Financial Advisors

[2Old2RE]

Does anybody here use a financial advisor? Or does everybody here use a financial advisor? We have in the 1.4 ballpark and its just hard for me to wrap my head around giving somebody $14,000 a year for them to manage my money. Is it really worth it?

[jeromedawg]

Does anybody here use a financial advisor? Or does everybody here use a financial advisor? We have in the 1.4 ballpark and its just hard for me to wrap my head around giving somebody $14,000 a year for them to manage my money. Is it really worth it?

If you need specific or directed advice, then pay a financial advisor a one-time fee to give you that advice. Don't pay them to manage your funds year over year though.

https://www.bogleheads.org/wiki/Getting_started
https://www.bogleheads.org/wiki/Three-fund_portfolio
https://www.bogleheads.org/wiki/Index_fund

[RWD]

Is it really worth it?

No. It is not.

Another good resource:
https://jlcollinsnh.com/stock-series/

[reeshau]

Don't pay someone to manage your money.  Do pay for professional help to answer questions and help make a plan you execute:  insurance, college, estate planning, etc.

It should cost you about $1,500.  One time.  And repeat checks should be less than that.

A place to start looking for such an animal:  https://www.garrettplanningnetwork.com/

[lost_in_the_endless_aisle]

$14,000? I will manage your money for $12,000. I promise to achieve the performance of the S&P500 (after accounting for my fee).

[Dee18]

I currently have a fee only financial advisor.  My employer provided an initial free session (when they ended our pension plan) and the advisor, contrary to my experience with some other financial professionals, had thoughtful suggestions that fit with my mustachian financial plan.  My investments are quite straightforward, but I am a single parent to a 24 year old and I want her to have an advisor in case something happens to me. (The family members who would be happy to step in would not give good advice.)  It's working out great and has cost very little.  My daughter began a new job this year and met with him to make her 401(k) choices.  I feel like this is the final piece in my estate plan.

[draco44]

I'm of the opinion that at least in the case of more complicated financial situations (like if you have some combination of factors such as owning a business/businesses or multiple rental properties, having many different income streams, weird inheritance situations, needing to plan long-term for a child or other relative mentally incapable of looking after their own financial affairs, etc.) it can be well worth speaking to a financial professional, at least as a one-time or occasional check-in where you pay for the consultation and not for ongoing services.

However, I'd have a lot of questions before I'd pay for someone else's advice. I'd want someone credentialed, like a CFP or CPA. They should adhere to a fiduciary standard. And I'd want to be crystal-clear on how they charge for their services, and look for someone who is fee-only rather than fee-based or commission-based. And have experience with whatever specific issues I wanted to discuss with them.

[PDXTabs]

I'm of the opinion that at least in the case of more complicated financial situations (like if you have some combination of factors such as owning a business/businesses or multiple rental properties, having many different income streams, weird inheritance situations, needing to plan long-term for a child or other relative mentally incapable of looking after their own financial affairs, etc.) it can be well worth speaking to a financial professional, at least as a one-time or occasional check-in where you pay for the consultation and not for ongoing services.

However, I'd have a lot of questions before I'd pay for someone else's advice. I'd want someone credentialed, like a CFP or CPA. They should adhere to a fiduciary standard. And I'd want to be crystal-clear on how they charge for their services, and look for someone who is fee-only rather than fee-based or commission-based. And have experience with whatever specific issues I wanted to discuss with them.

I agree, but I'd be hitting up attorneys that specialize either in business transaction/liability or estate planning.

[draco44]

Good call, depending on the specific questions you have, different types of professional may be the most appropriate to talk to. I probably should have mentioned lawyers too in addition to CFPs and CPAs.

[Metalcat]

Have you read many of MMM's posts about this very topic?

I recommend reading up on active vs passive investing, that will give you everything you need in order to decide what, if any, professional services you might need.

[draco44]

OP, re. Malcat's comment, if you want to read more of the MMM blog's contents, here's a direct link to the master list of all posts: https://www.mrmoneymustache.com/all-the-posts-since-the-beginning-of-time/

For a general overview of some pitfalls to keep in mind about investment advisors, here's also a post by JL Collins, another author frequently cited on this forum:
https://jlcollinsnh.com/2012/06/06/why-i-dont-like-investment-advisors/

For a crash course on passive investing by Collins, you can go here: https://jlcollinsnh.com/stock-series/

[PDXTabs]

For a general overview of some pitfalls to keep in mind about investment advisors, here's also a post by JL Collins, another author frequently cited on this forum:
https://jlcollinsnh.com/2012/06/06/why-i-dont-like-investment-advisors/

For a crash course on passive investing by Collins, you can go here: https://jlcollinsnh.com/stock-series/

I strongly recommend his book, The Simple Path to Wealth, it changed my asset allocation for sure. I have purchased multiple copies for friends and family.

[Kevin K.]

William Bernstein and many others point out that IF (a big "if") having an advisor between you and your behavioral errors during market meltdowns works as a firewall to keep you from selling when you should just hold (almost all the time, of course) then the money is well-spent - and that the majority of investors fall in this category. Of course target retirement date and fixed allocation funds-of-funds like Vanguard's LifeStrategy ones fulfill the same purpose without paying .30-1.0%+ of assets.

Complex financial situations and/or having a spouse who has little or no interest in investing are other good reasons to hire an FA. That said, I strongly advise against hiring anyone who charges a percentage of assets under management. Instead hire a fixed-fee advisor. There are plenty of good ones, but as an example Evanson Asset Management in California charges $3000-5000 annually (500K minimum but most clients have 1-2M or more), which gets you excellent portfolio construction advice, access to DFA and other institutional funds, a quarterly review of both your portfolio and macro market conditions and access to vetted specialists (CPA's, estate planners, etc.) you can hire on a per-hour basis as and if needed. FPL Capital is more bare bones and charges even less.