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Financial Advisors
Posted on 8/6/18 at 4:16 pm
Posted on 8/6/18 at 4:16 pm
Do you use a financial advisor, and if so why do you?
In the past I've self managed through real estate and low cost index funds. I'm recently married and my wife wants me to look into a financial advisor who is a family friend and has managed their family funds previously. The CFP does their investing portion with SEI who "actively manages the money managers", and he has claims about why this is superior to passive investing... it sounds to me like they take fees for managing people who take fees. The CFP charges 0.8% annually.
I'm guessing the consensus is that actively managed funds will slowly eat you through fees and that paying somebody 0.8% of your portfolio to do something you can do for yourself is silly. I figured instead of assuming and lurking, I'd actually ask.
Thanks, and
In the past I've self managed through real estate and low cost index funds. I'm recently married and my wife wants me to look into a financial advisor who is a family friend and has managed their family funds previously. The CFP does their investing portion with SEI who "actively manages the money managers", and he has claims about why this is superior to passive investing... it sounds to me like they take fees for managing people who take fees. The CFP charges 0.8% annually.
I'm guessing the consensus is that actively managed funds will slowly eat you through fees and that paying somebody 0.8% of your portfolio to do something you can do for yourself is silly. I figured instead of assuming and lurking, I'd actually ask.
Thanks, and
8
Posted on 8/6/18 at 4:35 pm to cajunfury87
If you have the financial skill to manage it on your own, then you should do that. The fees will save you thousands of dollars over the long-term.
What might be a better alternative (and make your wife feel better) is to have them build a financial plan for you that hits short, medium, and long-term goals. You can ask for a holistic financial plan and pay a flat fee for the service every few years. Through this process, you can get your questions answered but you avoid the annual fees that eat into your nest egg.
What might be a better alternative (and make your wife feel better) is to have them build a financial plan for you that hits short, medium, and long-term goals. You can ask for a holistic financial plan and pay a flat fee for the service every few years. Through this process, you can get your questions answered but you avoid the annual fees that eat into your nest egg.
Posted on 8/6/18 at 4:35 pm to cajunfury87
I decided against using an adviser when I realized that for every $1000 I invested in Edwards Jones that they would only be buying $930 worth of mutual fund shares for me and pocketing $70. That was enough right there to tell me all I needed to know about paying an adviser.
To each his own but it never seemed to add up. If I make 10% return and keep that money on the front end in addition to lower fees by doing it myself, would they actually be able to do better? I seriously doubt it.
To each his own but it never seemed to add up. If I make 10% return and keep that money on the front end in addition to lower fees by doing it myself, would they actually be able to do better? I seriously doubt it.
Posted on 8/6/18 at 4:43 pm to cajunfury87
I'm also wondering this. Is there any benefit to being in with one of the big boys (JPMorgan, UBS, etc.), say for instance you have an opportunity to be taken on by an advisor that otherwise works only with $5 Million plus books? Do they tend to have access to platforms that the small account guys do not have?
Posted on 8/6/18 at 4:45 pm to statman34
quote:
I decided against using an adviser when I realized that for every $1000 I invested in Edwards Jones that they would only be buying $930 worth of mutual fund shares for me and pocketing $70
How are they getting away with 7%? Seems way out of line with market.
Posted on 8/6/18 at 5:03 pm to statman34
quote:
decided against using an adviser when I realized that for every $1000 I invested in Edwards Jones that they would only be buying $930 worth of mutual fund shares for me and pocketing $70. That was enough right there to tell me all I needed to know about paying an adviser.
That's a very simplistic view of it, but you're right, to each his own.
quote:
make 10% return and keep that money on the front end in addition to lower fees by doing it myself, would they actually be able to do better? I seriously doubt it.
If you're using an advisor in order to generate higher returns, you're doing it wrong.
Posted on 8/6/18 at 5:04 pm to Wade Phillips
They aren't. The days of 7% up front on A shares are long gone. 
Posted on 8/6/18 at 5:37 pm to slackster
That is what they guy told me right before the flood happened. Scared me away whether it was true or not.
Posted on 8/6/18 at 5:38 pm to slackster
quote:
If you're using an advisor in order to generate higher returns, you're doing it wrong.
You are correct. The real reason I decided against it was fees and the fact that I knew exactly what I wanted to do and how, thus making them irrelevant.
Posted on 8/6/18 at 6:01 pm to lynxcat
quote:
What might be a better alternative (and make your wife feel better) is to have them build a financial plan for you that hits short, medium, and long-term goals. You can ask for a holistic financial plan and pay a flat fee for the service every few years. Through this process, you can get your questions answered but you avoid the annual fees that eat into your nest egg.
This is a great answer. Alternatively is if you have enough money in one brokerage, you can also get this for free. I know Schwab and Fidelity both do this for people who have X amount at the firm. Its not going to be comprehensive advice you get from a financial planner, but they run regular reports for me and help me identify potential problems.
Also, many works offer this as part of their benefits program.
Posted on 8/6/18 at 6:20 pm to cajunfury87
If you believe you absolutely must do something, I also suggest the 'fee only' plan. However, my experience with this was not very positive at all so YMMV. If you're completely clueless and scared to manage your own funds, then you will pay someone dearly for that privilege. Educate yourself and save yourself thousands of dollars.
This post was edited on 8/6/18 at 6:22 pm
Posted on 8/6/18 at 7:07 pm to cajunfury87
I recommend reading Vanguard's Advisor Alpha series. They've pegged potential advisor value from 1.5-3.0%.
DIY investing isn't for everyone, but obviously this board is skewed to that subset of investors.
DIY investing isn't for everyone, but obviously this board is skewed to that subset of investors.
Posted on 8/6/18 at 9:48 pm to Wade Phillips
Yes. I am interning with a firm that has a minimum account size of $10M. The access to alternative funds such as PE cannot be had at many retail brokers. Then again, most of those funds have $1m minimums, so many people cannot invest, and if they can, are not willing to have $1m locked away for 5+ years without access. And even then, that's a substantial amount with one fund - you need to diversify across funds within the same asset class.
Our firm also provides access to tax and estate lawyers, among numerous other services. This business model doesn't make sense for every Joe Blow with $50k in a 401k, hence the large minimum.
Our firm also provides access to tax and estate lawyers, among numerous other services. This business model doesn't make sense for every Joe Blow with $50k in a 401k, hence the large minimum.
Posted on 8/6/18 at 10:34 pm to slackster
I agree. This board obviously has people engaged on the topic, therefore aren’t the client an advisor can benefit nearly as much. Much like a car forum and the members assuming everyone knows cars like they do.
Advisors can be beneficial on several levels and they can help people that aren’t as engaged reach their financial planning goals. And like any industry, the dick heads are whom get mentioned the most. Industry has shifted more toward flat fee or managed money, but there will always be people that look out for their financial needs over clients- and that applies to mechanics, lawyers, doctors, etc.
Advisors can be beneficial on several levels and they can help people that aren’t as engaged reach their financial planning goals. And like any industry, the dick heads are whom get mentioned the most. Industry has shifted more toward flat fee or managed money, but there will always be people that look out for their financial needs over clients- and that applies to mechanics, lawyers, doctors, etc.
Posted on 8/6/18 at 10:53 pm to statman34
quote:
statman34
you have loads, crapper fund choice, higher expense ratios and annual fees with EJ depending what you have with them not to mention crazy stock commissions.
a myriad of expenses.
run away from EJ
Posted on 8/7/18 at 6:58 am to cajunfury87
Most people - no.
Once you get close to the $1MM range of investment savings, it is time to start shopping for an advisor.
Just before that, I would make sure I have a really good CPA and attorney that has my will and trusts lined up appropriately.
Once you get close to the $1MM range of investment savings, it is time to start shopping for an advisor.
Just before that, I would make sure I have a really good CPA and attorney that has my will and trusts lined up appropriately.
Posted on 8/7/18 at 8:27 am to cajunfury87
For someone who has zero idea how to invest his money I find value in mine. I was able to consolidate three 401ks I had floating out there, and I've been extremely pleased with the performance of my account so far.
Another thing to consider, the group I'm with lets you take very very low (zero?) interest loans against your portfolio, and while you have use of the cash you're still earning returns as if you've never withdrawn it.
Another thing to consider, the group I'm with lets you take very very low (zero?) interest loans against your portfolio, and while you have use of the cash you're still earning returns as if you've never withdrawn it.
Posted on 8/7/18 at 9:57 am to Fat Bastard
quote:
you have loads, crapper fund choice, higher expense ratios and annual fees with EJ depending what you have with them not to mention crazy stock commissions.
Using a full service brokerage firm for stock trades is going to cost alot of money in commissions, unless it's a fee based account.
I've got an uncle who uses EJs and we've spoken about how much cheaper other platforms can be for stock trading. He says his advisor keeps him from doing stupid stuff, so he sees value in it.
I know everyone on this board always keeps their emotions in check and never makes mistakes, but not everyone is built the same.
Posted on 8/7/18 at 2:37 pm to KillTheGophers
quote:
Once you get close to the $1MM range of investment savings, it is time to start shopping for an advisor.
Why? If you have managed to grow your investments to the million dollar range why change what you are doing?
Posted on 8/7/18 at 2:41 pm to EA6B
Agreed. $1M isn't a magical number that changes how you manage retirement funds.
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