Is an asset manager worth it?

[Invester17]

Hi all,

I use Personal Capital to track my wealth and they recently reached out to see if I would like them to manage my portfolio (minimum requirement of 100,000).

I’m not sure of their fees, I think it’s around 1% and obviously there is no garuntee of better results. Although, they made some good suggestions on where to allocate some of my funds.

The real question here is do you guys think asset managers are worth it? I’m 26 with about $260,000 invested (401k life index, S&P 500, robinhood select companies, some long term
Bonds etc).

Thanks!

[surfhb]

If someone came to you and said “ if you give me $216 a month I’ll manage YOUR money for you.... but there’s no garentee my work will out preform the index fund you’re already investing in”, would you do it? 

That’s pretty much sums up what they are telling you.   

Also, don’t forget the funds they will offer you will have fees too.

Now taxes would be another story.  I’ll pay for that advice... but that’s just me

[letired]

no, not worth it

[alexpkeaton]

I'll do it for you for 0.9% of your assets per year.

[smallstache]

Assuming it's still the same as a couple years ago, PC buys and sells about 80 domestic companies and uses funds for int'l and bonds. They will switch back and forth between, for example AT&T and Verizon to generate tax loss harvesting.

To me it seemed like a lot to keep up with, a nightmare at tax time, and not worth the cost. I don't even use the software much, as my desktop software does more and my data resides on my computer without accessing my accounts.

[Livewell]

Not worth it at all. 

Alternatively you can buy JL Collins book for $20 and save the 0.94% per year with Vanguard.

I discovered all of this five years ago at 39.  At 26 you will be well ahead of the game by the time you are my age now. 

Invest in index funds, stay focused on your income and be aware of lifestyle creep.  With that formula you can’t lose.

[alexpkeaton]

Ok, 0.8%? :D

[g46r]

Very few are worth it.  Ask to see their long term (longer than a market cycle - 10-year minimum) *risk adjusted returns*.    That return also must be achieved with the exact same strategy as the one they're using right now.  You should only pay for manager if they truly have alpha (risk adjusted return above market *after* fees)

[BigLou]

I was also recently contacted by a "Certified Financial Advisor' from Personal Capital One who wanted to manage my investments. He started off by saying the initial consultation was 'Complimentary'. The thing to remember is nothing, and I mean nothing, is free.
Remember that nobody cares about your investments the way you do. The kindly gentleman who contacted you does not give a  hoot about you or your investments; He knows nothing about your financial needs or goals.He is just trying to line his own pockets by taking a percentage of any gains you might make. He is trying to make a living just like the rest of us, I get that. But do not allow him to take your money for something you can easily do for yourself. There are just too many resources on the internet where you could educate yourself, and there are fine blogs such as this, where there are people far more intelligent than myself who willingly share their knowledge and expertise to help you. So please give serious thought before you give up any hard earned money to this person.

[Heckler]

Ok, 0.8%? :D

Ill do it for 0.7%

[FINate]

If they were good at managing assets why would they bother with other people's money for a small percentage when they could keep all the gains of their own investments?

[Indexer]

Well, let's start by ignoring Personal Capital, and ask the important question.

Do you need an advisor's help? Most Mustachians assume no. Some people do need that help. Managing a large portfolio can be intimidating for some. Some people can't handle the risk on their own, and having an advisor to talk to can help them avoid costly mistakes. You could have a complicated situation, especially from a tax perspective. If your portfolio includes a taxable account and you don't understand tax efficiency, what cost basis to use, tax loss harvesting, etc. then a 'good advisor' could save you more money in taxes then you pay the advisor. Use them until you feel comfortable doing it all yourself.

If you answered yes to needing an advisor then the next question is who your advisor should be. Here is an easy first rule. If they contacted you then they aren't worth your time. An advisor who is prospecting via cold calling has free time on their hands, and not enough referrals. They aren't established and they are probably inexperienced. 10 years from now they might be awesome, but right now they are a gamble. If you need an advisor do your own research and find the one that fits you. This will likely require scheduling appointments with a few different advisors so you can comparison shop.

Ask them how they are paid and if they are a fiduciary. If the answer doesn't make sense to you then you should leave. An experienced advisor has had ample opportunities to perfect how they answer these questions so it should be transparent and easy to understand.

What is their investment philosophy? Market timing = bad. Describing their investment philosophy is their chance to wow you, and your chance to make sure it is a good fit. Rule of thumb: Good advisors are goals/behavior driven. Bad advisors(salesmen) are product driven. How much time was spent talking about your goals/risk tolerance/etc. VS time spent talking about the products? This is another area where costs can come up. Index funds and ETFs are normally low cost, and active funds & annuities are expensive.

Ask tons of questions. If anything seems off, even a little, then ask. If something sounds interesting and you want to know more, ask. A good advisor wants questions. They are opportunities to show they know what they are talking about.


Costs: I would say in today's world anything over 0.5% AUM is excessive. If you can find an advisor that will charge a flat fee for the plan that also works. Consider the cost with Personal Capital. They charge 0.89% for a virtual(phone/video) relationship with an advisor. Vanguard charges 0.3% for a virtual relationship with a CFP.

[Aggie1999]

Really makes no sense for any investor who's end goal is a simple 2 - 4 fund portfolio to ever consider a financial advisor, even when they are new to investing. Two scenarios for the new investor that starts out with a financial advisor:

1. The advisor gets the person into a large number of funds and/or funds with high ER's. When the person is ready to drop the financial advisor now he has to deal with selling off those funds in order to go to the standard Vanguard 2 - 4 fund portfolio. Thus probably a large tax hit.

2. The advisors puts the person's money into the standard Vanguard 2 - 4 fund portfolio or the like at Schwab, Fidelity, etc. If this is the case what benefit has the advisor really offered? It literally takes about 30 minutes to read the applicable Bogleheads wiki pages to understand how to invest efficiently invest in a 2 - 4 fund portfolio. The hardest part for the new investor is finding out these pages exist.

[PizzaSteve]

Ok, 0.8%? :D

Ill do it for 0.7%

I'll do it for 0.5% and guarantee to return half if I don't outperform the S&P500 index. I can show an auditable 35 year track record of successful returns, which these new firms can't match. Not as many assets under management, but keeping small and focused is how we outperform....🤔

[alexpkeaton]

2. The advisors puts the person's money into the standard Vanguard 2 - 4 fund portfolio or the like at Schwab, Fidelity, etc. If this is the case what benefit has the advisor really offered?

The benefit is that the advisor knew this was simply the most efficient way to invest and his client presumably did not.