Should I keep my financial advisor

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
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FlyAF
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Re: Should I keep my financial advisor

Post by FlyAF » Thu Sep 06, 2018 3:17 pm

Greenman72 wrote:
Thu Sep 06, 2018 3:02 pm
Long story short--you get what you pay for when you take the advice of a talking earpiece. There's a big difference between a "financial advisor" and a financial advisor.
No offense, but spoken like a true financial advisor. OP found his way here, he can find his way into a low fee target date index fund while he learns the ropes. He is a high earner and will end up paying millions of dollars to folks like you should he listen to advice like that.

barnaclebob
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Re: Should I keep my financial advisor

Post by barnaclebob » Thu Sep 06, 2018 3:23 pm

Greenman72 wrote:
Thu Sep 06, 2018 3:14 pm
barnaclebob wrote:
Thu Sep 06, 2018 3:09 pm

Is there not someone you can pay by the hour for this kind of advice?
You could hire a quality financial planner--but everybody here has opposed the idea. You need a talking earpiece instead.

Or you could hire a CPA--but you don't need one after your first year. You can just copy what he did last year, and DIY. Rinse and repeat yearly.

Again--I have no idea what OP's situation is, and whether it warrants that kind of price. But just to uniformly say "NEVER PAY FOR ADVICE. NEVER EVER EVER--unless it's a Talking Earpiece at Vanguard. Then go ahead" is very dangerous advice.

Talking Earpieces and Online Algorithms will never replace quality financial advisors. And they exist--you just have to find them.
Very few people here are opposed to paying hourly rates or one time flat fees for financial, tax, and estate planning. Paying continuously for investment management is however unnecessary for most people that have discipline to not shoot themselves in the foot. OP hasn't given a lot of info but based on their assets and the statements they have made their situation is not complicated.

Greenman72
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Re: Should I keep my financial advisor

Post by Greenman72 » Thu Sep 06, 2018 3:28 pm

FlyAF wrote:
Thu Sep 06, 2018 3:17 pm
OP found his way here, he can find his way into a low fee target date index fund while he learns the ropes. He is a high earner and will end up paying millions of dollars to folks like you should he listen to advice like that.
Or he can pay thousands to Vanguard, hundreds of thousands to the IRS, and lose millions in foregone opportunity costs at future values, because he tried to DIY when he was clearly unqualified to do so. No offense to OP--I'm sure he's an intelligent person. But intelligence in one aspect of life does not equate to success in all areas.

barnaclebob
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Re: Should I keep my financial advisor

Post by barnaclebob » Thu Sep 06, 2018 3:30 pm

Greenman72 wrote:
Thu Sep 06, 2018 3:28 pm
FlyAF wrote:
Thu Sep 06, 2018 3:17 pm
OP found his way here, he can find his way into a low fee target date index fund while he learns the ropes. He is a high earner and will end up paying millions of dollars to folks like you should he listen to advice like that.
Or he can pay thousands to Vanguard, hundreds of thousands to the IRS, and lose millions in foregone opportunity costs at future values, because he tried to DIY when he was clearly unqualified to do so. No offense to OP--I'm sure he's an intelligent person. But intelligence in one aspect of life does not equate to success in all areas.
This forum exists to make people qualified to DIY and you aren't helping by bringing up complicated situations that don't pertain to the OP right now. Until he needs professional advice for a complicated situation Vanguard or any number of DIY friendly platforms will save him those hundreds of thousands.

Once you spend some time here you'll know what you don't know and that will keep most people from going through complicated situations without the proper knowledge.
Last edited by barnaclebob on Thu Sep 06, 2018 3:35 pm, edited 1 time in total.

bada bing
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Re: Should I keep my financial advisor

Post by bada bing » Thu Sep 06, 2018 3:35 pm

I'm definitely in the minority here, but I would say your FA might be worth it to you. It depends
a lot on your personality and temperament. Not so much (or even any) on the technical side of
just investing, but maybe because they will change you impulses at critical junctions. The offloading
of worry over how things are going might seem trivial but to a lot of people is valuable

Your FA might be worth it if having him/her creates a structure that makes your behavior more rational
and less emotional. Bogleheads tend to poo-poo the behavioral side of the equation, but that is where
the real money is made or lost. A monkey can set up a good, cheap indexed portfolio. Huge numbers
of extremely intelligent people have screwed up the returns on such a portfolio by panicking in a moment
of turmoil.

You have to self evaluate your personality. Are you a person that can keep tabs on your portfolio maybe
a few times a year but never touch it no matter what today's news is ? Would having your advisor be a
barrier to doing something stupid ? As I said, avoiding stupidity sounds so simple, but that is why the
average investor underperforms the market indexes to such a great degree.

From what you've posted about your advisor, they haven't hurt you a bit as far as what they have you
invested in. The AA differences of opinion is something that can be worked out and it may be your
advisor even understands some things about your personality that you don't. I wouldn't pay $5 for
an advisor to do portfolio design and investment choices. $6000 might be a very good deal for an
advocate that understands what makes you tick and will hold your hand when news is blaring out bad
stuff.

A caveat is that I personally have never had a paid FA. I can admit there was a period of ~15 years or so
at the beginning of my career that a good $6000/yr fiduciary advisor would have been a steal.

tommy85
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Re: Should I keep my financial advisor

Post by tommy85 » Thu Sep 06, 2018 3:42 pm

MikeG62 wrote:
Thu Sep 06, 2018 7:09 am
tommy85 wrote:
Wed Sep 05, 2018 4:24 pm
Hello all,

I'm a long time lurker but first time poster. I'm 33yrs old, married, no kids yet but planning to have one soon. I currently have a fee only financial advisor that manages my investment and other aspects of personal finance. They charge flat retainer fee of 5k per year, soon to go up to 6k. My total investment is about 200k. I have some basic understanding of investment and fund selection.

My question to all of you is are financial advisors worth their fees.. Should I keep my advisor or should I try to do it by myself.

Please let me know if you need any more information.

Thanks!
Tommy
It is hard to imagine paying someone 2.5% to 3.0% "per year" to manage their assets. If there was value, it may well be in the work already done (selecting the investments and deciding upon the appropriate asset allocation).

What is this person doing that you find remotely worth $5K per year?

The answer should not be because you "have heard people say (outside of this forum), it's best to have experts manage your money".
Initially when i started with her, i was financially illiterate and many changes happening in my life at once. I was finishing up my residency and was about to make real money, getting married, moving to a different state for my job, buying a house, needing disability/umbrella insurance to ensure i was adequately protected etc. I think at that point in life, she helped me tremendously but today i feel things are more on autopilot with minimal changes. Also over last couple years i have educated myself on financial stuff and have read a few books and posts on forum here. I feel confident i can manage my finances myself but was having some cold feet to cut her off and go independent. So in short, i feel she did 5K's worth in past, but not currently...

Thanks
T

tommy85
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Re: Should I keep my financial advisor

Post by tommy85 » Thu Sep 06, 2018 3:43 pm

J295 wrote:
Thu Sep 06, 2018 7:39 am
Consider another thread where you post your assets and other details and request advice on an allocation to a three fund portfolio. Perhaps you will get comfortable with moving from the advisor and handling these matters yourself with input from the board
Good suggestion! Thank you

tommy85
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Re: Should I keep my financial advisor

Post by tommy85 » Thu Sep 06, 2018 3:47 pm

sjt wrote:
Thu Sep 06, 2018 8:22 am
I think simply review your previous year performance (inclusive of fees) compared to what your 3 fund portfolio returned. If your adviser didn't make you $5000 more than you would have made with a 3 fund - you have to ask yourself why you would pay them $5k for that....
In last 2 years, I have roughly made about 10% per year on my investment compared to about 18% for the S&P 500 with dividends reinvested. I do not know how to calculate the return of 3 fund portfolio.

Thanks

tommy85
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Re: Should I keep my financial advisor

Post by tommy85 » Thu Sep 06, 2018 3:48 pm

JW-Retired wrote:
Thu Sep 06, 2018 9:05 am
tommy85 wrote:
Wed Sep 05, 2018 4:24 pm
I currently have a fee only financial advisor that manages my investment and other aspects of personal finance. They charge flat retainer fee of 5k per year, soon to go up to 6k. My total investment is about 200k. I have some basic understanding of investment and fund selection.

My question to all of you is are financial advisors worth their fees. Should I keep my advisor or should I try to do it by myself.
How is this "flat retainer fee" determined? I think most of these FAs have a fee schedule based on assets under management (AUM), and the fee in % of AUM drops in steps as your assets increase. What's the fee schedule for your FA? Will you be paying the same $6k when you have $1M, or the same %, or a lesser %, or what?

Regardless, starting at a 2.5% or 3% of AUM level sounds enormously high. :oops:

https://www.kitces.com/blog/independent ... ement-fee/
JW
Welcome to the Forum!
The fees is calcuated based on "complexity of our situation" and AUM. The exact formula is not disclosed to me. However, I do know it will go up as my assets increase. I have been told it is because as AUM increases, the complexity with management increases.

tommy85
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Re: Should I keep my financial advisor

Post by tommy85 » Thu Sep 06, 2018 3:51 pm

barnaclebob wrote:
Thu Sep 06, 2018 9:43 am
If you've found your way here you can certainly find your way back home with the reins in your hands now.

Other people say its best to have someone manage your money because they have filed wealth management into folder in their brain called "an expert must be better at this than I am, that's why they exist right?" They group financial advisors with doctors, lawyers, and other professional experts.

People used to not be able to book a flight by themselves and now travel agents are pretty much a dead business except for very high end, or complex travel, or to help old people who don't know how to use the internet book a vacation. Prior to the internet and index funds becoming widespread, financial advisors did have a useful role because it was much harder to access the markets with decent information. That barrier is gone now.

Your situation doesn't sound complex and if you are a Dr then you are smart enough to figure out how to DIY in pretty short order. There really aren't many pitfalls because you can always default to a Target Date Fund and not think about it. The next step up in complexity is the three fund portfolio which just requires periodic rebalancing.

The only hard part about DIY for most people is to tune out friends or coworkers bragging about getting in on Tesla and Amazon years ago (while not mentioning buying under armour or gopro mid 2015), moving to all cash because the market is way overpriced, saying bonds are garaunteed to go down soon, etc. If you can tune our your peers, are disciplined, and wont panic sell or change strategies based on the fear based headlines of the week then DIY is definitely for you.
Very well said Thank you for taking the time out.

T

sjt
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Re: Should I keep my financial advisor

Post by sjt » Thu Sep 06, 2018 4:04 pm

tommy85 wrote:
Thu Sep 06, 2018 3:47 pm
In last 2 years, I have roughly made about 10% per year on my investment compared to about 18% for the S&P 500 with dividends reinvested. I do not know how to calculate the return of 3 fund portfolio.
In the past 12 months, Vanguard total stock returned 18%, Vanguard S&P 500 fund returned 17%. And you made 10%. The choice is yours but I would have a long think about the benefits of the adviser and how much you're paying for those benefits.
"The one who covets is the poorer man, | For he would have that which he never can; | But he who doesn't have and doesn't crave | Is rich, though you may hold him but a knave." - Wife of Bath tale

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FlyAF
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Re: Should I keep my financial advisor

Post by FlyAF » Thu Sep 06, 2018 4:05 pm

tommy85 wrote:
Thu Sep 06, 2018 3:48 pm
JW-Retired wrote:
Thu Sep 06, 2018 9:05 am
tommy85 wrote:
Wed Sep 05, 2018 4:24 pm
I currently have a fee only financial advisor that manages my investment and other aspects of personal finance. They charge flat retainer fee of 5k per year, soon to go up to 6k. My total investment is about 200k. I have some basic understanding of investment and fund selection.

My question to all of you is are financial advisors worth their fees. Should I keep my advisor or should I try to do it by myself.
How is this "flat retainer fee" determined? I think most of these FAs have a fee schedule based on assets under management (AUM), and the fee in % of AUM drops in steps as your assets increase. What's the fee schedule for your FA? Will you be paying the same $6k when you have $1M, or the same %, or a lesser %, or what?

Regardless, starting at a 2.5% or 3% of AUM level sounds enormously high. :oops:

https://www.kitces.com/blog/independent ... ement-fee/
JW
Welcome to the Forum!
The fees is calcuated based on "complexity of our situation" and AUM. The exact formula is not disclosed to me. However, I do know it will go up as my assets increase. I have been told it is because as AUM increases, the complexity with management increases.
Holy moly, get out now!

palaheel
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Re: Should I keep my financial advisor

Post by palaheel » Thu Sep 06, 2018 4:21 pm

sjt wrote:
Thu Sep 06, 2018 4:04 pm
tommy85 wrote:
Thu Sep 06, 2018 3:47 pm
In last 2 years, I have roughly made about 10% per year on my investment compared to about 18% for the S&P 500 with dividends reinvested. I do not know how to calculate the return of 3 fund portfolio.
In the past 12 months, Vanguard total stock returned 18%, Vanguard S&P 500 fund returned 17%. And you made 10%. The choice is yours but I would have a long think about the benefits of the adviser and how much you're paying for those benefits.
I wouldn't make any decisions based on only 12 months of data. I only glanced at the history, but is the AA so out of whack that it needs to be overhauled after one year?
Markets crash. Markets recover. Inflation takes your money FOREVER.

MikeG62
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Re: Should I keep my financial advisor

Post by MikeG62 » Thu Sep 06, 2018 6:03 pm

tommy85 wrote:
Thu Sep 06, 2018 3:42 pm
MikeG62 wrote:
Thu Sep 06, 2018 7:09 am
tommy85 wrote:
Wed Sep 05, 2018 4:24 pm
Hello all,

I'm a long time lurker but first time poster. I'm 33yrs old, married, no kids yet but planning to have one soon. I currently have a fee only financial advisor that manages my investment and other aspects of personal finance. They charge flat retainer fee of 5k per year, soon to go up to 6k. My total investment is about 200k. I have some basic understanding of investment and fund selection.

My question to all of you is are financial advisors worth their fees.. Should I keep my advisor or should I try to do it by myself.

Please let me know if you need any more information.

Thanks!
Tommy
It is hard to imagine paying someone 2.5% to 3.0% "per year" to manage their assets. If there was value, it may well be in the work already done (selecting the investments and deciding upon the appropriate asset allocation).

What is this person doing that you find remotely worth $5K per year?

The answer should not be because you "have heard people say (outside of this forum), it's best to have experts manage your money".
Initially when i started with her, i was financially illiterate and many changes happening in my life at once. I was finishing up my residency and was about to make real money, getting married, moving to a different state for my job, buying a house, needing disability/umbrella insurance to ensure i was adequately protected etc. I think at that point in life, she helped me tremendously but today i feel things are more on autopilot with minimal changes. Also over last couple years i have educated myself on financial stuff and have read a few books and posts on forum here. I feel confident i can manage my finances myself but was having some cold feet to cut her off and go independent. So in short, i feel she did 5K's worth in past, but not currently...

Thanks
T
Great Tommy. Sounds like you got value out of the relationship and you are ready to take over the controls and cut out this unnecessary expense.

You will find this forum a great resource as you move forward.

Oh and one last thing. Run a quick google search of Warren Buffet and Protégé Partners. This will tell you all you need to know about the need to have experts managing your money.
Last edited by MikeG62 on Thu Sep 06, 2018 9:25 pm, edited 1 time in total.
Real Knowledge Comes Only From Experience

Greenman72
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Re: Should I keep my financial advisor

Post by Greenman72 » Thu Sep 06, 2018 6:09 pm

FlyAF wrote:
Thu Sep 06, 2018 3:17 pm
No offense, but spoken like a true financial advisor. He is a high earner and will end up paying millions of dollars to folks like you....
No offense taken. I am a true financial advisor.

I certainly hope he finds someone like me, pays them millions of 1% AUM fees, and makes tens of millions of what Vanguard calls “Advisor’s Alpha” at 3%. Imagine how rich he would be then!!!

ChinchillaWhiplash
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Re: Should I keep my financial advisor

Post by ChinchillaWhiplash » Thu Sep 06, 2018 8:12 pm

You should be able to manage your investments yourself and save a bunch of money over the long run. You do need to educate yourself in order to make the most tax efficient decisions. As a physician, you will more than likely be in a higher tax bracket. With proper investment vehicles you can reduce your effective tax rate. Will take some thought and planning, but if not self employed shouldn't be too difficult. A good CPA might be in order. They can steer you in the right direction to get the most out of your investments for tax purposes. Whatever you do, I wouldn't pay the current fees to your FA. Those fees are way out of line. I thought 1% of AUM was too much and dropped our FA at the beginning of the year. Probably one of the best financial move I've made.

John Laurens
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Re: Should I keep my financial advisor

Post by John Laurens » Thu Sep 06, 2018 8:13 pm

Greenman72 wrote:
Thu Sep 06, 2018 6:09 pm
FlyAF wrote:
Thu Sep 06, 2018 3:17 pm
No offense, but spoken like a true financial advisor. He is a high earner and will end up paying millions of dollars to folks like you....
No offense taken. I am a true financial advisor.

I certainly hope he finds someone like me, pays them millions of 1% AUM fees, and makes tens of millions of what Vanguard calls “Advisor’s Alpha” at 3%. Imagine how rich he would be then!!!
Does your name tag say ‘true’? Because if not, once he gains enough knowledge to distinguish the ‘true’ from the untrue, he should have plenty of knowledge to manage his own investments. Also, I found your post in November 2013 about bitcoin interesting.

Regards,
John

sambb
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Re: Should I keep my financial advisor

Post by sambb » Thu Sep 06, 2018 8:56 pm

to the OP - you are being fleeced. Place 60% of your funds in total stock, and 40% in tax exempt intermediate bonds (taxable). Dont change anything. Dont be tempted. As an MD you will have a good income, and this is all the risk you ever need. You will retire very rich at age 55-60.

I would avoid that financial advisor, and all financial advisors like the plague. The know you are easy money as a doc. Avoid. Your advisor knows nothing that you dont know. If the market goes down, you will get nervous and hear stories from other docs about how "they have a guy who got them out". Hogwash. Just keep on the plan. You will get comfortable with the ups and downs and you will be ok. Sheesh your advisor is making a fortune off of you.

Greenman72
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Re: Should I keep my financial advisor

Post by Greenman72 » Thu Sep 06, 2018 9:06 pm

??? I don’t recall ever posting about Bitcoin on Bogleheads. Or in 2013. Or at all, for that matter.

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StormShadow
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Re: Should I keep my financial advisor

Post by StormShadow » Thu Sep 06, 2018 9:22 pm

tommy85 wrote:
Wed Sep 05, 2018 4:24 pm
They charge flat retainer fee of 5k per year, soon to go up to 6k. My total investment is about 200k. I have some basic understanding of investment and fund selection.

My question to all of you is are financial advisors worth their fees.. Should I keep my advisor or should I try to do it by myself.
IMO... $5-6k is a lot for $2 mill, much less a $200k account.

At this point, the size of your investment is mostly going to depend on how much you save and not what investments you chose.

What I would do:
Ditch the advisor
Invest the difference plus whatever you have to spare
Live within your means
Lurk bogleheads and learn to invest on your own. This last step, frankly, is a LOT easier than those advisors would have you believe.

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SeeMoe
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Re: Should I keep my financial advisor

Post by SeeMoe » Thu Sep 06, 2018 10:37 pm

I periodically like an analysis done just to see if I’m drifting and also getting another opinion now and then. Trouble is finding anyone who will do it for a fair fee of, say,$300-$400 bucks...today!

SeeMoe.. :annoyed
"By gnawing through a dike, even a Rat can destroy a nation ." {Edmund Burke}

Kevin8696
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Re: Should I keep my financial advisor

Post by Kevin8696 » Thu Sep 06, 2018 11:10 pm

Tommy85....

Did you say you pay $5k a year for a $200k portfolio that is mostly invested in index funds ? OMG!!! Doctor... Stop the Bleeding !!

Wouldn't you rather have that $5k going into your portfolio and not your advisor's ?

Since you found your way here, you are likely a good candidate for DIY investing. Lots of good folks here with experience and ideas to help.

If you are not comfortable going it alone (with us), you can ease into self-management by paying 0.30% (per year) for a Vanguard team to set you up and get a plan in place for you, and then you can turn that service off anytime you want.

A couple good books to get you started and build your investment confidence that I would recommend are:

"The Coffeehouse Investor", by Bill Schultheis... a recovering Smith Barney broker. Amazon $15. It's a quick and easy read, about 190 pages, with some funny stories. His bottom line is that Wall Street wants you to believe that you can't do it alone. But of course you can.

"The Little Book of Common Sense Investing", by John C. Bogle (revised 2017). Amazon $16. Certainly a bit meatier than Coffeehouse, but a great source of information on how and why to build a portfolio of low-cost index funds. When you read his opening story about "the Gotrocks family", it will be an ah-ha moment for you.

Good Luck !!
Last edited by Kevin8696 on Thu Sep 06, 2018 11:23 pm, edited 1 time in total.

limeyx
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Re: Should I keep my financial advisor

Post by limeyx » Thu Sep 06, 2018 11:22 pm

Greenman72 wrote:
Wed Sep 05, 2018 8:35 pm
Sasquatch wrote:
Wed Sep 05, 2018 5:07 pm
What services does the advisor provide for 3% ? Is Estate planning and taxplanning somehow in the mix?
As a financial advisor, I am often asking myself the same questions.

Did you know? 67% of all "financial advisors" offer "tax planning" as part of their services. However, only 18% offer tax preparation.
How do you "plan taxes" if you don't "prepare taxes"?
Simple, you say "This might impact your taxes, please call your CPA to check" (Or at least that's what my ex-FA used to say)

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nedsaid
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Re: Should I keep my financial advisor

Post by nedsaid » Thu Sep 06, 2018 11:35 pm

Tommy, what I would say is by all means bounce ideas off of forum members. By all means have us look at your portfolio. By all means seek advice here. But some caution here.

We just cannot run your financial life from here. First of all, no way of knowing all the factors involved in your financial decisions. This would take a really, really long thread. One missing piece of information could completely change the advice given. Also we have various degrees of expertise here. Everyone here has limited time. Normally on threads like this, I will give general and high level advice. A few times, I have really waded into the detail to help somebody. The best we can do for you is to help educate you, clarify your thinking, and give you some options. Ultimately, it is your money and it is your responsibility to make your own decisions. Also check out what we say against reputable sources. We have recommended authors and recommended books. There is also a really fine Wiki here.

What I am trying to say is that there are limitations to even a great forum like this. There is a huge amount of knowledge and wisdom here and I have been very impressed with the quality of discussion here. The moderators also do a fine job here keeping everything civil and on track. We are one important tool in your toolbox, along with the recommended authors and books and the Wiki. Just saying we aren't the whole thing.

If you choose to continue working with the advisor, you will be much better informed and better able to make use of her time. Otherwise, you are well informed to manage all this yourself. Someone bright enough to get through medical school is plenty bright enough to manage your own financial life. You just have to build the skills and knowledge.

Many best wishes and welcome to the forum.
A fool and his money are good for business.

JW-Retired
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Re: Should I keep my financial advisor

Post by JW-Retired » Fri Sep 07, 2018 8:28 am

tommy85 wrote:
Thu Sep 06, 2018 3:48 pm
JW-Retired wrote:
Thu Sep 06, 2018 9:05 am
How is this "flat retainer fee" determined? I think most of these FAs have a fee schedule based on assets under management (AUM), and the fee in % of AUM drops in steps as your assets increase. What's the fee schedule for your FA? Will you be paying the same $6k when you have $1M, or the same %, or a lesser %, or what?
The fees is calculated based on "complexity of our situation" and AUM. The exact formula is not disclosed to me. However, I do know it will go up as my assets increase. I have been told it is because as AUM increases, the complexity with management increases.
Huh? Your advisor won't disclose what the fees would be when you do have $1M for them to manage! They won't tell you the "exact formula", meaning you basically have arbitrary fees at the whim of this FA. I've never heard of anything like this? Anybody know if it's even legal?

I would definitely flee given this sort of undisclosed fee formula. if you continue with this FA they sure have you in a perfect spot for them!
JW

ps: My disclosure ........... we haven't had any kind of a FA since some time in the 1970's. We muddled through fine even without anything like Boglehead guidance. :beer
Retired at Last

afan
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Re: Should I keep my financial advisor

Post by afan » Fri Sep 07, 2018 8:46 am

Greenman72 wrote:
Thu Sep 06, 2018 3:28 pm

Or he can pay thousands to Vanguard, hundreds of thousands to the IRS, and lose millions in foregone opportunity costs at future values, because he tried to DIY when he was clearly unqualified to do so.
Can we assume that your standard contract with customers includes language promising to save "hundreds of thousands" in taxes and generate "millions" in future values beyond those of a simple 3 fund portfolio? What does the contract say the customers get if you don't live up to these promises?

By the way, what is a "talking earpiece" and where can I get one?

Thanks
We don't know how to beat the market on a risk-adjusted basis, and we don't know anyone that does know either | --Swedroe | We assume that markets are efficient, that prices are right | --Fama

JBTX
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Re: Should I keep my financial advisor

Post by JBTX » Fri Sep 07, 2018 8:50 am

I can't speak to the quality of your financial advisor, but generically, whether they are worth it really is a function of what you want them to do for you. I recently discussed in another thread about researching fee only financial advisors for a friend. I have found it a frustating experiencing. Ultimately for them to be compensated fairly/ worth their time for portfolios under $500k, they charge a fee that comes out to a relatively high percent of your assets. The financial advice industry is largely built around "advisors" being compensated for churning transactions, so the true fee only model is somewhat a work in progress.

Ultimately, if you are willing to start learning and taking the time to manage this stuff, over the long term you will probably be better off. One just in terms of avoided fees, but also to the extent you learn and understand this stuff, it helps you plan better for the long term. Knowledge is power.

But you have to be willing to devote a little bit of time to it. Some people just don't want to do that. They want to hand it off to somebody else. Where do you fall?

Also, one function a good financial advisor does is essentially hand holding when things get rough. Investing is easy when markets keep going up and up. But eventually markets will fall, perhaps a lot. How will you react? A good advisor will tell you "don't panic, this is for retirement 20-30 years down the road, look at the long term, now you can buy stuff cheaper". Do you have the confidence and discipline not to bail out of your investments at the first sign of trouble? Only you know that.

If you think you have the stomach for it, I'd probably renew for another year, but during that time dedicate yourself to learning as much as you can such that you can take over all or part of it a year down the road. This forum and knowledge repository is an excellent resource if you choose to go the do it yourself route.

Greenman72
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Re: Should I keep my financial advisor

Post by Greenman72 » Fri Sep 07, 2018 12:09 pm

afan wrote:
Fri Sep 07, 2018 8:46 am
Greenman72 wrote:
Thu Sep 06, 2018 3:28 pm

Or he can pay thousands to Vanguard, hundreds of thousands to the IRS, and lose millions in foregone opportunity costs at future values, because he tried to DIY when he was clearly unqualified to do so.
Can we assume that your standard contract with customers includes language promising to save "hundreds of thousands" in taxes and generate "millions" in future values beyond those of a simple 3 fund portfolio? What does the contract say the customers get if you don't live up to these promises?

By the way, what is a "talking earpiece" and where can I get one?

Thanks
No. I tell them that I will plan and prepare their tax return in a manner that legally minimizes tax and maximizes wealth as much as possible. I tell them I will invest their investable assets in broad-based ETF's, and charge a fee similar to what the market will bear (known to you as a 1% AUM fee). I can also help with business succession (as noted above), estate and trust administration (although I will not serve as executor or trustee), and business administration, structuring, and bookkeeping. I tell them that I can devise a strategy that will maximize their qualified retirement accounts and minimize their tax burden. I will help them devise estate plans and "philanthropy plans" that will ensure that their assets are distributed in the most tax-efficient manner, according to their wishes. Moreover, because I can do all of the above (rather than just one or two pieces), I can integrate all of them in such a way that will maximize their overall wealth--which is something that very few, if any "financial advisors" can do. I can do this because I have more tools at my disposal than most retail "financial advisors".

If people ask, "What does my AUM fee cover and what can expect to be billed for?" I say, "Tax prep and bookkeeping are always billed. Anything dealing with portfolio management (security selection, asset allocation, asset location) are covered under the AUM fee. The other stuff that falls between may or may not get billed, depending on what it is, how much time it takes, how complex it is, and whether any outside expertise is involved. Think of it like a doctor's office. If you're coming in for a checkup--no charge. If you're coming in for a 10-minute clinic visit--no charge. If you need major surgery, you can expect a bill."

Some people push back and say, "Well, I can do this by myself without paying you anything." To which I respond, "Go ahead. I have plenty of other customers. If you don't value my services, we're probably not a good fit for each other. May the Force be ever in your favor." And that's about it.

I have plenty of stuff to do. I don't waste time with people who don't want me. There are a lot of people who think that I am worth it, and those are the people I spend time on.

The problem with most of the people (or should I say, the most vociferous people) on this site is that they think that most people can DIY with just a little help. I've been doing it a while, and I can assure you that they cannot. Even with a Boglehead's help, the sheer volume of information that a person has to learn in order to fully control his/her financial life is daunting. And even if they do have the intelligence to do it, they may not have the time or desire. Some of the people I work for are perfectly capable--they just don't want to deal with it. They'd rather pay somebody so they don't have to worry about it. And that's fine. Those are the people I want. I provide a valuable service to society, and feel like I shouldn't get paid any less than a doctor, lawyer, engineer, or any other professional.

delamer
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Re: Should I keep my financial advisor

Post by delamer » Fri Sep 07, 2018 1:41 pm

Greenman72 wrote:
Fri Sep 07, 2018 12:09 pm
afan wrote:
Fri Sep 07, 2018 8:46 am
Greenman72 wrote:
Thu Sep 06, 2018 3:28 pm

Or he can pay thousands to Vanguard, hundreds of thousands to the IRS, and lose millions in foregone opportunity costs at future values, because he tried to DIY when he was clearly unqualified to do so.
Can we assume that your standard contract with customers includes language promising to save "hundreds of thousands" in taxes and generate "millions" in future values beyond those of a simple 3 fund portfolio? What does the contract say the customers get if you don't live up to these promises?

By the way, what is a "talking earpiece" and where can I get one?

Thanks
No. I tell them that I will plan and prepare their tax return in a manner that legally minimizes tax and maximizes wealth as much as possible. I tell them I will invest their investable assets in broad-based ETF's, and charge a fee similar to what the market will bear (known to you as a 1% AUM fee). I can also help with business succession (as noted above), estate and trust administration (although I will not serve as executor or trustee), and business administration, structuring, and bookkeeping. I tell them that I can devise a strategy that will maximize their qualified retirement accounts and minimize their tax burden. I will help them devise estate plans and "philanthropy plans" that will ensure that their assets are distributed in the most tax-efficient manner, according to their wishes. Moreover, because I can do all of the above (rather than just one or two pieces), I can integrate all of them in such a way that will maximize their overall wealth--which is something that very few, if any "financial advisors" can do. I can do this because I have more tools at my disposal than most retail "financial advisors".

If people ask, "What does my AUM fee cover and what can expect to be billed for?" I say, "Tax prep and bookkeeping are always billed. Anything dealing with portfolio management (security selection, asset allocation, asset location) are covered under the AUM fee. The other stuff that falls between may or may not get billed, depending on what it is, how much time it takes, how complex it is, and whether any outside expertise is involved. Think of it like a doctor's office. If you're coming in for a checkup--no charge. If you're coming in for a 10-minute clinic visit--no charge. If you need major surgery, you can expect a bill."

Some people push back and say, "Well, I can do this by myself without paying you anything." To which I respond, "Go ahead. I have plenty of other customers. If you don't value my services, we're probably not a good fit for each other. May the Force be ever in your favor." And that's about it.

I have plenty of stuff to do. I don't waste time with people who don't want me. There are a lot of people who think that I am worth it, and those are the people I spend time on.

The problem with most of the people (or should I say, the most vociferous people) on this site is that they think that most people can DIY with just a little help. I've been doing it a while, and I can assure you that they cannot. Even with a Boglehead's help, the sheer volume of information that a person has to learn in order to fully control his/her financial life is daunting. And even if they do have the intelligence to do it, they may not have the time or desire. Some of the people I work for are perfectly capable--they just don't want to deal with it. They'd rather pay somebody so they don't have to worry about it. And that's fine. Those are the people I want. I provide a valuable service to society, and feel like I shouldn't get paid any less than a doctor, lawyer, engineer, or any other professional.
For us Bogleheads, I think the main issue is that most people’s financial lives are not complex enough to warrant the level of expertise, and commensurate cost, that you provide. Tax software, a target date retirement fund, and a visit to an estate attorney will take care of the overwhelming majority of W-2 filers’ financial needs.

Throw in a suspicion that advisors steer clients to products that maximize the advisors’ commissions rather than those that maximize the clients’ net worth, and we recommend the do-it-yourself approach.

Keep in mind that people who find their way to this site aren’t here because they are happy with their advisors.

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Re: Should I keep my financial advisor

Post by Jack FFR1846 » Fri Sep 07, 2018 1:48 pm

Greenman72 wrote:
Fri Sep 07, 2018 12:09 pm
Even with a Boglehead's help, the sheer volume of information that a person has to learn in order to fully control his/her financial life is daunting.
No, it isn't.
Bogle: Smart Beta is stupid

MittensMoney
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Re: Should I keep my financial advisor

Post by MittensMoney » Fri Sep 07, 2018 1:51 pm

2.5-3% is way too much. Fire him. You can get the same help (or better) for around 1% if you need it. At the very least, transfer to an advisor who's in that ballpark first and then you can go the DIY in the future if it makes sense. Use Mint, Personal Capital, Quicken, or build a spreadsheet to track everything and get to know your money.

Greenman72
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Re: Should I keep my financial advisor

Post by Greenman72 » Fri Sep 07, 2018 2:13 pm

^Don't misunderstand me. I'm not defending the "average" retail financial advisor. As noted elsewhere, I'm extremely critical of them.

I'm a CPA, and I'm on the local chapter of our State Society. I am trying to get more of us involved in this business, but most CPA's are very reluctant. I'm not sure why. The depth and breadth of knowledge that I have learned as a CPA is far greater than anything I would have learned in the financial advisory business.

That is evidenced by the difference between the AICPA's ENGAGE conference and my B-D's National Conference. ENGAGE was full of advanced technical knowledge. The National Conference was full of product sales, "how to sell to clients", "rah-rah-you can do it"-type of stuff.

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nedsaid
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Re: Should I keep my financial advisor

Post by nedsaid » Fri Sep 07, 2018 2:27 pm

Greenman72 wrote:
Fri Sep 07, 2018 2:13 pm
^Don't misunderstand me. I'm not defending the "average" retail financial advisor. As noted elsewhere, I'm extremely critical of them.

I'm a CPA, and I'm on the local chapter of our State Society. I am trying to get more of us involved in this business, but most CPA's are very reluctant. I'm not sure why. The depth and breadth of knowledge that I have learned as a CPA is far greater than anything I would have learned in the financial advisory business.

That is evidenced by the difference between the AICPA's ENGAGE conference and my B-D's National Conference. ENGAGE was full of advanced technical knowledge. The National Conference was full of product sales, "how to sell to clients", "rah-rah-you can do it"-type of stuff.
I am not a CPA but I do tax work. People come in wanting advice mostly about taxes but sometimes about retirement issues. I give them tax advice best I can and tell them that it might be worth it for them to pay by the hour for personal finance and investment advice.

I will mention the big three no-load mutual fund companies: Vanguard, Fidelity, and T Rowe Price. I also mention that certain discount brokerages like Charles Schwab are good places to put money. These firms can offer cheaper portfolio management and sometimes free access to a financial planner. That is a good place to start. I tell them to inform themselves before seeing an advisor so that they can ask better questions and better use the advisor's time. The reason I do this is that there are some complex issues with retirement and the making of decisions that are irreversable or not easily reversed.

Also many people are ignorant about the taxability of Social Security. Sometimes people will just do a Roth conversion because somebody told them to do it. Sometimes, a Roth conversion offers little in the way of benefits. When a Roth conversion makes sense, thinking things through ahead of time can save on taxes. Doesn't make sense to convert if it throws you into a higher tax bracket. Stuff like that.
A fool and his money are good for business.

John Laurens
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Re: Should I keep my financial advisor

Post by John Laurens » Fri Sep 07, 2018 3:41 pm

:dollar
Greenman72 wrote:
Fri Sep 07, 2018 12:09 pm
afan wrote:
Fri Sep 07, 2018 8:46 am
Greenman72 wrote:
Thu Sep 06, 2018 3:28 pm

Or he can pay thousands to Vanguard, hundreds of thousands to the IRS, and lose millions in foregone opportunity costs at future values, because he tried to DIY when he was clearly unqualified to do so.
Can we assume that your standard contract with customers includes language promising to save "hundreds of thousands" in taxes and generate "millions" in future values beyond those of a simple 3 fund portfolio? What does the contract say the customers get if you don't live up to these promises?

By the way, what is a "talking earpiece" and where can I get one?

Thanks
No. I tell them that I will plan and prepare their tax return in a manner that legally minimizes tax and maximizes wealth as much as possible. I tell them I will invest their investable assets in broad-based ETF's, and charge a fee similar to what the market will bear (known to you as a 1% AUM fee). I can also help with business succession (as noted above), estate and trust administration (although I will not serve as executor or trustee), and business administration, structuring, and bookkeeping. I tell them that I can devise a strategy that will maximize their qualified retirement accounts and minimize their tax burden. I will help them devise estate plans and "philanthropy plans" that will ensure that their assets are distributed in the most tax-efficient manner, according to their wishes. Moreover, because I can do all of the above (rather than just one or two pieces), I can integrate all of them in such a way that will maximize their overall wealth--which is something that very few, if any "financial advisors" can do. I can do this because I have more tools at my disposal than most retail "financial advisors".

If people ask, "What does my AUM fee cover and what can expect to be billed for?" I say, "Tax prep and bookkeeping are always billed. Anything dealing with portfolio management (security selection, asset allocation, asset location) are covered under the AUM fee. The other stuff that falls between may or may not get billed, depending on what it is, how much time it takes, how complex it is, and whether any outside expertise is involved. Think of it like a doctor's office. If you're coming in for a checkup--no charge. If you're coming in for a 10-minute clinic visit--no charge. If you need major surgery, you can expect a bill."

Some people push back and say, "Well, I can do this by myself without paying you anything." To which I respond, "Go ahead. I have plenty of other customers. If you don't value my services, we're probably not a good fit for each other. May the Force be ever in your favor." And that's about it.

I have plenty of stuff to do. I don't waste time with people who don't want me. There are a lot of people who think that I am worth it, and those are the people I spend time on.

The problem with most of the people (or should I say, the most vociferous people) on this site is that they think that most people can DIY with just a little help. I've been doing it a while, and I can assure you that they cannot. Even with a Boglehead's help, the sheer volume of information that a person has to learn in order to fully control his/her financial life is daunting. And even if they do have the intelligence to do it, they may not have the time or desire. Some of the people I work for are perfectly capable--they just don't want to deal with it. They'd rather pay somebody so they don't have to worry about it. And that's fine. Those are the people I want. I provide a valuable service to society, and feel like I shouldn't get paid any less than a doctor, lawyer, engineer, or any other professional.

In 2013, when you made a comment on Bogleheads regarding bitcoin, did you tell every client to buy bitcoin and hold on to it until late 2017. If I was paying 1% AUM on my millions to a financial advisor, I would expect them to make me many millions when the opportunity arose. Do all of your clients have yachts?

Regards,
John

Greenman72
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Re: Should I keep my financial advisor

Post by Greenman72 » Fri Sep 07, 2018 4:28 pm

I looked for the aforementioned comment and I found it. I forgot that I made it.

I did not recommend that anybody buy Bitcoin. I have never in my life recommended Bitcoin. In fact, when asked about it, I told people to stay far away from it.

[OT comment removed by admin LadyGeek]

Nate79
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Re: Should I keep my financial advisor

Post by Nate79 » Fri Sep 07, 2018 4:29 pm

First, you posted on Bogleheads asking if you should have a financial advisor. It's a DIY site. You get one canned answer on here - no. I'm going to go against the 99% and say you didn't waste your money and that you should consider the overall cost from what your time is worth and if you are able and want to do this one your own.

Can you do it yourself? yes, it is very easy. Truthfully this website overcomplicates everything by 100x. You could pick a simple target date fund and get it 99% right.

But you have to look at it from the other side. You are not paying an AUM % of assets. Who wants to manage a small portfolio for a % when it requires much the same time no matter the amount? You paid a flat fee you said. You probably paid for about 10-20 hours worth of an advisors time over the whole year. Do you think you got 10-20 hours worth of a professional's time to manage your portfolio? Did you meet with the advisor over the year or make any calls? How many hours total was that?

Time adds up in the end. These guys/gals are running an office and they are not running the office for minimum wage.

How much is your time worth per hour? How many hours do you plan to spend each year to run your portfolio? Is that ok with you?

If your advisor had you in index funds, wasn't churning and if you value your time more than the per hour rate then don't feel bad. People around here pay for maid service, lawn service, mechanics, etc but they just yelled at you for having a financial advisor.

The other main goal of an advisor is to keep you from doing stupid things when the market is going crazy. Only you know if you are able to buy and hold. There are countless threads of people who sold at the bottom and stayed out of the market. If there is a chance you will do this then having an advisor may help. That is worth FAR more than the advisory fee.

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Re: Should I keep my financial advisor

Post by Nate79 » Fri Sep 07, 2018 4:31 pm

sjt wrote:
Thu Sep 06, 2018 4:04 pm
tommy85 wrote:
Thu Sep 06, 2018 3:47 pm
In last 2 years, I have roughly made about 10% per year on my investment compared to about 18% for the S&P 500 with dividends reinvested. I do not know how to calculate the return of 3 fund portfolio.
In the past 12 months, Vanguard total stock returned 18%, Vanguard S&P 500 fund returned 17%. And you made 10%. The choice is yours but I would have a long think about the benefits of the adviser and how much you're paying for those benefits.
He has a 60:40 portfolio. He would not have gotten a 18% return :oops: . In fact 10% sounds about right considering how bad bonds have done in the last 1 year but we also don't know if this was lump sum or if there were periodic investments as well.

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Re: Should I keep my financial advisor

Post by LadyGeek » Fri Sep 07, 2018 5:18 pm

I removed an off-topic comment. As a reminder, see: General Etiquette
We expect this forum to be a place where people can feel comfortable asking questions and where debates and discussions are conducted in civil tones.
The discussion is getting a bit contentious. Please stay focused on helping the OP and state your concerns in a civil, factual, manner.
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.

bltn
Posts: 227
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Re: Should I keep my financial advisor

Post by bltn » Fri Sep 07, 2018 6:20 pm

Greenman72 wrote:
Thu Sep 06, 2018 3:28 pm
FlyAF wrote:
Thu Sep 06, 2018 3:17 pm
OP found his way here, he can find his way into a low fee target date index fund while he learns the ropes. He is a high earner and will end up paying millions of dollars to folks like you should he listen to advice like that.
Or he can pay thousands to Vanguard, hundreds of thousands to the IRS, and lose millions in foregone opportunity costs at future values, because he tried to DIY when he was clearly unqualified to do so. No offense to OP--I'm sure he's an intelligent person. But intelligence in one aspect of life does not equate to success in all areas.
I m trying to teach my children and my son in law basic money management and wealth accumulation. The kids are quite bright and all have jobs equally as complicated as financial advice. Their ability to do their own money management will only be limited by their willingness to learn. This forum will help them learn how to gain financial security, as well.
They will make mistakes, as everyone does, during their learning process. Will these opportunity costs equal the losses that will come from higher advisor fees? Possibly some of these mistakes will be avoided if they are able to get periodic advice on an hourly basis, with relatively limited fees. The idea that you get what you pay for in terms of financial advice certainly is not a truism.
My feeling is, that if a reasonably intelligent person has a desire to learn how to manage his money, he ll be able to do so. After all, it isn t brain surgery!! The above note about doctors not being good with money applies to all professions. The op should do fine, with his interest in taking care of his family s finances.
Best of luck.
Last edited by bltn on Fri Sep 07, 2018 9:59 pm, edited 2 times in total.

NotWhoYouThink
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Re: Should I keep my financial advisor

Post by NotWhoYouThink » Fri Sep 07, 2018 6:39 pm

tommy85 wrote:
Wed Sep 05, 2018 4:24 pm
Hello all,

I'm a long time lurker but first time poster. I'm 33yrs old, married, no kids yet but planning to have one soon. I currently have a fee only financial advisor that manages my investment and other aspects of personal finance. They charge flat retainer fee of 5k per year, soon to go up to 6k. My total investment is about 200k. I have some basic understanding of investment and fund selection.

My question to all of you is are financial advisors worth their fees.. Should I keep my advisor or should I try to do it by myself.

Please let me know if you need any more information.

Thanks!
Tommy
So you are a doctor? I read a lot of replies but didn't see the whitecoatinvestor.com site mentioned. You could definitely get a lot of help and insight there. White Coat Investor posts on this forum sometimes, check out his posts and thoughts.

Since you are married, is there a chance your wife would be interested in digging into some of the financial issues. You both are undoubtedly smart enough to figure all this out, but are probably short on time, and I'm not sure what your interest level is. It's pretty easy to get it mostly right, but also pretty easy to bungle up, so before you leave your current FA do a little research.

And if Greenman72 really provides all the services and insight he claims, many people on this board would be happy to pay him for a few hours a year, but few of us would be willing to pay an AUM fee to him or anyone else.

Good luck in your career.

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White Coat Investor
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Re: Should I keep my financial advisor

Post by White Coat Investor » Fri Sep 07, 2018 6:40 pm

tommy85 wrote:
Wed Sep 05, 2018 4:24 pm
Hello all,

I'm a long time lurker but first time poster. I'm 33yrs old, married, no kids yet but planning to have one soon. I currently have a fee only financial advisor that manages my investment and other aspects of personal finance. They charge flat retainer fee of 5k per year, soon to go up to 6k. My total investment is about 200k. I have some basic understanding of investment and fund selection.

My question to all of you is are financial advisors worth their fees.. Should I keep my advisor or should I try to do it by myself.

Please let me know if you need any more information.

Thanks!
Tommy
If you've gotten to the point where you're asking the question in a place like here, you usually won't have an advisor within a year.

That said $5-6K/year for good advice is a fair price.
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course

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Re: Should I keep my financial advisor

Post by MikeG62 » Sat Sep 08, 2018 7:41 am

Nate79 wrote:
Fri Sep 07, 2018 4:29 pm

Can you do it yourself? yes, it is very easy. Truthfully this website overcomplicates everything by 100x. You could pick a simple target date fund and get it 99% right.
I agree that it is fairly easy. A target date fund is a reasonable option in a tax deferred (or tax free) account. Not sure I would use one in a taxable account though.
Real Knowledge Comes Only From Experience

afan
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Re: Should I keep my financial advisor

Post by afan » Sat Sep 08, 2018 8:54 am

A balanced fund is a good choice. Target date funds lock you in to a declining stock allocation, as if that is appropriate for everyone. They also force you to accept whatever the manager decides is the best mix of investments over time.

They are in this sense active management.

A balanced fund, ideally one that gives you a fixed allocation between a stock and a bond index fund, provides all the value of a Target date fund without the disadvantages.

The balanced fund often will cost slightly more than the expense ratios of the underlying index funds. This difference should be far less than the cost of even the cheapest AUM investment manager.

If you need financial advice as well then buy it by the hour or by the project from someone who only sells advice.

The other problem with buying advice via AUM fees is that one can go for years before using it. Paying many thousands or tens of thousands of dollars for services one rarely or never uses is a bad design.

Note that this "pay for services you never use" feature is the only reason the AUM model works for the advisor. If the average client actually used a large number of hours a year of advice, say 200, then the advisor would be able to have only a limited number of clients. The numbers would be so small that the business would not work. But the clients would have to use that much for the advice to be costing something similar to simply paying by the hour.

If you need help with taxes, hire an enrolled agent or CPA who does a lot of individual taxes. If you need estate planning help, hire an attorney who is expert in this area. You don't need anyone to assemble a portfolio of index funds for you, so the investment advice is unnecessary. For any other advice, buy it by the hour and pay nothing when you have not reached out for help.
We don't know how to beat the market on a risk-adjusted basis, and we don't know anyone that does know either | --Swedroe | We assume that markets are efficient, that prices are right | --Fama

Miakis
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Re: Should I keep my financial advisor

Post by Miakis » Sat Sep 08, 2018 9:15 am

Greenman72 wrote:
Fri Sep 07, 2018 12:09 pm
The problem with most of the people (or should I say, the most vociferous people) on this site is that they think that most people can DIY with just a little help. I've been doing it a while, and I can assure you that they cannot. Even with a Boglehead's help, the sheer volume of information that a person has to learn in order to fully control his/her financial life is daunting. And even if they do have the intelligence to do it, they may not have the time or desire. Some of the people I work for are perfectly capable--they just don't want to deal with it. They'd rather pay somebody so they don't have to worry about it. And that's fine. Those are the people I want. I provide a valuable service to society, and feel like I shouldn't get paid any less than a doctor, lawyer, engineer, or any other professional.
Agreed. I'm a tax-focused CPA. People tell me all the time that they want to do-it-themselves with accounting, bookkeeping and taxes. It doesn't bother me. Heck, I'll even train them how. And then a year later, they walk back into my office having done absolutely zero accounting work, with poor records, panicked because they forgot their deadlines, didn't pay their payroll taxes on time, and have no bookkeeping prepped.

A large part of my job is to reduce stress/workfor people who are perfectly capable of doing it themselves, but are too busy or lack motivation.

Why shouldn't a doctor pay a CPA or a financial advisor if it frees up his time to spend with his family or go fishing, makes him feel comfortable, lowers his stress level, and gives him someone to bounce ideas off of when he's hearing a lot of financial advice from non-professionals at work?

My favorite comment is always "Just hire a CPA the first year and then copy the tax return." Because that's all we do? Like the CPA exam is just 16 hours of telling us to get a copy of last year's workpapers and "SALY" (Same As Last Year) our way through a career. That's why my license has an experience and supervision requirement? To make sure I'm a good copier? Every continuing ed class I take is titled, "Get last year's tax return and let the tax software do the work."

This year's favorite investment for DIY'ers, by the way? Cryptocurrency.

aristotelian
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Re: Should I keep my financial advisor

Post by aristotelian » Sat Sep 08, 2018 9:19 am

Greenman72 wrote:
Thu Sep 06, 2018 10:17 am
As a financial advisor and a CPA....

I recommend that you find somebody who does both financial advising and tax prep. As I mentioned earlier, most "financial advisors" will offer "tax advice", but it is vastly inferior to the tax advice you will get from a person who actually prepares tax returns for a living. (Then again, I'm a little biased....)

In my opinion (and again, I'm biased), $5,000 isn't a lot to pay for true "financial advice". In fact, it's chump change compared to how much you're costing yourself in the long run. That said, you need to make sure you're getting true "financial advice", and that you're getting real value for it. Paying somebody else to deal with your financial problems isn't necessarily a bad thing, especially if you have other demands on your time and can't devote time to doing it yourself.
$5000 would be a reasonable amount to charge on $2M. On $200k it is borderline criminal. He is basically offsetting the man's Roth IRA.

afan
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Re: Should I keep my financial advisor

Post by afan » Sat Sep 08, 2018 9:32 am

Miakis wrote:
Sat Sep 08, 2018 9:15 am

This year's favorite investment for DIY'ers, by the way? Cryptocurrency.
Really? I suspect the total DIY cash flow into Vanguard index funds alone, not counting investment in any other index funds, exceeds the total cash flow into crypto currency. Probably by at least one order of magnitude.
We don't know how to beat the market on a risk-adjusted basis, and we don't know anyone that does know either | --Swedroe | We assume that markets are efficient, that prices are right | --Fama

Kevin8696
Posts: 155
Joined: Mon Oct 08, 2012 7:45 pm

Re: Should I keep my financial advisor

Post by Kevin8696 » Sat Sep 08, 2018 9:43 am

Miakis wrote:
Sat Sep 08, 2018 9:15 am
Greenman72 wrote:
Fri Sep 07, 2018 12:09 pm
The problem with most of the people (or should I say, the most vociferous people) on this site is that they think that most people can DIY with just a little help. I've been doing it a while, and I can assure you that they cannot. Even with a Boglehead's help, the sheer volume of information that a person has to learn in order to fully control his/her financial life is daunting. And even if they do have the intelligence to do it, they may not have the time or desire. Some of the people I work for are perfectly capable--they just don't want to deal with it. They'd rather pay somebody so they don't have to worry about it. And that's fine. Those are the people I want. I provide a valuable service to society, and feel like I shouldn't get paid any less than a doctor, lawyer, engineer, or any other professional.
This year's favorite investment for DIY'ers, by the way? Cryptocurrency.
Miakis... Would you be so kind as to post a link supporting your claim on Cryptocurrency ?

Greenman72
Posts: 187
Joined: Fri Nov 01, 2013 2:17 pm

Re: Should I keep my financial advisor

Post by Greenman72 » Sat Sep 08, 2018 10:02 am

As another practicing CPA--In the past year, I have had over two dozen people ask me "Should I buy Bitcoin?" or "Is now the right time to buy Bitcoin?"

I have never in my life had a person ask me, "Is now the right time to invest in an index fund?"

ChinchillaWhiplash
Posts: 570
Joined: Sat Jan 20, 2018 5:40 pm
Location: Colorado

Re: Should I keep my financial advisor

Post by ChinchillaWhiplash » Sat Sep 08, 2018 10:43 am

tommy85 wrote:
Thu Sep 06, 2018 3:47 pm
sjt wrote:
Thu Sep 06, 2018 8:22 am
I think simply review your previous year performance (inclusive of fees) compared to what your 3 fund portfolio returned. If your adviser didn't make you $5000 more than you would have made with a 3 fund - you have to ask yourself why you would pay them $5k for that....
In last 2 years, I have roughly made about 10% per year on my investment compared to about 18% for the S&P 500 with dividends reinvested. I do not know how to calculate the return of 3 fund portfolio.

Thanks
That is not a bad return. If you were set at 60/40 for total US stock market and Total US bonds, you would have seen a return from 2016 to present of around 10.5%. 3 fund with 40/20/40. Total US stock/international/Total US bonds would have seen 9.25% over that time period.

afan
Posts: 3922
Joined: Sun Jul 25, 2010 4:01 pm

Re: Should I keep my financial advisor

Post by afan » Sat Sep 08, 2018 11:39 am

Greenman72 wrote:
Sat Sep 08, 2018 10:02 am
As another practicing CPA--In the past year, I have had over two dozen people ask me "Should I buy Bitcoin?" or "Is now the right time to buy Bitcoin?"

I have never in my life had a person ask me, "Is now the right time to invest in an index fund?"
To state the obvious: your customers are not DIYers.

The people who use you may ask about cryptocurrency and ignore index funds. That makes it clear they are not representative of the people who manage their finances themselves.
We don't know how to beat the market on a risk-adjusted basis, and we don't know anyone that does know either | --Swedroe | We assume that markets are efficient, that prices are right | --Fama

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