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Message
Need help picking advisor (dimensional fund advisors)
Posted on 9/5/14 at 3:42 am
Posted on 9/5/14 at 3:42 am
I'm looking at an advisor who says he has an alliance with Dimensional Fund Advisors. Anyone familiar with this group? The advisor I'm speaking with says he is one of the few firms in the area that has access to their investment strategy and funds. I'm looking for someone to manage my portfolio and am considering going this route. Having access to DFA is what he was pushing to get my business. Any thoughts?
This post was edited on 9/5/14 at 9:30 am
1
Posted on 9/5/14 at 7:29 am to JL
DFA is a very goo shop. Institutional caliber investment shop. Now that has nothing to do with the guy that you are dealing with.
Posted on 9/5/14 at 8:05 am to TheHiddenFlask
My understanding is that they are fairly selective as to who they associate with. Could I make the assumption that if they are doing business with this certain advisor it's safe to say he has his shite together?
Posted on 9/5/14 at 9:12 am to JL
Just like every other fund company out there DFA has funds that are good and funds that aren't. There really aren't any one stop shops when it comes to funds/managers.
Don't be taken in by exclusivity, that is just a marketing tactic. They want to you make the credibility association with the advisor because of their marketed selective nature.
Full disclosure, I don't know their criteria for working with advisors. My firm has no relationship with them and have never had a problem using them in the past with any investments. I also primarily invest for institutions and they rarely come up on any of our screens and searches as among the best in any category.
Here is the link to their Morningstar Fund Family Page for further research.
LINK
Don't be taken in by exclusivity, that is just a marketing tactic. They want to you make the credibility association with the advisor because of their marketed selective nature.
Full disclosure, I don't know their criteria for working with advisors. My firm has no relationship with them and have never had a problem using them in the past with any investments. I also primarily invest for institutions and they rarely come up on any of our screens and searches as among the best in any category.
Here is the link to their Morningstar Fund Family Page for further research.
LINK
Posted on 9/5/14 at 9:24 am to Maderan
I'm trying to find someone to handle my investments, the advisor in question is someone I know and trust. The minimum investment with his group is $500k. He has fiduciary duty and with my limited knowledge of investments their investing model looks good. I'm just trying to determine if this is the right place to go before I just hand over a large chunk of money. Any other questions or concerns I should have before doing this? I've done a bit of research but I'm not the best when it comes to financial knowledge.
Posted on 9/5/14 at 9:34 am to JL
All advisors have a fiduciary duty.
Sounds like he is a great salesman.
I will say that associating with DFA puts your base level a lot higher than most fly by night shops, but not enough to base your whole decision on.
Sounds like he is a great salesman.
I will say that associating with DFA puts your base level a lot higher than most fly by night shops, but not enough to base your whole decision on.
Posted on 9/5/14 at 9:36 am to TheHiddenFlask
Can you help me out with some other considerations please? I'm an engineer, no business/finance background.
Posted on 9/5/14 at 9:37 am to JL
My advice is to go with who you feel comfortable with.
All fee only Registered Investment Advisors (RIA) have fiduciary duty to their clients to only provide advice to them that is in the clients best interests. I probably would not go with an advisor who is accepts commissions of any kind or one who pushes insurance.
I would focus on his model/models and if you think it is the right fit for you. Performance is not repeatable but process is. Focus on an advisor's process and make sure you are comfortable with that, because that is what you are really getting.
All fee only Registered Investment Advisors (RIA) have fiduciary duty to their clients to only provide advice to them that is in the clients best interests. I probably would not go with an advisor who is accepts commissions of any kind or one who pushes insurance.
I would focus on his model/models and if you think it is the right fit for you. Performance is not repeatable but process is. Focus on an advisor's process and make sure you are comfortable with that, because that is what you are really getting.
Posted on 9/5/14 at 9:42 am to Maderan
Bingo!
Find someone you are comfortable with that is fee based. Everything he should put you in should be liquid and non-proprietary. Therefore, if you don't like him you can leave with any issues. However, like someone said if you like his process then you should give him time. In a year like last year you won't find many advisors that beat the market.
Find someone you are comfortable with that is fee based. Everything he should put you in should be liquid and non-proprietary. Therefore, if you don't like him you can leave with any issues. However, like someone said if you like his process then you should give him time. In a year like last year you won't find many advisors that beat the market.
This post was edited on 9/5/14 at 9:49 am
Posted on 9/5/14 at 9:55 am to Janky
I can give you an opinion of what I think you should be looking for if you give me some basic info.
Info like age and purpose of account (retirement, to eventually purchase house, take care of parents, for heirs etc). A more complete financial picture is obviously much better but may not be information you want to post to a message board!
Info like age and purpose of account (retirement, to eventually purchase house, take care of parents, for heirs etc). A more complete financial picture is obviously much better but may not be information you want to post to a message board!
Posted on 9/5/14 at 10:00 am to Maderan
31, net worth ~700k, planning on an early retirement. Plan to roll my 401k and a few loose investment accounts I have under one advisor, this investment would be $500k. Already have a house with very low interest rate. May need to take care of my parents a little but not worried about that. Not married, no kids.
This post was edited on 9/5/14 at 10:03 am
Posted on 9/5/14 at 11:06 am to JL
It looks like you have some great habits from a savings standpoint and you are way ahead of the curve of individuals your age when it comes to savings.
It really depends on what you define as an early retirement (45, 50, 55 or ASAP). What additions do you plan on making on an annual basis while working? What will you be doing in retirement (travel, etc)? Your income needs will determine how much savings you will need. I would stick to a below 5% annual distribution rate if you never want to run out of money.
With 500k at this point you want to target a growth rate of around 8% annualized. If you work until you are 50 and achieve this target return you would be looking at around 2 million at that point with no additional contributions. At a safe 5% distribution rate you would get annual income of 100k. If you need more you would need to save more or adjust the portfolio risk up (which also impacts the success rate of getting to your target).
You want a process that focuses on slow steady compound growth. You want to reach your 8% target with a minimum of risk. You can not eliminate risk but you should understand it.
There is a disproportionate effect of losses and gains and losing money has a much more powerful effect on your ability to compound money at high rates of return. For example a 50% loss and a 50% gain are not equal. It takes a 100% gain to offset a 50% loss. Guess which is easier to do:)
Lower volatility is better. I would look for a portfolio with 80+% capture rate of the S&P 500 on the upside and as low as they can engineer on the downside but around 60% or lower.
When looking at models understand that most models are backwards looking and the primary diversification tool is going to be bonds. Bonds will act very different in the coming years than they have in the past. If they can change the assumptions in their models to lower forward looking bond returns to around 2.5% that would probably be a more accurate (but conservative).
It really depends on what you define as an early retirement (45, 50, 55 or ASAP). What additions do you plan on making on an annual basis while working? What will you be doing in retirement (travel, etc)? Your income needs will determine how much savings you will need. I would stick to a below 5% annual distribution rate if you never want to run out of money.
With 500k at this point you want to target a growth rate of around 8% annualized. If you work until you are 50 and achieve this target return you would be looking at around 2 million at that point with no additional contributions. At a safe 5% distribution rate you would get annual income of 100k. If you need more you would need to save more or adjust the portfolio risk up (which also impacts the success rate of getting to your target).
You want a process that focuses on slow steady compound growth. You want to reach your 8% target with a minimum of risk. You can not eliminate risk but you should understand it.
There is a disproportionate effect of losses and gains and losing money has a much more powerful effect on your ability to compound money at high rates of return. For example a 50% loss and a 50% gain are not equal. It takes a 100% gain to offset a 50% loss. Guess which is easier to do:)
Lower volatility is better. I would look for a portfolio with 80+% capture rate of the S&P 500 on the upside and as low as they can engineer on the downside but around 60% or lower.
When looking at models understand that most models are backwards looking and the primary diversification tool is going to be bonds. Bonds will act very different in the coming years than they have in the past. If they can change the assumptions in their models to lower forward looking bond returns to around 2.5% that would probably be a more accurate (but conservative).
Posted on 9/5/14 at 12:06 pm to JL
Made ran has been very on point, but you can email me if you want to chat offline.
I only post from my phone, so long posts aren't my strong point.
I only post from my phone, so long posts aren't my strong point.
Posted on 9/6/14 at 10:30 am to Maderan
quote:
At a safe 5% distribution rate you would get annual income of 100k.
If the OP retires at 50 I would really question a 5% portfolio withdrawal rate as "safe". Assuming an 8% annualized return may also be questionable as you know market returns don't work like that, and volatility can aid an accumulator. Otherwise solid. This is coming from a pre-50 "retiree".
Posted on 9/7/14 at 12:22 pm to tirebiter
Since the start of the S&P there have only been 2 (possibly 3) starting distribution years where you would have run out of money with a 5% distribution rate of you staring investment and an investment strategy capturing 80% upside S&P and 50% downside.
Two of years were the first years of the great depression and maybe 2008 but after the current recovery, probably not.
Two of years were the first years of the great depression and maybe 2008 but after the current recovery, probably not.
Posted on 9/7/14 at 1:50 pm to Maderan
quote:
an investment strategy capturing 80% upside S&P and 50% downside.
not following this...can you explain?
Posted on 9/7/14 at 4:36 pm to Ole War Skule
S&P is up 10% you are up 80% of that or 8%. S&P is down -10% you are down 50% of that or -5%.
Posted on 9/7/14 at 5:35 pm to Maderan
This explains why when everyone keeps touting VTSMX as the best thing since sliced bread I shake my head and walk away.
Posted on 9/7/14 at 5:51 pm to Janky
quote:
This explains why when everyone keeps touting VTSMX as the best thing since sliced bread I shake my head and walk away.
For guys in their 20s and 30s, it is.
Posted on 9/7/14 at 5:52 pm to Sigma
Nope, not in my opinion anyway.
This post was edited on 9/7/14 at 5:54 pm
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