Author Topic: Financial advisor-face plant  (Read 1686 times)

brellis1vt

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Financial advisor-face plant
« on: June 12, 2022, 09:50:42 AM »
A family member asked me to invest money for him 5 years ago.  I set him up with a robo advisor and he's up 70%.  He did this while having the lowest risk score possible.  At the same time he invested some money with a financial advisor.  Somehow in the time period the guy lost money.  Now he is switching his money to another financial advisor (who is a family friend and a good person.). He has closed out the account I set up and gave the money to the new guy to invest.  This isn't a message to bash advisors because I believe they serve a purpose for people that don't understand investing and are too lazy to learn.  But I just can't understand why this family member thinks the new guy will be able to outperform the account I set up (at a comparable risk level.)

hankscorpio84

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Re: Financial advisor-face plant
« Reply #1 on: June 12, 2022, 01:15:52 PM »
Sadly, this is all too common amongst people who get their financial advice from the guy at the bar, or by the pool at the timeshare. 

My mother and her husband are at a point where they could retire and travel comfortably but don't know it and won't be able to live the lives they want because of ignorance and sales people who take advantage. 

She held onto a lakefront property paying property taxes through the market run up because "Mr XYZ (former school principal with pension, no financial experience) says that lake property is my retirement plan."  Sold for 3.5x purchase price after 20 years of owning (bringing a tax bill and realtor fees) and thinks it was a great investment.

He has "an $800,000 annuity that my financial guy set me up with".  I don't know the details, but this sounds like something he was sold by a "financial advisor" to get a big commission.  Financial guy is definitely not giving good advice, if any, because he is 10 years older than her, yet pulled his SS at 62, no Roth conversions before RMD.  Pulled SS early "because its gonna be gone if I wait the way the gubmint spends money" and now won't move to any of the 3 states they actually want to live because of state income taxes.  The difference in tax paid to retire in the ideal location will be negligible compared to the mistakes they have already made.

I have tried to encourage them to speak with a fee only advisor, but they are stubborn and set in their ways.  They are semi-retired, which is better than being stuck in the rat race, but definitely not taking advantage of remaining healthy years, or spending time with grandkids in other states.  Penny-wise, pound foolish all the way around.


chevy1956

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Re: Financial advisor-face plant
« Reply #2 on: June 13, 2022, 06:55:44 AM »
My parents are wealthy and pay a financial adviser to fleece them a couple of percent per year. They must have a couple of million and I reckon the fees are 2%. So they are paying say 40k per year so my mum can tell people she has a financial adviser.

My dad is just too lazy too care and he has enough money.

The takeout to me is people are freaken crazy with their money.

ATtiny85

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Re: Financial advisor-face plant
« Reply #3 on: June 13, 2022, 05:21:12 PM »
I donít like the high fees, but I really hate the churning and high kickbacks that seem to be present. Paying 1% is ugly, but as mentioned it can do some good for some people. But the rest of what seems to often be there is sleazy.

brellis1vt

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Re: Financial advisor-face plant
« Reply #4 on: June 13, 2022, 07:38:01 PM »
I donít like the high fees, but I really hate the churning and high kickbacks that seem to be present. Paying 1% is ugly, but as mentioned it can do some good for some people. But the rest of what seems to often be there is sleazy.

I actually got burned myself a couple of times.  As a kid I invested with my dad's financial advisor.  Then when I graduated college i studied it and realized my investments had gained a fraction of what the market had gained (who takes advantage of a 12 year old?)  Looked at the funds he had me in and they were awful with high fees and kickbacks.  So, I still wasn't confident at that at point in my career so I went with another financial advisor. He did perform better (not S&p better) and bought individual companies for the most part.  Then I started digging again and found some more of the bad fee laden mutual funds.  Some of them really are wolves in sheep clothing and the only way to know (outside of a fee only financial advisor) is to dig.  Most people won't do that because they are making money.

Car Jack

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Re: Financial advisor-face plant
« Reply #5 on: June 16, 2022, 11:43:37 AM »
Keep in mind that not all brokers work like Schwab and Fidelity and TDA with zero fees to trade stock.  Used to be that on the low end, you could do it yourself with Scottrade for $7 to buy but then later, $7 again to sell.  Even at this time "full service brokers" had fees for transactions.  I can't remember exactly, but at one time, I had some DEC stock.  Actual stock certificates and decided to go back to college, so used my dad's broker to sell those 10 shares.  I remember getting something like $1000 and paying something like $140 to have the transaction completed.  How anyone made money in the stock market back 40+ years ago, I have no idea.

clarkfan1979

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Re: Financial advisor-face plant
« Reply #6 on: June 16, 2022, 12:23:23 PM »
My dad and step-mom have an Edward Jones account. It was inherited when my step-moms mother died. They have no clue. I did their taxes in 2020 and 2021. They sold about 16K worth of investments in 2020 and 2021 that were about 5 years old.

For 2020, they lost 5.1%. For 2021, they gained 9%.

Even though the stock market makes money in 8/10 years, it's very possible for people to lose money in 8/10 years with bad advisors. It makes sense that those people don't get excited about the stock market.

Because of my parents poor investment returns in the stock market over the past 5-6 years, they decided to invest $10,000 into silver and bought at $25/ounce. They had to pay 18% spot price increase and 6% sales tax. When they sell, they will have to pay 4% + shipping.

 

Wow, a phone plan for fifteen bucks!