Are there actually any good financial advisers? Wondering about what my FA said. [Singapore]

For investors outside the US. Personal investments, personal finance, investing news and theory.
Sister forums: Canada, Spain (en español)
---------------
Topic Author
Cyath
Posts: 43
Joined: Thu Jun 16, 2016 7:30 am

Are there actually any good financial advisers? Wondering about what my FA said. [Singapore]

Post by Cyath »

I have been on the fence about ditching my FA and just doing it DIY with the Bogleheads approach for about a year now. Made lots of posts about it too.

However, I have been looking over the returns that my FA has generated. In lean years it's about 6% PA and good years 11.5%. Those are not bad numbers considering they factor in the cost of the FA, expense ratios and switches.

I have discussed my Bogleheads strategy with my FA and he says it's a good one. I've even more or less said that if I can do I'll just leave - he probably has tons of other clients so he doesn't really need me.

Most of the books I have read make out FAs to be some horrible spawn of evil that are taking you for a ride. I guess that is true for completely uneducated investors (I used to be one) Or maybe it's more true in the USA market - I am Singaporean and the market here is very strictly controlled.

Most recently he said that he could combine the buy and hold Bogleheads strategy with sentiment-based investing to generate 11-12% PA - having the FA on hand helps take advantage of things like Nvdia (which I wouldn't normally be aware of) This seems a little too good to be true?

I welcome advise and opinions.

[Title clarified - moderator Kendall]
monkeytoad
Posts: 135
Joined: Sat Apr 06, 2024 11:16 am

Re: Are there actually any good financial advisers? Wondering about what my FA said.

Post by monkeytoad »

Cyath wrote: Sat Jun 15, 2024 1:43 am
However, I have been looking over the returns that my FA has generated. In lean years it's about 6% PA and good years 11.5%. Those are not bad numbers considering they factor in the cost of the FA, expense ratios and switches.
There's the caveat that past performance doesn't indicate future performance, but even as past performance goes, you can calculate the long-term past returns of, say VT and VXUS, and see if your FA outperformed that.
Cyath wrote: Sat Jun 15, 2024 1:43 am Most of the books I have read make out FAs to be some horrible spawn of evil that are taking you for a ride.
IMHO that is irrelevant. The FA either brings you value or not.
Cyath wrote: Sat Jun 15, 2024 1:43 am Most recently he said that he could combine the buy and hold Bogleheads strategy with sentiment-based investing to generate 11-12% PA -
Personally, I would leave the FA just based on that. If they can guarantee 11-12%, then they don't need any clients.
Cyath wrote: Sat Jun 15, 2024 1:43 am having the FA on hand helps take advantage of things like Nvdia (which I wouldn't normally be aware of)
If you invest in VTI (or the technology VGT), you are already taking advantage of that, without needing to be aware of it. Long term, if your FA knows to pick outperforming stock like NVIDIA, and also knows when to switch to the next one - go with them. If they did, it's unlikely they would share it with clients.
Cyath wrote: Sat Jun 15, 2024 1:43 am This seems a little too good to be true?
That is because it is too good to be true. If they can guarantee 11-12%, then they don't need any clients.
Just trying to stay the course
Jack FFR1846
Posts: 18930
Joined: Tue Dec 31, 2013 6:05 am
Location: 26 miles, 385 yards west of Copley Square

Re: Are there actually any good financial advisers? Wondering about what my FA said.

Post by Jack FFR1846 »

How did the FA get 11-12% for you net fees? Was he just invested in a good group of funds, holding and watching the number climb or was he buying, selling, shuffling, getting on the hot stock before it warmed and getting out before it crashed? If the first, why can't you simply do that? If the second, you do understand that a single mistake can mean you lose nearly everything. I think I'd rather have annual returns that look like 5%, 6%, 3%, 7%, 4% than 12%, 18%, 10%, 9%, 20%, -90%.
Bogle: Smart Beta is stupid
chassis
Posts: 2369
Joined: Tue Mar 24, 2020 4:28 pm

Re: Are there actually any good financial advisers? Wondering about what my FA said.

Post by chassis »

Cyath wrote: Sat Jun 15, 2024 1:43 am I have been on the fence about ditching my FA and just doing it DIY with the Bogleheads approach for about a year now. Made lots of posts about it too.

However, I have been looking over the returns that my FA has generated. In lean years it's about 6% PA and good years 11.5%. Those are not bad numbers considering they factor in the cost of the FA, expense ratios and switches.

I have discussed my Bogleheads strategy with my FA and he says it's a good one. I've even more or less said that if I can do I'll just leave - he probably has tons of other clients so he doesn't really need me.

Most of the books I have read make out FAs to be some horrible spawn of evil that are taking you for a ride. I guess that is true for completely uneducated investors (I used to be one) Or maybe it's more true in the USA market - I am Singaporean and the market here is very strictly controlled.

Most recently he said that he could combine the buy and hold Bogleheads strategy with sentiment-based investing to generate 11-12% PA - having the FA on hand helps take advantage of things like Nvdia (which I wouldn't normally be aware of) This seems a little too good to be true?

I welcome advise and opinions.
Advisors are like lawn guys. They can cut the lawn, or you can cut the lawn. The difference is your time, and your money to pay the lawn guy.

Your lawn will not be in better condition (usually) whether the lawn guy cuts it, or if you cut it. In fact the lawn may look worse if the lawn guy cuts it. There are plenty of stories on this site stating advisors making an expensive mess of clients' portfolios.

There are a few lawn guys and a few advisors who can do a better job than you can with your lawn, or with your financial portfolio. They are paid accordingly and hard to find.

It's a question of whether or not you want to manage your finances, or not.
Wanderingwheelz
Posts: 3369
Joined: Mon Mar 04, 2019 8:52 am

Re: Are there actually any good financial advisers? Wondering about what my FA said.

Post by Wanderingwheelz »

Fincial advising is like any other career where advice is at the root of the profession. There are outstanding ones and there are decling degrees from there. Some advisors are called other things (doctor, attorney, accountant) but when it really comes down to it they’re recommending you do things- things that you expect them to know tons more about than you do. Managing your own money is different than many other facets of adulting, since it only takes a basic understanding to get it 90%+ right. If you’re going to pay for a person to help you with managing your assets I hope they’re giving you a lot of other really good advice too- since that’s likely where the value is.
Being wrong compounds forever.
wannabeteacher
Posts: 79
Joined: Wed Sep 09, 2015 2:59 pm

Re: Are there actually any good financial advisers? Wondering about what my FA said.

Post by wannabeteacher »

" my FA has generated ". Nobody generates returns. The belief by many that others can " generate " returns is false I believe.

Returns happen, positive or negative.

So, I invest myself and accept whatever the returns are.

FAs can guarantee returns, that is the biggest misconception, and is obvious in my opinion.
mikejuss
Posts: 3106
Joined: Tue Jun 23, 2020 1:36 pm

Re: Are there actually any good financial advisers? Wondering about what my FA said.

Post by mikejuss »

I'm unclear on why this is such a hard decision for you, OP. Is your financial adviser a friend? It sounds like you're perfectly equipped to manage your porfolio.
50% VTSAX | 25% VTIAX | 25% VBTLX (retirement), 25% VTEAX (taxable)
ScubaHogg
Posts: 4034
Joined: Sun Nov 06, 2011 2:02 pm

Re: Are there actually any good financial advisers? Wondering about what my FA said.

Post by ScubaHogg »

Cyath wrote: Sat Jun 15, 2024 1:43 am
Most recently he said that he could combine the buy and hold Bogleheads strategy with sentiment-based investing to generate 11-12% PA - having the FA on hand helps take advantage of things like Nvdia (which I wouldn't normally be aware of) This seems a little too good to be true?
An advisor can be good or bad depending on your needs. There’s lot they can do

Want they can’t do is consistently pick single stocks (like nvdia) to “beat the market.” If they could, which they can’t, they wouldn’t work for you. They’d work for some hedge fund you’ve never heard of.

And if they try you will be worse off than had you just diy’d
“Anyone may arrange his affairs so that his taxes shall be as low as possible; he is not bound to choose that pattern which best pays the treasury.” | ― Judge Learned Hand
Bogleway
Posts: 18
Joined: Sat May 11, 2024 5:34 pm

Re: Are there actually any good financial advisers? Wondering about what my FA said.

Post by Bogleway »

We ditched our FA a few weeks ago. He had us in 40 high expense ratio mutual funds/ETFs, 25 highly complicated structured notes and a very expensive (3% annual) variable annuity. This was all spread out over a total of six accounts. With all of the fees incurred over the past four years we probably gave up a couple hundred grand. We now have three funds between only two accounts, and it feels great!
gavinsiu
Posts: 5372
Joined: Sun Nov 14, 2021 11:42 am

Re: Are there actually any good financial advisers? Wondering about what my FA said.

Post by gavinsiu »

What you have hired is a stock picker, not a Financial Advisor. I have had relatives that hire s "FA" who did pretty well for while until they didn't because they invested in stuff like Enron. A portfolio with a few stock is quite risky.

A FA should help you with non-portfolio part of financial advice.

Not all FA are bad, but not all FA are actually at actually FA. Is this FA helping you with your financial goals or are they just picking stocks. You do not need to diy but you should educate yourself. You seemed to think the FA is shady, whats stopping you from firing the FA?
Last edited by gavinsiu on Sat Jun 15, 2024 2:25 pm, edited 1 time in total.
invest4
Posts: 2058
Joined: Wed Apr 24, 2019 2:19 am

Re: Are there actually any good financial advisers? Wondering about what my FA said.

Post by invest4 »

Much has been written about the ability of professional advisors, traders, etc. which you can read about with a simple search.

There may be reasons why you would be willing to pay for someone to manage your portfolio…I do not count reliably beating the market over the long term amongst them.

No one cares about your money more than you do. You can absolutely manage for yourself, along with the support of this forum.

Best wishes.
User avatar
WoodSpinner
Posts: 3568
Joined: Mon Feb 27, 2017 12:15 pm

Re: Are there actually any good financial advisers? Wondering about what my FA said.

Post by WoodSpinner »

OP,

What other services (besides Investment Advice) is your FA providing? Are they important to you at this stage of life?

Personally, I think the Modeling, Planing, and Strategizing are the major value adds that a FA can provide assistance with. Investing — not so much.

WoodSpinner
WoodSpinner
User avatar
Wiggums
Posts: 7347
Joined: Thu Jan 31, 2019 7:02 am

Re: Are there actually any good financial advisers? Wondering about what my FA said.

Post by Wiggums »

It doesn’t sound like you have fully embraced the Boglehead philosophy and that’s ok. Our son is holding the S&P 500 and treasuries. Low cost, easy to maintain, and no manager risk. Advisors can offer other services which may be of value. Stock picking should not be one of them.
"I started with nothing and I still have most of it left."
aristotelian
Posts: 12680
Joined: Wed Jan 11, 2017 7:05 pm

Re: Are there actually any good financial advisers? Wondering about what my FA said.

Post by aristotelian »

If your FA is capable of beating the market using sentiment investing, perhaps you can pay him a share of the alpha that he generates, and he can work for free if he underperforms his benchmark or loses money.
monkeytoad
Posts: 135
Joined: Sat Apr 06, 2024 11:16 am

Re: Are there actually any good financial advisers? Wondering about what my FA said.

Post by monkeytoad »

aristotelian wrote: Sat Jun 15, 2024 2:51 pm If your FA is capable of beating the market using sentiment investing, perhaps you can pay him a share of the alpha that he generates, and he can work for free if he underperforms his benchmark or loses money.
Nobel laureate Prof. Aumann https://en.wikipedia.org/wiki/Robert_Aumann once came over to my workplace to give a lecture. He gave something like this as the first example of an incentive structure which creates a discrepancy between the optimum for both sides. In this case, the financial adviser should rationally choose wildly volatile stocks (almost irrespective of their expectation).
Just trying to stay the course
User avatar
HipCoyote
Posts: 308
Joined: Mon Jan 27, 2020 5:30 pm

Re: Are there actually any good financial advisers? Wondering about what my FA said.

Post by HipCoyote »

A FA is absolutely critical…..if you’re likely to do something stupid such as buy high and sell low, chase returns, panic. If you can adhere to and understand a basic, solid financial plan there is no need for an FA.

FAs like to tout a study that says that people make more with FAs than not, on average. No doubt true. But that
Is due to behavioral matters, not performance of stock selection.
goblue100
Posts: 1815
Joined: Sun Dec 01, 2013 9:31 am

Re: Are there actually any good financial advisers? Wondering about what my FA said.

Post by goblue100 »

monkeytoad wrote: Sat Jun 15, 2024 4:21 pm
aristotelian wrote: Sat Jun 15, 2024 2:51 pm If your FA is capable of beating the market using sentiment investing, perhaps you can pay him a share of the alpha that he generates, and he can work for free if he underperforms his benchmark or loses money.
Nobel laureate Prof. Aumann https://en.wikipedia.org/wiki/Robert_Aumann once came over to my workplace to give a lecture. He gave something like this as the first example of an incentive structure which creates a discrepancy between the optimum for both sides. In this case, the financial adviser should rationally choose wildly volatile stocks (almost irrespective of their expectation).
Gambling other peoples money is a lot of fun.
"Confusion has its cost" - Crosby, Stills and Nash
User avatar
Stinky
Posts: 14917
Joined: Mon Jun 12, 2017 11:38 am
Location: Sweet Home Alabama

Re: Are there actually any good financial advisers? Wondering about what my FA said.

Post by Stinky »

Cyath wrote: Sat Jun 15, 2024 1:43 am I have been on the fence about ditching my FA and just doing it DIY with the Bogleheads approach for about a year now.
Do you know what fees the FA is charging you?

Do you know the expense ratios of the funds he/she has invested you in, and how they compare to the fees of low cost funds that many Bogleheads prefer?

Are you confident that your advisor is providing excess returns that cover the fees and excess fund charges?
Retired life insurance company financial executive who sincerely believes that ”It’s a GREAT day to be alive!”
User avatar
Doom&Gloom
Posts: 5562
Joined: Thu May 08, 2014 3:36 pm

Re: Are there actually any good financial advisers? Wondering about what my FA said.

Post by Doom&Gloom »

OP,
I'm going to go against the grain here. If, after 8 years on this site, you are still wondering whether you need an FA or not, you probably do.
hvaclorax
Posts: 669
Joined: Mon Nov 21, 2016 5:01 pm

Re: Are there actually any good financial advisers? Wondering about what my FA said.

Post by hvaclorax »

Doom&Gloom wrote: Sat Jun 15, 2024 8:13 pm OP,
I'm going to go against the grain here. If, after 8 years on this site, you are still wondering whether you need an FA or not, you probably do.
+1
The responses above are given by a select group of experienced individuals. I personally need someone to help me day to day and face to face. I like Bogleheads as an adjunct but I need someone with skin in the game.
gavinsiu
Posts: 5372
Joined: Sun Nov 14, 2021 11:42 am

Re: Are there actually any good financial advisers? Wondering about what my FA said.

Post by gavinsiu »

Doom&Gloom wrote: Sat Jun 15, 2024 8:13 pm OP,
I'm going to go against the grain here. If, after 8 years on this site, you are still wondering whether you need an FA or not, you probably do.
I feel that the OP might benefit from a FA, bit just not the one OP is using. The FA talks about how they can help the op earn a higher return by their superior stock picking, but I don't hear the FA checking if OP is saving enough. Even if the FA is Warren Buffet, it won't help the op if they are saving only 1% of income.
Topic Author
Cyath
Posts: 43
Joined: Thu Jun 16, 2016 7:30 am

Re: Are there actually any good financial advisers? Wondering about what my FA said.

Post by Cyath »

I plan to grill him about how he is justifying the figures he gives me, which I am a little skeptical about.

I probably should have done it DIY some time ago, but I was uncertain at that point. I come from a background with very little financial expertise, my family has lost lots of money before and I used to freeze up when large sums were mentioned.

I resonate with the inherent Bogleheads philosophy (and I have read up on it) but I question everything to make sure the information is legit.

The FA is providing some other information, but it's not anything I can't do myself, since I usually like to learn and research. I signed on because I didn't know how to manage my money well and I thought you had to be some super expert in order to do so.

Is the S&P in and of itself a reasonable benchmark? I'm not certain how anyone can reliably promise returns of more than 8-9%.
josephny
Posts: 184
Joined: Wed Apr 03, 2024 9:24 am

Re: Are there actually any good financial advisers? Wondering about what my FA said.

Post by josephny »

OP: Not much value I can add except to say that I am living with a similar situation of having a smallish (~15%) of my portfolio being charged a 90bp AUM fee by a FA and (possibly even more importantly) not having the authority to decide how that 15% is being invested. And I know the challenging nature of deciding to cut out the FA.

I'm hoping my response furthers this conversation and doesn't hijack it.

Others have indicated that there is a role for FAs other than investment-picking.

Modeling, planning, strategizing, and a balance to the irrational and emotion-based decision making tendencies.

I think I get the emotional stuff (stocks are on sale! Things have fallen so much I better get out now before I lose everything! NewTechCo just rose 4000% I better catch that wave now, etc.).

But, I have no idea about modeling, planning, and strategizing, or other generally accepted justified services of value an FA would bring within the BH approach.

Can someone elaborate?
User avatar
happysteward
Posts: 484
Joined: Tue Jun 16, 2015 11:42 am
Location: East Coast USA

Re: Are there actually any good financial advisers? Wondering about what my FA said.

Post by happysteward »

Stinky wrote: Sat Jun 15, 2024 8:04 pm
Cyath wrote: Sat Jun 15, 2024 1:43 am I have been on the fence about ditching my FA and just doing it DIY with the Bogleheads approach for about a year now.
Do you know what fees the FA is charging you?

Do you know the expense ratios of the funds he/she has invested you in, and how they compare to the fees of low cost funds that many Bogleheads prefer?

Are you confident that your advisor is providing excess returns that cover the fees and excess fund charges?
OP the first two questions (at least) should be known to you…can you answer and post here ?

If you don’t know ask your FA to specify the fees for you and please post their answer here…
"How much money is enough?", John Rockefeller responded, "...just a little bit more."
EricGold
Posts: 845
Joined: Sat Mar 16, 2024 4:19 pm

Re: Are there actually any good financial advisers? Wondering about what my FA said.

Post by EricGold »

I have been on the fence about ditching my FA
Ask yourself what else you want to know to make a decision
However, I have been looking over the returns that my FA has generated. In lean years it's about 6% PA and good years 11.5%. Those are not bad numbers considering they factor in the cost of the FA, expense ratios and switches.
Sounds poor to me, but you should calculate accurately
he probably has tons of other clients so he doesn't really need me.
That is not your problem. Your comment reminded me of battered wife syndrome
sentiment-based investing
Insanity. This offer puts your FA squarely in the idiot category
Last edited by EricGold on Sun Jun 16, 2024 6:56 am, edited 1 time in total.
gavinsiu
Posts: 5372
Joined: Sun Nov 14, 2021 11:42 am

Re: Are there actually any good financial advisers? Wondering about what my FA said.

Post by gavinsiu »

Cyath wrote: Sun Jun 16, 2024 12:38 am I plan to grill him about how he is justifying the figures he gives me, which I am a little skeptical about.

I probably should have done it DIY some time ago, but I was uncertain at that point. I come from a background with very little financial expertise, my family has lost lots of money before and I used to freeze up when large sums were mentioned.

I resonate with the inherent Bogleheads philosophy (and I have read up on it) but I question everything to make sure the information is legit.

The FA is providing some other information, but it's not anything I can't do myself, since I usually like to learn and research. I signed on because I didn't know how to manage my money well and I thought you had to be some super expert in order to do so.

Is the S&P in and of itself a reasonable benchmark? I'm not certain how anyone can reliably promise returns of more than 8-9%.
There are a few of use who started with financial expertise, but most of us started with zero. The BH believe is that you can learn everything on your own and that it does not require special knowledge if you are using something like mutual funds or ETF. My father once invested in the stock market and lose quite a bit of money.

As for your question, S&P is a good benchmark if your allocation is 100% equity. Your question indicates to me that you might want to read up on asset allocation some more. Returns on the stock market is finicky, so you might have long periods where the market underperform. A predatory stock picker might tell you that they can prevent you from suffering this fate, they are wrong. There is no reliable return, the return is just more predictable over the long term with lots of peaks and dips in between.
gavinsiu
Posts: 5372
Joined: Sun Nov 14, 2021 11:42 am

Re: Are there actually any good financial advisers? Wondering about what my FA said.

Post by gavinsiu »

josephny wrote: Sun Jun 16, 2024 4:33 am OP: Not much value I can add except to say that I am living with a similar situation of having a smallish (~15%) of my portfolio being charged a 90bp AUM fee by a FA and (possibly even more importantly) not having the authority to decide how that 15% is being invested. And I know the challenging nature of deciding to cut out the FA.

I'm hoping my response furthers this conversation and doesn't hijack it.

Others have indicated that there is a role for FAs other than investment-picking.

Modeling, planning, strategizing, and a balance to the irrational and emotion-based decision making tendencies.

I think I get the emotional stuff (stocks are on sale! Things have fallen so much I better get out now before I lose everything! NewTechCo just rose 4000% I better catch that wave now, etc.).

But, I have no idea about modeling, planning, and strategizing, or other generally accepted justified services of value an FA would bring within the BH approach.

Can someone elaborate?
The role of a FA is not to managed your portfolio, but to guide you toward your goal. For example, a FA should interview you to understand your financial profile: how much you make, what debts you have, and how much you need for retirement, any other needs, etc. The FA should craft you a financial plan on how you can get there. The plan on a higher level is something like
  1. Live below your mean. Eliminate your debts.
  2. Save a percentage of your income like 20% or so.
  3. Keep your money invest in the market, do not falter. Have a emergency fund in case you need money in the short term and won't dip into your money earmark for retirement.
The problem with a lot of people is that they hire someone to managed their money, but they are oriented toward the return and not the goal itself.

As for modeling and stuff, they are simply ways to help you visualize your journey. You can use a too like portfolio Visualizer or a retirement calc to estimate what your portfolio would be like in the future. It is just a tool though and only shows you what it might be. For example, when i used it, I realized that my possible feature will fall on a range and aim to make sure that I have enough for a semi-comfortable low. I also learn the effect of coumpounding where your money grows faster as your portfolio rises. For example, it might take eternity to get to 100K, but once you are there things sees to grow faster, and faster still when your portfolio reaches $1M.

These are thing you should learn yourself. if you want help, ask the forum and use them as your FA. Keep in mind tht opinions will vary, the one disadvantage may be too much info. However, you should read through and come up with your own conclusion. You may eventually feel that you still need an FA whether to serve as a second option (using a fee only) or a full time one, but you need to know enough not to be scammed.

Good luck.
EricGold
Posts: 845
Joined: Sat Mar 16, 2024 4:19 pm

Re: Are there actually any good financial advisers? Wondering about what my FA said.

Post by EricGold »

gavinsiu wrote: Sun Jun 16, 2024 7:12 am The role of a FA is not to managed your portfolio, but to guide you toward your goal.
The role can be whatever you want it to be, presuming the FA is competent in those role(s). I recently learned that a foreign stock I own would have been better kept in the post-tax account. This error has cost me about $4k a year. The thing is, an AUM would cost me 15x that amount, and until I fired the AUM it would be every year.
EricGold
Posts: 845
Joined: Sat Mar 16, 2024 4:19 pm

Re: Are there actually any good financial advisers? Wondering about what my FA said.

Post by EricGold »

josephny wrote: Sun Jun 16, 2024 4:33 am I have no idea about modeling, planning, and strategizing, or other generally accepted justified services of value an FA would bring within the BH approach.
Paying for help on an hourly basis -- can be reasonable
AUM -- perhaps as part of living with dementia, or a mental equivalent
User avatar
HomerJ
Posts: 21504
Joined: Fri Jun 06, 2008 12:50 pm

Re: Are there actually any good financial advisers? Wondering about what my FA said.

Post by HomerJ »

hvaclorax wrote: Sat Jun 15, 2024 8:54 pm
Doom&Gloom wrote: Sat Jun 15, 2024 8:13 pm OP,
I'm going to go against the grain here. If, after 8 years on this site, you are still wondering whether you need an FA or not, you probably do.
+1
The responses above are given by a select group of experienced individuals. I personally need someone to help me day to day and face to face. I like Bogleheads as an adjunct but I need someone with skin in the game.
Your FA doesn't have any skin in the game. He's investing your money, and get his fees regardless if your money goes up or down.

But if you do want face-to-face, and especially if you need day-to-day, then an FA is a good idea. But do the math on how much you are paying him or her, so you can decide if it's worth it.
"The best tools available to us are shovels, not scalpels. Don't get carried away." - vanBogle59
User avatar
HomerJ
Posts: 21504
Joined: Fri Jun 06, 2008 12:50 pm

Re: Are there actually any good financial advisers? Wondering about what my FA said.

Post by HomerJ »

Cyath wrote: Sat Jun 15, 2024 1:43 am sentiment-based investing
This tells me your FA is actually an active trader, and not a safe place for you to keep your money.
"The best tools available to us are shovels, not scalpels. Don't get carried away." - vanBogle59
gavinsiu
Posts: 5372
Joined: Sun Nov 14, 2021 11:42 am

Re: Are there actually any good financial advisers? Wondering about what my FA said.

Post by gavinsiu »

EricGold wrote: Sun Jun 16, 2024 7:38 am Paying for help on an hourly basis -- can be reasonable
AUM -- perhaps as part of living with dementia, or a mental equivalent
Most ANUM advisors don't want to deal with dementia patients directly, so they really need to have a POA. I am using an ANUM advisor for my mom because she is unwilling to learn. I can't use Fee only because she can't call them on a moment's notice. This is not idea cost-wise but the alternative is worse if I pass away before her.
gavinsiu
Posts: 5372
Joined: Sun Nov 14, 2021 11:42 am

Re: Are there actually any good financial advisers? Wondering about what my FA said.

Post by gavinsiu »

HomerJ wrote: Sun Jun 16, 2024 7:47 am This tells me your FA is actually an active trader, and not a safe place for you to keep your money.
That is a very good point, the FA is listing off the way they are making money, but the OP could be losing money by
  • The ANUM Fee
  • Extra tax and transaction fee from active trading, which can be considerable.
  • A bunch of other fee that can be hidden.
hvaclorax
Posts: 669
Joined: Mon Nov 21, 2016 5:01 pm

Re: Are there actually any good financial advisers? Wondering about what my FA said.

Post by hvaclorax »

HomerJ wrote: Sun Jun 16, 2024 7:43 am
hvaclorax wrote: Sat Jun 15, 2024 8:54 pm
Doom&Gloom wrote: Sat Jun 15, 2024 8:13 pm OP,
I'm going to go against the grain here. If, after 8 years on this site, you are still wondering whether you need an FA or not, you probably do.
+1
The responses above are given by a select group of experienced individuals. I personally need someone to help me day to day and face to face. I like Bogleheads as an adjunct but I need someone with skin in the game.
Your FA doesn't have any skin in the game. He's investing your money, and get his fees regardless if your money goes up or down.

But if you do want face-to-face, and especially if you need day-to-day, then an FA is a good idea. But do the math on how much you are paying him or her, so you can decide if it's worth it.
Your opinion is entirely your own. Don’t make such a blanket statement about all FAs. Will you be a an available when needed for the next important investment decision? FA certainly will. None of us Bogleheads have skin in the game. Perhaps it’s all relative. Bogleheads is a great adjunct, but not more valuable than face to face. I can’t imagine allowing an online site as my go to advisor. The Bogleheads info is free and you get what you pay for from FA or from this forum.
SevenBridgesRoad
Posts: 1236
Joined: Sat Jul 07, 2018 12:14 am

Re: Are there actually any good financial advisers? Wondering about what my FA said.

Post by SevenBridgesRoad »

Cyath wrote: Sat Jun 15, 2024 1:43 am .....I am Singaporean.....

Most recently he said that he could combine the buy and hold Bogleheads strategy with sentiment-based investing to generate 11-12%......

I had not heard of "Sentiment-based investing", so I did a bit of research.

Sentiment-Based Investing - Market sentiment is the current attitude or mood of investors regarding a stock, an industry, or the entire financial market. The Financial Advisor skillfully and uniquely determines the mood of the market and therefore can easily make the client 12%, no problem. https://www.investopedia.com/terms/m/ma ... timent.asp.


It sounds amazing. However there are a number of "sound-alike" investing systems and it's possible you misheard. I've listed a few examples.

Sediment-Based Investing - The FA actually studied Geology in college and can determine at a glance the types of sedimentary rocks existing near and around the client. Understanding the percent of clastic rocks for example can practically guarantee out-sized returns.

Sentient-Based Investing - The market is treated as a sentient being. The FA becomes best friends with Mr. Market and even hangs out with the market each day over coffee or perhaps a beer after 5. The FA is really good at making friends. This makes the client a lot of money.

Sentimental-Based Investing - FA is skilled at making you become emotionally attached to him or her. This attachment inevitability guarantees the client can retire with a fortune.


There are other systems that start with a different letter, but sound similar. For example:

Tenant-Based Investing - Takes the important elements of tenant farming and applies these to FA’s clients. For example, the Financial Advisor is seen as the “land baron” and the client sweats all day to make the FA money. The benefit for the client is obvious.

(I heard that Singaporeans have a great sense of humor.)

____________
User avatar
Sandtrap
Posts: 20319
Joined: Sat Nov 26, 2016 5:32 pm
Location: Hawaii No Ka Oi - white sandy beaches, N. Arizona 1 mile high.

Re: Are there actually any good financial advisers? Wondering about what my FA said.

Post by Sandtrap »

Cyath wrote: Sat Jun 15, 2024 1:43 am I have been on the fence about ditching my FA and just doing it DIY with the Bogleheads approach for about a year now. Made lots of posts about it too.

However, I have been looking over the returns that my FA has generated. In lean years it's about 6% PA and good years 11.5%. Those are not bad numbers considering they factor in the cost of the FA, expense ratios and switches.

I have discussed my Bogleheads strategy with my FA and he says it's a good one. I've even more or less said that if I can do I'll just leave - he probably has tons of other clients so he doesn't really need me.

Most of the books I have read make out FAs to be some horrible spawn of evil that are taking you for a ride. I guess that is true for completely uneducated investors (I used to be one) Or maybe it's more true in the USA market - I am Singaporean and the market here is very strictly controlled.

Most recently he said that he could combine the buy and hold Bogleheads strategy with sentiment-based investing to generate 11-12% PA - having the FA on hand helps take advantage of things like Nvdia (which I wouldn't normally be aware of) This seems a little too good to be true?

I welcome advise and opinions.
It has often been said on the forum that if you study and absorb the "entire wiki' starting from the "Getting Started" page, and also read all the book suggestions and related material suggested (not mass market "how to" books or media or website "expert noise"), that you will know as much or more than the average FA. And, certainly, you will know whether you need one or not, and how to select one if you did.

Question: about how much is your AUM total and fee% paid, visible and non visible, to the FA?
for example:
If you have an AUM portfolio total of 200k for example, the FA is not making much. There are many that have a client acceptance of no less than 3-5 million or more AUM to "accept" them as "their private clients" and brag about their exclusivity. (I don't take just anyone).

As for the "numbers" that your FA is quoting you. Realize that "numbers" and "results" can be made any number of ways and presented favorably.

Maybe you have a great FA. But, given your data provided, that is unknown.
j :D
Wiki Bogleheads Wiki: Everything You Need to Know
bonesly
Posts: 1659
Joined: Mon Dec 18, 2017 9:28 pm
Location: WA

Re: Are there actually any good financial advisers? Wondering about what my FA said.

Post by bonesly »

Cyath wrote: Sun Jun 16, 2024 12:38 am Is the S&P in and of itself a reasonable benchmark? I'm not certain how anyone can reliably promise returns of more than 8-9%.
It is a reasonable benchmark for US stocks. Total Stock Market Index would be a more complete benchmark but the two have very similar performance.

The reason for uncertainty of promises in excess of 8-9% for 20+ year periods is that nobody is making that annual return as a promise. They might say "it's likely you'll get 11-12%" on average, but they would be fools to promise that year-over-year never being below 11% in writing that they are legally bound to in a court of law. The averages (and their standard deviations) for the S&P-500 (stocks), 10y US Treasuries Notes (bonds), and 3m US Treasury Bills (cash) are given below from 1928-2017 from the NYU Data Set.

Stocks: 11.5% ± 19.5%
10y T-Bonds: 5.2% ± 7.7%
3mo T-Bills: 3.4% ± 3.0%

Given that a portfolio that is 100/0 (all stocks) had a historical average of 11.5%, saying "it's likely you'll get 11-12% on average" is a reasonable statement for a salesman to pitch to an investor and they even have data to back up that sales pitch. However it completely ignores sequence-of-return (SOR) risk. There is a wide variance in outcomes due to that pretty large standard deviation of ±19.5% that is around that 11.5% average. When the standard deviation is accounted for in a Monte Carlo with 1,000 trials, then an initial balance of $100K with $30Kk/yr contributions (with +3%/yr increases for raises/inflation) has a pretty big spread that looks like this for a particular set of 1,000 trials:

End-Bal Percentile
$1,773.6K 5th
$3,109.7K 25th
$4,761.5K 50th
$7,781.4K 75th
$15,033.5K 95th

A responsible FA would tell you "it's 95% likely that from age 40 to age 65, you portfolio would grow to $1.7M, which will meet your portfolio spending needs. There's also a a 50% chance of $4.7M and that you'll be able to increase spending/gifting."

The irresponsible salesman disguised as a fiduciary (but never signing up to that responsibility) would say "this XYZ portfolio [of all stocks]" will return 10.96%. They would omit that that average return is the 50th percentile and would also omit the bad SOR outcome of only 5.01% at the 5th percentile. They most certainly would omit that the minimum end-balance in that set of 1,000 trials was only $952.3K which is an average return of 0.83%! An unwitting investor might fall for that "promise" of 11-12%, but an investor that at least has a basic understanding of the variance in stock & bond returns and the resultant variance in end-balance at retirement (and the corresponding average return for 5th, 25th, and 50th percentile outcomes), is going to know that such a "promise" has a 50% chance of being broken.

Next time you meet with you FA, ask if he'll answer these questions in writing... it might be that you have "one of the good" FAs, but if he's promising 11-12% consistently (never <11% for the next 20 years), then that's a huge red flag.

Jason Zweig's 19 Questions for your Advisor
Don't do what Bogleheads tell you. Listen to what we say, consider other sources, and make your own decisions, since you have to live with the risks & rewards (not us or anyone else).
oldmotos
Posts: 217
Joined: Fri Aug 04, 2017 9:37 pm

Re: Are there actually any good financial advisers? Wondering about what my FA said.

Post by oldmotos »

I just hired my first FA at age 69. I went with an hourly fee advisor at a cost of $275/hr. and an estimate of 11-12 hours to do the initial review. Part of my thinking is my wife has little interest in investing so it will be good to have someone up to speed if something happens to me. I have no interest in paying someone a percentage of my investments as that has never made any sense to me.
student
Posts: 11239
Joined: Fri Apr 03, 2015 6:58 am

Re: Are there actually any good financial advisers? Wondering about what my FA said.

Post by student »

Financial advisers usually charge AUM or project based, but I think the majority are AUM. In general, I think financial advisers that charge AUM are not worth it if they are "investment advisers," that is, they only construct your portfolio and maintain it. The main reason is I do not believe they can beat the market. So a "free" way to do it is to first identify one's risk profile and then get an appropriate target date index fund. Of course, target date funds are less tax efficient. So a slightly more complicated choice is to use just 3 index funds and pay attention to asset location such as equities in tax-"free" (I prefer calling it tax-"paid") and fixed income in tax-deferred. I think one can usually handle this oneself.

Financial advisers that charge AUM could be useful if they take a comprehensive approach that includes items such as tax planning (not tax filing), income planning, Roth conversion, estate planning, health care expensive planning, insurance planning and cash flow planning. As I age, if I become less capable, I may use one. So far, I find one that fits this criteria with 0.65% AUM fee including the expense ratio of funds. Currently I am using Planvision because it is inexpensive. After the first year, it is only about $100 per year. (First year is more.) It comes with eMoney, which is not as good as I thought. So I value eMoney at $50. If I get answers for a couple of question a year, I think it is already worth $100. If I don't ask any question, $100 for eMoney is still an acceptable deal.
Topic Author
Cyath
Posts: 43
Joined: Thu Jun 16, 2016 7:30 am

Re: Are there actually any good financial advisers? Wondering about what my FA said.

Post by Cyath »

Let me try to give more information and answer the questions posed. Thanks for the help.

https://www.ifastcorp.com/ifastcorp/ - this is the group my FA is from.

The returns include the wrap fee and the switching fees that come with rebalancing. I've asked.

I can't say I have read the entire wiki but I have read at least half and read some of the recommended books. I have been with the company listed above for more than 10 years because I knew too little about finance. Right now I believe I know more, I have posted on forums, read up etc. Do I know enough to do it all alone? That's what I am trying to figure out as well.

My strategy going forwards would be a three fund portfolio. (actually more like 2) Basically Vanguard ETFs, buy and hold. I do not actually need a FA for my other financial considerations, I think I can handle those on my own. However, my FA does provide advice in that capacity.

His comment about sentiment based investing was along the lines of making nimble and tactical deployments to take advantage of market changes. The company above has a research team which has been about 70% accurate thus far.

I made the topic because most of the Bogleheads literature makes FAs out to be horrible scam artists. I always want to learn more and I question what I learn to make sure it's accurate. One of my concerns was that a lot of finance books are written for the USA market and have a certain bias towards that.
ROIGuy
Posts: 2516
Joined: Sun May 08, 2016 10:10 am

Re: Are there actually any good financial advisers? Wondering about what my FA said.

Post by ROIGuy »

11-12% is a huge red flag. Can he show you examples of how he implemented this specific tactic in the past and the results? Does his number also include his AUM /wrap? Any other fees you've been paying?
User avatar
dogagility
Posts: 3445
Joined: Fri Feb 24, 2017 5:41 am
Location: Del Boca Vista - Phase 3

Re: Are there actually any good financial advisers? Wondering about what my FA said.

Post by dogagility »

Cyath wrote: Tue Jun 18, 2024 6:58 am His comment about sentiment based investing was along the lines of making nimble and tactical deployments to take advantage of market changes. The company above has a research team which has been about 70% accurate thus far.
Your advisor is extremely unlikely (about a 10% chance over a 10 year period) to beat the index because of the fees charged. Full stop.
Make sure you check out my list of certifications. The list is short, and there aren't any. - Eric 0. from SMA
BradleyB
Posts: 125
Joined: Sun Sep 10, 2023 7:31 pm
Location: Ohio

Re: Are there actually any good financial advisers? Wondering about what my FA said.

Post by BradleyB »

dogagility wrote: Tue Jun 18, 2024 4:49 pm
Cyath wrote: Tue Jun 18, 2024 6:58 am His comment about sentiment based investing was along the lines of making nimble and tactical deployments to take advantage of market changes. The company above has a research team which has been about 70% accurate thus far.
Your advisor is extremely unlikely (about a 10% chance over a 10 year period) to beat the index because of the fees charged. Full stop.
It doesn't have to be all or nothing. We use a FA for questions such as Roth conversions, when to take SS, logistics of inherited IRA accounts and that sort of stuff. Rules for some of the inherited accounts get kind of confusing.

But actual asset allocation is handled by me, with a sort of Boglehead approach.
Xrayman69
Posts: 1084
Joined: Fri Jun 01, 2018 8:52 pm

Re: Are there actually any good financial advisers? Wondering about what my FA said.

Post by Xrayman69 »

Doom&Gloom wrote: Sat Jun 15, 2024 8:13 pm OP,
I'm going to go against the grain here. If, after 8 years on this site, you are still wondering whether you need an FA or not, you probably do.
+1. If you gotta ask at this pint then you probably need. But not for the advice but rather the comfort to say something reassuring when you ask a question. It’s essentially an insurance cost. It’s ok to buy and pay for a service that provides you “value”

We had an Edward jones account and advisor when we started our journey 20 years ago. After about 3-5 years we started the off-ramp as most of our money went into employers retirement accounts then about 10 years ago found BH community that was able to confirm most of my question needs, still have some small residual legacy within the Edward jones account mainly due to individual stocks that remain in the account (about 8% of our total equity assets as I’m too lazy to transfer them to my main vanguard or fidelity accounts)
Topic Author
Cyath
Posts: 43
Joined: Thu Jun 16, 2016 7:30 am

Re: Are there actually any good financial advisers? Wondering about what my FA said.

Post by Cyath »

I haven't been that active on the forums, I also need to be certain of the information here, right?

He doesn't promise, he says 11-12% with a combination of strategies may be possible. He has revised his estimates before when I have quizzed him on it. This year he initially said 10%, now 8%.

The numbers quoted are with the wrap fee, as I said before.

I probably could do it alone but I wasn't that confident before. For those who did away with their FA, when do you feel that you can take the plunge?
student
Posts: 11239
Joined: Fri Apr 03, 2015 6:58 am

Re: Are there actually any good financial advisers? Wondering about what my FA said.

Post by student »

Cyath wrote: Wed Jun 19, 2024 9:12 pm He doesn't promise, he says 11-12% with a combination of strategies may be possible. He has revised his estimates before when I have quizzed him on it. This year he initially said 10%, now 8%.
Joke: Don't ask him questions again, or he will drop it to 6%.
gavinsiu
Posts: 5372
Joined: Sun Nov 14, 2021 11:42 am

Re: Are there actually any good financial advisers? Wondering about what my FA said.

Post by gavinsiu »

Cyath wrote: Wed Jun 19, 2024 9:12 pm I haven't been that active on the forums, I also need to be certain of the information here, right?

He doesn't promise, he says 11-12% with a combination of strategies may be possible. He has revised his estimates before when I have quizzed him on it. This year he initially said 10%, now 8%.

The numbers quoted are with the wrap fee, as I said before.

I probably could do it alone but I wasn't that confident before. For those who did away with their FA, when do you feel that you can take the plunge?
In the early mid part of 90's, my mom had an advisor that we end up firing not because they were doing a bad job, but they were too expensive at around 1.25% and wanted to increase it to 2%. The portfolio was returning like 20-30%, but in that time period S&P 500 was returning the same amount or better. I then managed it for a few years and the numbers were not worse, but that was because the later part of the 90's was great for stock and not because of skill.

For some reason, you do not feel that you can do it on your own. I am not sure if you feel that you can't contruct a portfolio on your own or you feel that you cannot stay the course. There is value in an advisor if you are the type that needs to be talked down from selling everything when the market goes down, but the fee is going to hurt. 1% of $1M is going to be $10K a year. $10K will buy you 25 hours of a fee only advisor that charges $400 an hour and most only charge half that much and I doubt you meet your advisor for 25 hours a year. You will pay that 1% if that portfolio is making -40%.

Asking the board will not get you a definitive answer. You will just get a bunch of different answers. If you feel you can't do it alone, I suggest hiring a fee only advisor to review your choices. You can hire a low cost advisor like Planvision. You can even hire one now to examine your existing portfolio to get a second opinion.
GaryA505
Posts: 3247
Joined: Wed Feb 08, 2017 1:59 pm
Location: New Mexico

Re: Are there actually any good financial advisers? Wondering about what my FA said.

Post by GaryA505 »

Cyath wrote: Wed Jun 19, 2024 9:12 pm I haven't been that active on the forums, I also need to be certain of the information here, right?

He doesn't promise, he says 11-12% with a combination of strategies may be possible. He has revised his estimates before when I have quizzed him on it. This year he initially said 10%, now 8%.

The numbers quoted are with the wrap fee, as I said before.

I probably could do it alone but I wasn't that confident before. For those who did away with their FA, when do you feel that you can take the plunge?
When you have enough knowledge to make good decisions, and confidence to make those decisions and stick with them. That could take years.

That said, you could probably just pick some conservative AA and come out ahead.
Get most of it right and don't make any big mistakes. All else being equal, simpler is better. Simple is as simple does.
Topic Author
Cyath
Posts: 43
Joined: Thu Jun 16, 2016 7:30 am

Re: Are there actually any good financial advisers? Wondering about what my FA said.

Post by Cyath »

Based on all the reading I am doing, I am reasonably confident of my ability to just buy and hold a two or three fund portfolio. And no, I don't make rash decisions, investment or otherwise.

A one-off advisor is an option I have considered before. I also asked a friend of mine who is a full time investor, but her approach is to buy things like Fundsmith which I am not crazy about.

I guess my main hurdle was/is knowing about the knowledge cutoff. I thought to be an Investor(TM) you need to know things like Sharpe ratio, alpha etc (which I do now) and it was an incredibly complex and arcane art. However, it seems the basics are simple enough, just like when I first started working as a translator (my job for 20+ years) I thought you needed to know all the declensions and clauses of all languages...which couldn't be further from the truth.
GaryA505
Posts: 3247
Joined: Wed Feb 08, 2017 1:59 pm
Location: New Mexico

Re: Are there actually any good financial advisers? Wondering about what my FA said.

Post by GaryA505 »

Cyath wrote: Fri Jun 21, 2024 1:19 am Based on all the reading I am doing, I am reasonably confident of my ability to just buy and hold a two or three fund portfolio. And no, I don't make rash decisions, investment or otherwise.

A one-off advisor is an option I have considered before. I also asked a friend of mine who is a full time investor, but her approach is to buy things like Fundsmith which I am not crazy about.

I guess my main hurdle was/is knowing about the knowledge cutoff. I thought to be an Investor(TM) you need to know things like Sharpe ratio, alpha etc (which I do now) and it was an incredibly complex and arcane art. However, it seems the basics are simple enough, just like when I first started working as a translator (my job for 20+ years) I thought you needed to know all the declensions and clauses of all languages...which couldn't be further from the truth.
Your friend who is a "full time investor" probably does not beat the market average, despite what she tells you. Maybe she's lucky sometimes, maybe not at other times.

Do you think you can beat professional fund managers who do this for a living? That is who you are trading against, if you try. And even the best pros will eventually stumble, and maybe crash and burn. The best pro I know of is David Giroux (T Rowe Price Cap. Apprec. Fund), and I expect even him to fail, eventually.

When you realize you can't beat the market, then you just buy the broad market. Maybe that's just a total stock fund, or 60/40, or a target date fund, or a LifeStrategy fund, or Wellington, or whatever.

Your most important decision is selecting your asset allocation and sticking to it. You can ignore stuff like Sharpe ratio and Alpha, which are interesting but really not that useful.
Get most of it right and don't make any big mistakes. All else being equal, simpler is better. Simple is as simple does.
Post Reply