Something that I haven't seen mentioned is that as you get to be older, say late 60 to 70's and older, your mental abilities may not be as sharp as they once were. In your younger years you managed your own retirement portfolio and did an acceptable to good job. But, then you start down the path of dementia and Alzheimer's. From what I've seen, those that start down that path rarely seek out help in a timely fashion. By the time your spouse or family intervene serious damage may have been done to your retirement. If you can find a financial advisor that charges 1% of the assets, it might be worth it to protect your savings from yourself.
Money/Investment Managers Questions
- Thread starter KCCLONE712
- Start date
I put my trust in a financial advisor becuase i believe he can return better than the 1% he's charging me. Plus, they do it all day long so should be better at it than I am.
If you think your guy can beat the market by 25% on average (they won’t), you pay the 2%. If you think they can beat the market by 15% (they can’t), you pay 1%. If you don’t want to worry about getting taken for a ride, put your money in a total market fund like VTI and pay 0.03%.
No brainer once you get comfortable investing on your own.
No brainer once you get comfortable investing on your own.
I hadn't thought of it sliding with age, but I can kind of see how that might be a factor.
Would that amount go down for a 40 or 50 year old?
I read a few investment books and found what works for me and stuck with it until I could retire. Later after I had saved some I subscribed to a newsletter.
The newsletter told me most of what an advisor would, by keeping me abreast of the economic fundamentals. The author never raised his fee all the years. So it was an annual $185 to someone that helped me just stay the course.
Several brokerage firms put out a poop sheet with similar information. A word of caution is advised in their regards however, as they get richer when they induce their clients to trade. Low cost wins every time. Time in the market is more important than timing the market. Most people have their own unique risk tolerance, and need to learn about themselves.
The newsletter told me most of what an advisor would, by keeping me abreast of the economic fundamentals. The author never raised his fee all the years. So it was an annual $185 to someone that helped me just stay the course.
Several brokerage firms put out a poop sheet with similar information. A word of caution is advised in their regards however, as they get richer when they induce their clients to trade. Low cost wins every time. Time in the market is more important than timing the market. Most people have their own unique risk tolerance, and need to learn about themselves.
This will be my longest post ever on this site, so buckle up. I am a Financial Advisor with a CFP and CFA, and I agree that most people can do it themselves if they want to. I spent the first 15 years of my career as a Navy officer and then in data center management, and I never considered hiring an FA because I enjoyed managing money myself. So, I get it when someone tells me they don't need me - I was that person. Honestly, that attitude made me reluctant to start my current career 6 years ago. Why would anyone hire me when they can just do it themselves?
As it turns out, there are a surprising number of people who have very good reasons for hiring an FA, and several have been mentioned. For younger clients, it can be the planning we do (i.e. setting and prioritizing goals), peace of mind, or just having someone to talk them out of making bad decisions. Obviously, the more complex the situation or the more money they have, the more it makes sense. For older clients, it can be withdrawal strategies, tax efficiency, wealth transfer advice, etc. One of the biggest reasons to work with someone like me is how much easier it is for beneficiaries to handle things when a client dies. When a deceased client's spouse or child can come to my office and walk out an hour later with everything taken care of, I know that's a huge value to the family. If you've ever tried to deal with that with multiple large companies, you'll know what I mean.
Also, I want to be clear that my goal isn't to "beat the market", and I don't have access to anything special (other than mutual funds with super-low internal expenses). My goal is to have disciplined diversification and rebalancing strategies in place that offset the percentage fee my firm charges, or at least come very close to it. In other words, I'm aiming to get the same return a client would get if they followed a very simple DIY strategy. If I'm successful, then everything else I mentioned above is just a bonus.
The advice of just investing in the S&P 500 is fine, but diversifying further can be better IF there's a rebalancing strategy. Very few people do that on their own, even if they say they want to. As a former DIYer myself, I know that life gets in the way and inertia happens, so having an FA doing it for you can be valuable. For example, the S&P 500 isn't homogenous - just look at what is considered "growth" versus "value" and how much the performance of those two categories can vary. A good portfolio should also have some small/mid-cap and international as well.
Lastly, I'd like to point out that 2% plus anything is a crazy high fee, unless maybe you're talking about the top hedge fund managers in the world, and that's a whole different ballgame. Also, the previous poster talking about Northwestern Mutual charging a bunch just to transfer money to them is not the industry norm. Finally, I'm not a fan of commission-based accounts, where every suggestion to make a trade is met with skepticism - is the advisor suggesting this because it's a good idea or because it'll make him money? I highly prefer the percentage-fee model, as I think it's best for both me and the client.
Mostly, I agree with what others have said, but I wanted to share my experience from the other side of the desk, so to speak. Just because you want to handle your finances yourself doesn't mean that everyone does, or should.
As it turns out, there are a surprising number of people who have very good reasons for hiring an FA, and several have been mentioned. For younger clients, it can be the planning we do (i.e. setting and prioritizing goals), peace of mind, or just having someone to talk them out of making bad decisions. Obviously, the more complex the situation or the more money they have, the more it makes sense. For older clients, it can be withdrawal strategies, tax efficiency, wealth transfer advice, etc. One of the biggest reasons to work with someone like me is how much easier it is for beneficiaries to handle things when a client dies. When a deceased client's spouse or child can come to my office and walk out an hour later with everything taken care of, I know that's a huge value to the family. If you've ever tried to deal with that with multiple large companies, you'll know what I mean.
Also, I want to be clear that my goal isn't to "beat the market", and I don't have access to anything special (other than mutual funds with super-low internal expenses). My goal is to have disciplined diversification and rebalancing strategies in place that offset the percentage fee my firm charges, or at least come very close to it. In other words, I'm aiming to get the same return a client would get if they followed a very simple DIY strategy. If I'm successful, then everything else I mentioned above is just a bonus.
The advice of just investing in the S&P 500 is fine, but diversifying further can be better IF there's a rebalancing strategy. Very few people do that on their own, even if they say they want to. As a former DIYer myself, I know that life gets in the way and inertia happens, so having an FA doing it for you can be valuable. For example, the S&P 500 isn't homogenous - just look at what is considered "growth" versus "value" and how much the performance of those two categories can vary. A good portfolio should also have some small/mid-cap and international as well.
Lastly, I'd like to point out that 2% plus anything is a crazy high fee, unless maybe you're talking about the top hedge fund managers in the world, and that's a whole different ballgame. Also, the previous poster talking about Northwestern Mutual charging a bunch just to transfer money to them is not the industry norm. Finally, I'm not a fan of commission-based accounts, where every suggestion to make a trade is met with skepticism - is the advisor suggesting this because it's a good idea or because it'll make him money? I highly prefer the percentage-fee model, as I think it's best for both me and the client.
Mostly, I agree with what others have said, but I wanted to share my experience from the other side of the desk, so to speak. Just because you want to handle your finances yourself doesn't mean that everyone does, or should.
Good post and that’s a fair take. I do it myself because I enjoy it. If someone is willing to take a little bit of time learn the basics the min they can definitely do it all on their own, but absolutely that is not for everyone, so for do what’s best for you.
I actually meet with a financial adviser quarterly for the past 2-3 years. I don’t use him as an adviser. Actually met with him as a courtesy the first time since he was a friend of a friend. I got life insurance through him once we had our first kid, but that was it. We are about to meet again this week just to chat. I’m sure I won’t buy any new services from him and I think he is fine with it as he knows I don’t need them. I can’t quite figure out why he likes meeting still, maybe playing the long game for when I retire but that’s a long ways away. He is a nice dude and meet over beers, so I don’t mind doing it lol.
Wow.
You are saying we should take our 7+ figure investment portfolio and crawl in a hole and die.
What would my 600+ tax clients feel or think? They all ask for advise and I do the best I can, tax wise. For the near term, the federal income tax situation is untenable. Good luck trying to guess that outcome.
Give me your best expectation with regards to the federal income tax problem.
Please remember, I am apparently in your intellectually compromised category.
Make it simple,.....I guess.
I just retired at end of 2024. Thinking about hiring a financial analyst, not an investment advisor. Devin Carroll is a national tax, SS and income guru with a huge YouTube following (that's how I first found out about him). He will analyze all your accounts, taxes, etc. and advise on moves for a flat $10k fee. I am still hesitant and undecided if it is worth it.
www.youtube.com
Devin Carroll, CFP®
Hi, I’m Devin. I’m a financial planner who makes retirement planning easier to understand. I create content for successful retirees—especially those with $1 million or more saved—who want to make smart, confident money decisions. I cover Social Security, taxes, and investments, breaking it all...
www.youtube.com
10k?!?! Man I haven’t started looking into retirement strategies yet as I have quite a ways to go, so I have no idea what I am talking about, but 10k feels hard to justify. Even if you have 5M+ in savings. IMHO.I just retired at end of 2024. Thinking about hiring a financial analyst, not an investment advisor. Devin Carroll is a national tax, SS and income guru with a huge YouTube following (that's how I first found out about him). He will analyze all your accounts, taxes, etc. and advise on moves for a flat $10k fee. I am still hesitant and undecided if it is worth it.
Devin Carroll, CFP®
Hi, I’m Devin. I’m a financial planner who makes retirement planning easier to understand. I create content for successful retirees—especially those with $1 million or more saved—who want to make smart, confident money decisions. I cover Social Security, taxes, and investments, breaking it all...
If you have $5M, and someone is charging 1% of assets, that's.... $50k. Annually.
In my earlier post I mentioned multiple different folks around CR. The only one that was a flat flat fee was $12,500 - although that also covered them doing your taxes too. Everyone else was 1%, declining with volume. That was by FAR the cheapest I found.
VA I agree with a lot of what you said there, I think you make the exact right case for when/why to get an advisor.
My issue with the percentage fee model is this: does it really take 10x more hours to manage a $5M client as opposed to a $500k client? I know there's declining % rates, but I don't think it is proportionate. IMHO.
I did the math on one of places I interviewed, and plugged in $200 per hour for a rate. It came up to roughly 10 hours per month. That seemed like a lot more than necessary for basically just allocating assets. Maybe with creating individual tax-efficient withdrawal strategies it does, but even then- once setup, it seems like the maintenance of it wouldn't be that time intensive. Maybe I am just used to being billed hourly for the atty and CPA for professional services for our business and it makes me allergic to the %...
Yeah, right around $10k is the starting point from what I have found. Devin is out of Texarkana and his fee is one time analysis and action plan for investment, taxes, social security, Roth conversions, the whole shebang.
There's people with a lot more money at their disposable that are even better than them, so they have no advantages.
Thanks for saying this as I was not sure if it was the case. I know I was very surprised to find out this was part of their structure. I clarified several times that this was money right off the top just to move my money from my personal accounts to NW Mutual Accounts. THEN they would add their annual fees (probably where the 3-5% came from as a combined rate). At that time I didn't have a ton of investments, but that fee was going to be several thousands of dollars just to click a few buttons. This was 10 years ago so maybe they have changed.
I said 'as you get to be older, say late 60 to 70's and older, your mental abilities MAY not be as sharp as they once were'. In the snip it above of the state of Iowa, almost all counites show that 10-12% of residents over 65 have Alzheimer or some form of dementia. From what you wrote, it sounds like you are in the 85-90% that do not have dementia. For families that fall in the 10-15% that do have dementia, often times the individual with dementia is the last one to ask for help. If that family member is primary money manager of their own finances or their families, that is where the danger is.
What is the scope of advice you are looking for? Clients with more than $500k of investable assets Vanguard charges 0.3% for a dedicated CFP.
For me - when the money is left in my hands, I’m not disciplined enough to not gamble some of it on riskier investments. I’ve found that keeping a big chunk with a manager takes my lack of skill out of the picture.
If you’re someone that can buy and hold index funds, definitely do it yourself. If you’re not, managers are great
