followed his advice.

Implicit in the idea of advisors adding value in this way is there is some objectively correct risk tolerance, that most clients do not take "enough" risk, and that advisors add value by artificially increasing their clients' risk tolerance through coaching. This seems like a dubious proposition. It is certainly not one that I would accept without firm evidence. I suspect that clients would be better served by the advisor making a serious effort to help them understand what their risk tolerance actually is, and not to exceed it--so that they are not spooked into selling at the bottom like Dan Solin.
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Re: Do Advisers Add $$$ Value?

Post by nisiprius » Sun Jul 01, 2018 9:03 pm

Rick Ferri wrote:
Sat Jun 30, 2018 7:48 pm
...Has anyone come across a study, research paper or quantifiable data that shows advised clients earn higher returns than DIY investors?...
And, please, let's make that risk-adjusted returns.
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Re: Do Advisers Add $$$ Value?

Post by livesoft » Sun Jul 01, 2018 9:06 pm

Re: risk and clients, here's anecdote:

I know someone who received a 7-figure life insurance payout. They kept the money in a bank savings account paying 0.1% interest because they were afraid of a high-yield savings account Ally and anything where they needed to use the Internet. Their advisor tried to talk them into something like Vanguard Prime Money Market which was paying a nice rate, but they were afraid of that, too.

Let's say this fear was costing them $10K to $30K a year in missed interest earnings.
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Re: Do Advisers Add $$$ Value?

Post by Fallible » Sun Jul 01, 2018 9:27 pm

9-5 Suited wrote:
Sun Jul 01, 2018 6:07 pm
I find it generally fascinating that this industry has been able to normalize an ongoing percentage fee for advice. Think of all the professionals who advise or help us on a regular basis and how absolutely, utterly absurd it would be if one of them requested a never ending percentage of your financial assets as payment.
...
Charles Ellis writes in his book, Winning the Loser’s Game (2017 ed.): “The pricing of investment management services has been an exception to the hallowed laws of economics for the past 50 years.”

In the chapter “Phooey on Phees!”, he calls fees “astonishingly high” and much higher than many investors realize. I can’t do justice here to what he has written as he goes into the history of fees, alternatives to the way they are charged, reasons they seem “low” to investors, even fees worldwide. Highly recommended reading!
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Re: Do Advisers Add $$$ Value?

Post by LadyGeek » Sun Jul 01, 2018 9:34 pm

I found a paper that was not written by Vanguard: Alpha Duties: The Search For Excess Returns and Appropriate Fiduciary Duties, revised February 2018.

Ayres, Ian and Fox, Edward G., Alpha Duties: The Search For Excess Returns and Appropriate Fiduciary Duties (August 28, 2017). Yale Law & Economics Research Paper #583; NYU Law and Economics Research Paper No. 17-37. Available at SSRN: https://ssrn.com/abstract=3028334 or http://dx.doi.org/10.2139/ssrn.3028334

==============
Assuming I interpreted this paper correctly(?), advisors just need to generate excess returns of 5% to 15% (9% to 18% in a volatile market) to earn their keep.
Abstract:

It is standard investment advice to buy mutual funds or ETFs that are (i) well-diversified, (ii) low-cost, and (iii) expose one’s portfolio to age-appropriate stock-market risk. But advisors at times deviate from this advice in order for their clients to cash in on investment opportunities with expected above-market returns. For example, an advisor might have a client forego the benefits of diversification to invest in a stock or a handful of stocks that the advisor believes will produce “alpha,” excess returns. This article provides the first estimates of how large expected alpha has to be to justify sacrifices in diversification, cost, and age-appropriate exposure. For example, we estimate that a person of average risk aversion would need an annual alpha between 500 and 1500 basis points before being willing to forego the benefits of diversification and hold an individual stock (and that during a financial crisis a person would need an alpha between 900 and 1800 basis points).

Conclusion:

Instead of prohibiting financial advisors, and other fiduciaries from recommending or allowing clients to pursue “seeking alpha” strategies, we have proposed making sure that the fiduciaries understand how much alpha is required to offset specific kinds of losses. Failures to minimize excess fees, diversification and exposure losses can be justified by sufficient expectations that a portfolio will generate above market returns. This Article has estimated how much alpha is necessary to offset particular kinds of portfolio losses – from taking on inefficient idiosyncratic risk (diversification loss), inefficient systemic risk (exposure loss) or inefficient excess fees. We find that diversification loss is likely higher during crisis periods, both because systemic risk tends to be higher and because idiosyncratic risk tends to be higher.
Financial resources are in the wiki. See: Financial websites and blogs (Research and other financial articles)

Two paper sources are SSRN and RePEc: Research Papers in Economics.

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Re: Do Advisers Add $$$ Value?

Post by Rick Ferri » Sun Jul 01, 2018 10:01 pm

Interesting conclusions! Thanks, LadyGeek.
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Re: Do Advisers Add $$$ Value?

Post by DJN » Sun Jul 01, 2018 10:12 pm

I have a slightly different point of view to nearly all of the observations here. US investors and most BH's are in a priviledged position to be in a fairly transparent market with a great range of products and providers with well known tax and social security aspects. In my case I am offshore (non US) earning tax free and preparing for return to a European jurisdiction with a spouse who can be non resident for tax purposes in our upcoming location.
There is nothing simple about setting up our portfolio from both tax, structure and fund availability points of view. The only safe way to go forward is to find advisers including for tax, estate and fund advice in order to set up the portfolio so as to "avoid" several very serious pitfalls. This is the practical side of the problem, there is then of course the personal side where you have to demonstrate to your partner confidence in what you are doing in an environment where the normal course of events is to succumb to greedy and lazy pension funds who charge quite extraordinary fee levels in comparison to your discussion so far. 1% would be nice in those cases!
Add to that the difficulties in certain jurisdictions of accessing US ETF's in a tax efficient and cost efficient way. Even choosing a simple three fund portfolio is in our case fraught with difficulty.
Please continue to argue for lower fees! When we catch up with the US to where you are now we will celebrate.
My approach is that I will pay a fixed fee for a plan and for an initial set up of the portfolio then I will pay yearly for a checkup on an hourly basis.
DJN

BritishInvestor
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Joined: Thu Jun 14, 2018 5:22 am

Re: Do Advisers Add $$$ Value?

Post by BritishInvestor » Mon Jul 02, 2018 12:22 am

If you go and see a decent financial planner (at least here in the UK), portfolio construction etc. is a long way down the list in the terms of where they believe they add value (Vanguard/Dimensional are very popular in these advisers' portfolios). Very few of them would claim to beat the market, and of course there will be a drag on market returns due to adviser fees. However, I thought it was common knowledge that the average private investor generates terrible returns relative to their chosen benchmark??

https://seekingalpha.com/article/410868 ... re-endures

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