Trying to convince my sister not to use a financial advisor

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LadyGeek
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Re: Trying to convince my sister not to use a financial advisor

Post by LadyGeek » Fri Oct 06, 2017 3:26 pm

oldcomputerguy wrote:
Fri Oct 06, 2017 3:15 pm
After you tell her this, give her a copy of Professor Bernstein's "If You Can".
Here you go, it's a free download: If You Can: How Millennials Can Get Rich Slowly

From the wiki: Books: recommendations and reviews
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.

staythecourse
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Re: Trying to convince my sister not to use a financial advisor

Post by staythecourse » Fri Oct 06, 2017 4:01 pm

prudent wrote:
Thu Oct 05, 2017 4:24 pm
I think it is often extraordinarily difficult to get neophyte investors to believe they can handle their own investments and to understand the impact of high fees.
Agreed 100%. Interesting it is just not neophyte investors. I'm a physician and tried to convince my old partners to change a 401k to a low cost platform. They just would not believe investing can be done correct WITHOUT an expert. Boy, were they a bunch of idiots.

Good luck.
"The stock market [fluctuation], therefore, is noise. A giant distraction from the business of investing.” | -Jack Bogle

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Re: Trying to convince my sister not to use a financial advisor

Post by tfb » Fri Oct 06, 2017 6:47 pm

maria00200 wrote:
Fri Oct 06, 2017 8:33 am
Yes she did ask me for input, which is why I don't understand why she won't take my advice. Anyhow, I tried explaining to her, I tried doing a graph showing all the fees with the advisor vs without, she still won't budge. I give up. I guess her advisor will be enjoying her money every year sipping on margaritas in the Bahamas :annoyed
Don't give up. She didn't take your advice because she didn't think you gave her a viable option. Just a graph isn't enough. If someone shows me how much money I can save by painting my rooms myself when I have never held a paintbrush before, I wouldn't take that advice either. You have to give her an option that she thinks is viable, not just something that you think is viable.
Harry Sit, taking a break from the forums.

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Re: Trying to convince my sister not to use a financial advisor

Post by LadyGeek » Fri Oct 06, 2017 7:07 pm

New member CFK is trying to help his/her sister here: Explanation of Investing Basics to Sister
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.

multiham
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Re: Trying to convince my sister not to use a financial advisor

Post by multiham » Fri Oct 06, 2017 9:31 pm

Sometimes people are just more comfortable dealing with someone they can meet and establish a relationship with versus a phone relationship and never getting to see that person. If that helps her sleep at night, than it is worth the $1,400 to her.

IMHO, people in this forum tend to underestimate the level of confidence you have to have in yourself to make the right decisions with your $'s. So much of the investment lingo is words/concepts that the average investor either doesn't understand or does not want to try and understand. Just take a look at the information they provide you on the fund you purchase. How many normal investors are going to understand what all of that means? The average investor is going to think that if it takes that many pages of numbers and disclosures, it must be really complicated and I need a professional to help.

Be happy she is investing. You do not want the pressure of having her trust you and then lose $. I can just imagine the conversation where she could say that the advisor would have had her out of these funds prior to the market decline and into bonds since they continuously monitors key indexes which help predict the market.

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Re: Trying to convince my sister not to use a financial advisor

Post by lynneny » Sat Oct 07, 2017 12:14 am

I was your sister. I knew nothing about investing, and went to a pricey financial advisor and paid the outrageous fees. But you know what? It was an education. I was lucky he put me in index funds, mostly Vanguard, and patiently explained things like what's a bond fund and what's an asset allocation, told me to open a Roth IRA, and kept me from selling during the financial crisis. I found it really interesting, and gained enough confidence to figure out my 401(k) and later HSA investments myself, and did just as well as he did. After a few years (I know, it shouldn't have taken me nearly that long), I thanked him for all his help, and explained I was switching to a brokerage account because I needed to put the AUM fees I'd been paying him toward maxing out my retirement accounts.

My point is that if your sister's financial advisor does the hard part that scares her of choosing the initial investments (as long as they're low-cost Vanguard index funds), she may realize after the first year or two that managing her account isn't really much work on an ongoing basis, and that she's comfortable doing it on her own.

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Re: Trying to convince my sister not to use a financial advisor

Post by BlackStrat » Sat Oct 07, 2017 10:11 am

Explain to her the concept of the Safe Withdrawal Rate (SWR) at retirement age (being able to withdraw 4% of your portfolio per year to maintain a a balance for 30 years).

This advisor would be taking a huge chunk of that yearly.

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Re: Trying to convince my sister not to use a financial advisor

Post by TravelGeek » Sat Oct 07, 2017 10:43 am

Nearly A Moose wrote:
Fri Oct 06, 2017 2:45 pm

Has the advisor shown her exactly what she'd put in and what the balance would be targeted at? I bet it's very similar (if it's being done well) to what Vanguard would do under their 0.3% personal advisory service. Perhaps she might look at those side by side and decide if what the advisor is offering is worth 4 times as much.
I don't know that it would be in the best interest of the advisor to put the client into a simple two or three fund portfolio. The goal needs to be to retain the client by making it look non-trivial to manage $100k :twisted: :shock:

We have good friends who are well educated (PhD) and yet they are using a major bank's local wealth mgmt department. I suspect they pay about as much as the OP's sister (but the AUM is much higher). We have talked in broad terms about what I do and how little it costs us in expenses, and I plan to dive a bit deeper into the various options (VG advisors) if the topic comes up again but I have no interest in becoming their financial advisor and certainly won't approach them with unsolicited guidance.

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Re: Trying to convince my sister not to use a financial advisor

Post by alpine_boglehead » Sat Oct 07, 2017 10:57 am

+1 for "If You Can" - it's so very clear on financial advisors: "their main goal is to transfer your wealth to them."

Maybe you can convince her to postpone the investment a bit. She could just say "need a bit of time to think about this" when meeting the advisor. This would give her the time to educate herself a bit.

One thing to keep in mind in your situation is to not let this have a bad influence on your relationship. It's a tough to see your loved ones make mistakes (amd be taken advantage of), with them valuing an other person's advice over yours.

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Re: Trying to convince my sister not to use a financial advisor

Post by mrc » Sat Oct 07, 2017 11:02 am

There is a lot of math in some of these suggestions. And books. And definitions. BH are a precise lot. What worked for me:

Do you want to use the X (FA/AUM/active) or Y(low cost target fund)?

X will cost you $500,000 in fees and lost earnings by the time you die.

Y will cost you $20,000.

Pick one.
A great challenge of life: Knowing enough to think you're doing it right, but not enough to know you're doing it wrong. — Neil deGrasse Tyson

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