You should be your own Financial Advisor

[capjak]

Should I Use A Financial Advisor Or Do It Myself? | White Coat Investor

Financial advisors cost a lot of money. Learning to be your own advisor may save you time, money, and hassle. Those who spend more time thinking about saving money, investing well, and becoming financially independent are far more likely to actually do it than those who only think about these...

www.whitecoatinvestor.com

Some highlights:
# 1 You will save a lot of money
It can be really tough to find a competent, ethical, and low-cost advisor, much less someone you feel is a good fit.

# 2 You won’t rip yourself off on purpose
Clients had no idea how many self-styled “advisors” there are that are either crooked or completely incompetent.

# 3 You don’t have to learn how to recognize a good advisor
I’ve said many times that by the time you know how to recognize a good advisor, you probably know enough to be your own financial advisor.

# 5 You don’t have to spend time meeting with an advisor
# 6 You only have to learn the stuff that actually applies to your life
# 7 You don’t have to prevent investment misbehavior
# 8 You’ll pay more attention to your financial life

 

[needvaca]

amen.
low cost market index funds are all you need. serves people well even up to the $100s of millions.
You can't beat the market- so why try?

 

[Luanne]

If I were my own financial advisor I'd probably be arguing with myself all the time about whether or not I could take money out for this or that.

 

[rhonda]

If I were my own financial advisor I'd probably be arguing with myself all the time about whether or not I could take money out for this or that.

So who often wins that argument now ... and wouldn't it be the same if the dialog were with yourself?

 

[artringwald]

amen.
low cost market index funds are all you need. serves people well even up to the $100s of millions.
You can't beat the market- so why try?

There's also plenty of low cost 'retirement date' funds so you may only need one fund. It's not that hard to set up and account. I've been my own financial advisor for years, but I did try using Vanguard Personal Advisor Services for my Roth IRA just to see how I liked it. They only charge 0.3% for the account they're managing instead of the more typical 3%. She does quarterly reviews by phone of video conference with us, and has give us good advice like prompting us to talk to an estate planner (which we finally did). I wanted to find an advisor we liked in case something happened to me, I wanted DW to have someone that could take over managing all our Vanguard accounts.

 

[DavidnRobin]

I have a Schwab Financial Advisor that charges nothing, but is always available for advice or connect with an area expert (bonds, taxes, retirement, etc). Of course they do this when you have a high-asset account. For lower-asset individuals, it is certainly possible to completely DIY as I did since I was able to start saving in my 30s.
But, with high-assets I would consider it too risky to completely DIY.

I am a DIYer, but did take up 2 managed funds through Schwab because I needed tax-free income via CA Bonds following the sale of our home. The money was split between the two CA Bond funds at 0.65% and 0.35% fees. The higher fee managed fund is doing better after one year.
I would not have even begun to deal with the nuances of these bonds doing this myself.

And yes - I am well diversion beyond these funds, including low-fee equity and fixed-income ETFs. As well as individual equities and REITs.

Prior to retirement, I went to my families paid FA (Morgan Stanley) at no fee, and it was great to get independent feedback that indeed our assets and resulting income to match our future Spend (retirement point), and diversification was well-balanced.

We were very fortunate to have taken advantage of the bull market that has gone on for 10+ years (for those really paying attention...).

Stock Market Performance by President

This interactive chart shows the running percentage gain in the Dow Jones Industrial Average by Presidential term. Each series begins with the closing value of the month of inauguration and runs to the closing value of the last month of the term. The y-axis shows the total percentage increase...

www.macrotrends.net

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[geekette]

Yep. I set out to be my own FA and so far have not robbed myself blind nor lost any money. If it all goes to crap, I have myself to blame. I'm good with that. Nobody is going to have more of an interest in what happens to my money than me, so I can count on myself to really care about the outcome. I am my only client so #6 is blissfully true.

My sister is not about to learn anything about money and hires someone for it. that's ok, too. We both sleep well at night, worlds apart.

 

[bogey21]

Some of us have the ability to manage our own money. Some don't. The latter are better off with a reputable Financial Advisor...

George

 

[Luanne]

So who often wins that argument now ... and wouldn't it be the same if the dialog were with yourself?

Now I leave my money alone. If I were the financial advisor I would probably feel I could get to it easier.

 

[tompalm]

Not for everyone. Some people will do better with a FA.

 

[WinniWoman]

I agree to a point. I would not give my money to someone else to manage and take commissions or charge annual fees. But we do have one that only charges by the hour or a one time fee for the year- $1000- works with you holistically and draws up a plan and is available all year for questions and advice. Can even meet with him virtually, and communicate via phone and email. You invest your money yourself.

Example- we have always had T Rowe Price as our financial company. I have always done all our investing. Our adviser is just fine with that. In fact said we are invested appropriately. He advises us on how to handle our withdrawals in retirement now and how to handle taxes and Roth conversions and so forth. My husband just retired so he is going to look at his 401k and help us decide whether or not to roll it over into an IRA or leave it with the company. He will look at his pension lump sum and advise as to where to invest that (within his T Rowe Price IRA Brokerage account). But I will be the one doing it- not him. He helped us to understand how we could buy our retirement home when we thought we could not and how much to spend on it and how to live on our money right now until the dust settles. Things like that. He originally had mentioned annuities (a certain kind- I forget which one) to us and I told him I did not like annuities so he took them off the table without blinking an eye.

He is advising us when to take SS and also on health insurance for me (ACA plan). Looks at other insurances. Looks at your expenses.

He looks at the whole picture. Asks what our plans are for retirement. Will we work part time? Will we be taking extravagant vacations? What are our hobbies? Are we plannign to buy new cars any time soon? The status of our son. Do we want to leave money to any charities or to any family members and CAN we? Etc.

It is great to have an objective eye in this stage of our lives which is new to us. Sometimes life becomes overwhelming and some people, like us, need a professional and objective person to sort it out. To me, this is what a FA should be.

PS I might add that T Rowe Price has an advisor assigned to us for free, and I do speak with him annually, but I find he wants to put us in a higher percentage of stock mutual funds (T Rowe Price ones, of course) and I have always resisted that. Our Garret FA advisor that I spoke of above agrees with me. I think T Rowe Price makes more money when you invest in stock funds instead of bond funds or money markets. So I am always cautious about an "advisor" that works for a financial company.

 

[Fredflintstone]

Should I Use A Financial Advisor Or Do It Myself? | White Coat Investor

Financial advisors cost a lot of money. Learning to be your own advisor may save you time, money, and hassle. Those who spend more time thinking about saving money, investing well, and becoming financially independent are far more likely to actually do it than those who only think about these...

www.whitecoatinvestor.com

Some highlights:
# 1 You will save a lot of money
It can be really tough to find a competent, ethical, and low-cost advisor, much less someone you feel is a good fit.

# 2 You won’t rip yourself off on purpose
Clients had no idea how many self-styled “advisors” there are that are either crooked or completely incompetent.

# 3 You don’t have to learn how to recognize a good advisor
I’ve said many times that by the time you know how to recognize a good advisor, you probably know enough to be your own financial advisor.

# 5 You don’t have to spend time meeting with an advisor
# 6 You only have to learn the stuff that actually applies to your life
# 7 You don’t have to prevent investment misbehavior
# 8 You’ll pay more attention to your financial life

I’m old fashioned. I use 2 banks and 2 financial advisors. Both banks have been around for over 100 years and have proven to be good managers. I do some small investing myself just for learning and for fun (10 percent of net worth). I like the balance.


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[Talent312]

I've been managing my own $$ for ~30 years, and know my limits.
But I only invest within those limits, so I feel I know what I'm doing.

Most of my stuff are in broad-based ETF's with low fees.
I use funds with active management for foreign stock & bond funds.
Those areas, I feel, need a higher level of attention than I can spare.
.

 

[BJRSanDiego]

Here are a few thoughts on this:

1. There are many people who should NOT do this. Many people are not very sharp with financial concepts, and know little/nothing about simple diversification, stocks versus bonds, domestic/intl diversification, P&L statements, PE ratios, etc. Heck, many people are financially incompetent.
2. I remember reading one of the Motley Fool (Gardner Brothers) books on investing. They had done research that showed that 80% of mutual funds did poorer than the S&P500 over a 5 or 10 year period. Their advice was that unless you are really sharp - - and sharper than 80% of the fund managers - - just invest in S&P500.
3. Through a well respected investment company I was courted to hire them as financial advisors. I think that they wanted about 1% of the funds they managed. I declined year-after-year. Then they offered a free year. I accepted and told them that if they earned me more money than I could, I'd hire them. They told me to buy this, and sell that, etc. At the end of the year (it was a good financial year in general), they told me how much $ I made. Lets call the increase "X dollars". On the surface it looked okay. Then I asked them what would the number be if I did nothing - - no sells, no buys, nothing. They didn't know. I told them that "you made me "X" dollars - - if I did nothing, I would have 1.5X dollars (50% more than the active managment). Then I told them that if I did the opposite of what they advised I would have had 2X dollars. That is, if they told me to buy more GE stock I instead sold that number, and if they told me to sell something, instead I bought more of it. This was a head-shaking moment. Their advice seemed very rationale and well based. But in the end they gave me advice that made me less money than if I did nothing. Poor advice? Maybe not, but it wasn't worth the cost if I had to pay the 1% management fee.

So, if a person knows that they are financially inept, or if they remember that they have done some dumb financial things in the past, they should hire a professional. If a person wants to just ride with the market (remembering that "all ships rise with an incoming or rising tide"), invest in wide domestic and Intl ETFs, including S&P500.

Me, I guess that I'm my own financial advisor. (BTW, my wife and I each have MBAs majoring in Finance)

 

[Big Matt]

You will get 10x the benefit of having a Tax advisor/accountant/lawyer rather than an investment adviser. You will give away far more to the government if you don't have a solid strategy related to taxable income, investments, deferrals than the delta on having an investment adviser rather doing it yourself.

 

[goaliedave]

As with timeshares, it is about education. I'm a CPA and also licenced to sell securities and life insurance. I only deal with middle class people who got screwed by trusting banks and want to learn the basics. Take responsibility for your own money! So sad to see people who dont know they have a bad deal. As with timeshares.

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[Talent312]

So sad to see people who dont know they have a bad deal. As with timeshares.

Like a guy I know who only invested in Savings Bonds becuz they were safe.
Great, but he missed out on the growth in the market over the last 40 years.
Now, he can't retire 'cuz he has kids in college and won't have enuff. Sad.
.

 

[easyrider]

Too many people I know think they understand their investments and they have only a clue. Even with a good financial advisor many people really don't understand their investments because it is complicated and sort of emotional. Currently things are pretty good regarding almost all types of investments but there are many things that can tank intangible assets.

Bill

 

[PamMo]

When the stock market is going up, everyone thinks they are a financial genius. In a bull market, it's easy to make money. It takes a lot of humility and discipline to recognize your shortcomings and limitations. A good financial/tax advisor can help keep your ego and emotions in check, and provide advice to help you make money and keep it. I have no problem doing my homework AND getting advice from experts.

 

[controller1]

I’m old fashioned. I use 2 banks and 2 financial advisors. Both banks have been around for over 100 years and have proven to be good managers. I do some small investing myself just for learning and for fun (10 percent of net worth). I like the balance.


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I like that your banks have proven to be good managers but I certainly would not use a bank's longevity as a reason to use the bank. There are probably some Wells Fargo customers who never imagined what happened to them would have happened due to the bank's longevity.

 

[goaliedave]

I like that your banks have proven to be good managers but I certainly would not use a bank's longevity as a reason to use the bank. There are probably some Wells Fargo customers who never imagined what happened to them would have happened due to the bank's longevity.

Exactly. Both Donald Trump and Hilary Clinton have longevity, and 90% of USA folk hate one of them! Sad that some older people who were raised on longevity = trustworthy stability haven't grown with changes in the world.

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[bogey21]

There are many people who should NOT do this. Many people are not very sharp with financial concepts, and know little/nothing about simple diversification, stocks versus bonds, domestic/intl diversification, P&L statements, PE ratios, etc. Heck, many people are financially incompetent.

Here is a real life story that supports this point of view. When I retired my Employer offered what is known as an Early Retirement Window for 12 of us so my successor could pick his team. To encourage the other 11 to retire (I was already committed) they sweetened the benefits for the others. We all had a choice. Take the annuity i.e. monthly payments for the rest of our lives or a lump sum. The other 11 took the lump sum. I took a reduced annuity so my ex-wife (20 years younger than me) would continue to get 50% of my benefit as long as she lives. At last count only 4 or the 11 who took the lump sum have any of it left. The other 7 (or their investment advisor) either made bad decisions or they otherwise squandered the money. Which it is doesn't really matter. Their money is gone and I (20 years later) continue to collect my monthly checks. The ironic part of this is that I understand investing as I was the Chief Financial Officer of the Bank before I became President...

George

 

[Fredflintstone]

I like that your banks have proven to be good managers but I certainly would not use a bank's longevity as a reason to use the bank. There are probably some Wells Fargo customers who never imagined what happened to them would have happened due to the bank's longevity.

Yes, I agree within the US Banking system longevity doesn’t matter as much as the rules are very different than in Canada. In Canada, longevity matters. For example, when the big banks in the US needed bailing out in 2008, the big 5 banks in CAnada were business as usual. No bail outs or crisis here. Also, the Bank Act in Canada has always had strong regulations on how banks must conduct business.


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[Fredflintstone]

Here is a real life story that supports this point of view. When I retired my Employer offered what is known as an Early Retirement Window for 12 of us so my successor could pick his team. To encourage the other 11 to retire (I was already committed) they sweetened the benefits for the others. We all had a choice. Take the annuity i.e. monthly payments for the rest of our lives or a lump sum. The other 11 took the lump sum. I took a reduced annuity so my ex-wife (20 years younger than me) would continue to get 50% of my benefit as long as she lives. At last count only 4 or the 11 who took the lump sum have any of it left. The other 7 (or their investment advisor) either made bad decisions or they otherwise squandered the money. Which it is doesn't really matter. Their money is gone and I (20 years later) continue to collect my monthly checks. The ironic part of this is that I understand investing as I was the Chief Financial Officer of the Bank before I became President...

George

Good points. I think sometimes folks take in too high a risk to beef up their accounts and the risk sometimes smacks them between the eyes. Greed can punish. You were smart in going simple. Diversify is key and regular monthly saving over the long haul.




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[stmartinfan]

I disagree that everyone should handle their own investing. We have been very pleased with our financial adviser. We follow financial news and have a decent understanding of various investment options, but he has broadened our portfolio to include some options we wouldn't have ventured into on our own that have done well, while still keeping it within a reasonable level of risk. We pay a fee based on the size of our portfolio but negotiated a lower rate than originally suggested, so our growth isn't significantly affected by his fees. Meeting with him quarterly or so also forces us to focus and reassess our investments more often than we likely would on our own. We don't churn the portfolio but do discuss if we should consider moving our of underperforming assets. We are financially in a much better position that we would be without his advice.