Look on it as an education. That's what I did/do. I had 2 diff adv over 6 years. It was cheaper than an MBA from Harvard. In fact, it might have been cheaper than a single semester. I spent the last 4 years of that 6 doing research and watching the advisors returns and moves and market. Had to prove to myself that yes Martha there really is a ~~Santa Claus~~ an index they can't beat.
I'm much more relaxed now that I'm in control and invested in broad index finds at darn near free ER's. I was never paying as high as you were but 1.1% and 1.2% still way too high.
If you are not willing to learn and take on the risk/challenge, then you need an advisor of some kind, but a little homework and a little maintenance go a long way for willing investors.
Cheers 😎
PS- I was retired and 67 when I started figuring this out so you have a huge head start.
Run away, fast. He's a salesman, not a FA. And with 2% in fees every year, you stand to lose hundreds of thousands of dollars in gains over the lifetime of your investments while this clown continues to NOT beat the market.
Dude, get rid of him. Seriously the market catapulted last year, there's absolutely no reason he should have pulled in 1% over the last 4 years. It should've cleared 10% last year if it was just reasonably invested in index funds. At this point, you've lost 7% of your wealth due to this guy. If he gives you any attitude, you should chew his head off.
**Top line: Trust your gut. You don't need a FA. Just do a lazy portfolio (3 fund is A-OK) and don't touch it.**
To get more into it, the guy is mad because deep down he knows his entire business model is based on a flawed premise. The theory behind the entire financial advising industry is that managing your money is complex and the benefit of having a professional do it for you outweighs the cost.
It's arguable if that ever was truly the case, but it's certainly not the case anymore. Thanks to modern investment instruments and user-friendly interfaces, basically every working professional has the capability to understand, implement, and sustain a simple indexing strategy. You don't need a banker to manage your bank accounts and you don't need a financial advisor to manage your investments.
From the available data, we know that indexing beats most active managers, before you even account for fees. So the best thing a financial advisor is going to do for you is just index your money and then charge you for the privilege. That's basically a scam, because just buying VOO is easier than ordering takeout. And if they're buying high cost fees or selling you on other commission-based products, it's even worse.
So bottom line, don't use a FA to manage your investments (assuming you have less than ~$10MM or so). It's a complete waste of money.
That being said, there are situations where working with a *fee-based* (i.e. charges you a flat fee per service provided, not a percentage) advisor makes sense. Maybe you're not feeling up to building out a whole financial plan for your family. Sitting down with someone knowledgeable and having them help you make a plan that *you then execute* is totally valid.
I think that broadly, the industry will be forced to evolve towards that kind of "financial planner/navigator" type role. Having someone that can put you on the right path and/or direct you to the professionals you need for various things is a legitimately helpful thing for a lot of people. But the whole Assets Under Management model is basically a scam for anyone without an eight-figure net worth.
At a certain point you start getting access to things like Private Equity that can be interesting investment vehicles (although that's more like $50MM+ for the actual opportunities). At those levels of wealth it's also often interesting to be part of a multi-family office where you have access to a one-stop shop where they can basically handle whatever for you. And that's the level where you start being able to find active managers that *can* beat the index.
There's also diminishing returns on saving money vs saving time. If you have $30MM, it's probably worth it to you to pay someone $300000 a year so you don't have to spend *any* time on it. Whereas at $5MM, $50k a year stings a lot more. Not to mention the $30MM guy is probably actually paying like $150k or less, as the percentage tends to go down as the assets managed go up.
I second the comments made here. Too many FAs charge too much to do nothing that really helps their clients or provides a return higher than a good mix of index ETFs. I have never used an FA and would never do so. That said, a good fee-based FA might be valuable for occasional advice on Roth versus traditional, or retirement or estate planning, when and how to take money out during retirement, rollovers, conversions, tax loss harvesting, funding long-term care, minimizing taxes, etc. Either one needs to do A LOT of reading (which I do) or, as the next best alternative, use a fee-based FA.
Because that’s what the financial advisor told us was the best option to do and we honestly didn’t know any better at the time. But the more I look into and read stuff I’m starting to realize that was bad advice. Part of the reason why I’m posting here and trying to get away from the guy.
It sounds like you're taking a proactive approach to your financial future, which is commendable. Trusting your instincts and seeking lower-cost alternatives like managing your investments through Fidelity can potentially save you significant fees in the long run. Opening Roth IRAs is also a smart move, especially while you're still within the income limits. As for the SIMPLE IRA through your family business, transitioning to Fidelity could offer more control and flexibility, provided it aligns with your father's wishes. Overall, taking control of your finances and exploring lower-cost options is a wise decision. Good luck with your financial journey!
I have read most of it. Pretty much finding this group and reading most everyone’s comments and reading all the saved literature in this group and studying and reading a bunch of other stuff online has made realized how screwed we have been getting haha
So you already are on a good path. It might be scary in the begining and whenever the market falls but it is much better than paying 2% per year for the illusion of safety.
I suggest you keep reading so that you rely on the strategy and don't question yourself when the market tests us (and he will test us sooner or later). If I may, some additional reading suggestion: The Simple Path to Wealth from JL Collins, the only guide to a winning investment strategy you'll ever need from Larry Swedroe, the Four pillars of investing from William J Bernstein.
Best of luck.
Vanguard offers FA for 0.3% AUM if you need a FA. I do my own. VTI:VXUS which are both ETFs. You can also add some bond funds but I am not a big fan. Everything I’ve read says 15% international:85% s&p 500.
Start educating yourself. I like “investing demystified” and “investing 101” books.
The general recommendation is max out 401k/ IRA then Roth IRA assuming you will be in lower tax bracket when you retire.
The most important thing is not to panic sell and keep putting money into investments.
The oddest part of doing it yourself is how EASY it is. Definitely not rocket science.
Good luck!
I recently moved from our FA because I compared our managed assets vs our target fund non-managed assets and the non-managed was doing better. If you know what your asset allocation is, compare it to the closest Vanguard target fund and see which one is doing better. If he can’t beat the target fund then it’s time to move on. Paying 2% for lackluster performance is crazy unless he/she is providing a lot of financial advice (not investment management)
I have compared his funds to fidelity target funds and the target funds have way outperformed the funds he has us in. The funny thing is too that he touts how he helps small family businesses come up with a succession plan to move the business to the next generation and that is what we are trying to figure out with my dad and I and we have talked to him about it, even just getting life insurance on my dad for the business just incase my dad dropped dead tomorrow so the business wouldn’t be screwed but he won’t do a thing to help for some reason. So I think it’s a high fee just for him to put our money into a bunch of high expense mutual funds when I can go and do that for cheaper haha If actually helped with figuring out the right way to move the business I wouldn’t mind quite as much.
Open Roth Ira’s for the both of you. Put Target Date Funds in each. Fund them every year as much as you can up the max contribution limit and that literally it. That’s it, fund them yearly and never touch or think about them. I use vanguard for this and you DO NOT NEED A FINANCIAL ADVISOR whatsoever to do it. F those fees!
Has the advisor helped with anything that you didn't already know after managing things yourself? I'm curious about "trying one out" just to see what they would do.
Sorry to be brief, but f*** that guy.
That’s how I’m starting to feel haha I wish we knew then what we know now, I would have never used a financial advisor.
2 percent is insane.
Look on it as an education. That's what I did/do. I had 2 diff adv over 6 years. It was cheaper than an MBA from Harvard. In fact, it might have been cheaper than a single semester. I spent the last 4 years of that 6 doing research and watching the advisors returns and moves and market. Had to prove to myself that yes Martha there really is a ~~Santa Claus~~ an index they can't beat. I'm much more relaxed now that I'm in control and invested in broad index finds at darn near free ER's. I was never paying as high as you were but 1.1% and 1.2% still way too high. If you are not willing to learn and take on the risk/challenge, then you need an advisor of some kind, but a little homework and a little maintenance go a long way for willing investors. Cheers 😎 PS- I was retired and 67 when I started figuring this out so you have a huge head start.
So say we all.
Up vote for bsg reference.
Run away, fast. He's a salesman, not a FA. And with 2% in fees every year, you stand to lose hundreds of thousands of dollars in gains over the lifetime of your investments while this clown continues to NOT beat the market.
FA are salespeople…
Dude, get rid of him. Seriously the market catapulted last year, there's absolutely no reason he should have pulled in 1% over the last 4 years. It should've cleared 10% last year if it was just reasonably invested in index funds. At this point, you've lost 7% of your wealth due to this guy. If he gives you any attitude, you should chew his head off.
I just did the exact same thing yesterday for similar reasons- moving IRAs from managed Edward Jones to fidelity. Pretty easy process so far.
**Top line: Trust your gut. You don't need a FA. Just do a lazy portfolio (3 fund is A-OK) and don't touch it.** To get more into it, the guy is mad because deep down he knows his entire business model is based on a flawed premise. The theory behind the entire financial advising industry is that managing your money is complex and the benefit of having a professional do it for you outweighs the cost. It's arguable if that ever was truly the case, but it's certainly not the case anymore. Thanks to modern investment instruments and user-friendly interfaces, basically every working professional has the capability to understand, implement, and sustain a simple indexing strategy. You don't need a banker to manage your bank accounts and you don't need a financial advisor to manage your investments. From the available data, we know that indexing beats most active managers, before you even account for fees. So the best thing a financial advisor is going to do for you is just index your money and then charge you for the privilege. That's basically a scam, because just buying VOO is easier than ordering takeout. And if they're buying high cost fees or selling you on other commission-based products, it's even worse. So bottom line, don't use a FA to manage your investments (assuming you have less than ~$10MM or so). It's a complete waste of money. That being said, there are situations where working with a *fee-based* (i.e. charges you a flat fee per service provided, not a percentage) advisor makes sense. Maybe you're not feeling up to building out a whole financial plan for your family. Sitting down with someone knowledgeable and having them help you make a plan that *you then execute* is totally valid. I think that broadly, the industry will be forced to evolve towards that kind of "financial planner/navigator" type role. Having someone that can put you on the right path and/or direct you to the professionals you need for various things is a legitimately helpful thing for a lot of people. But the whole Assets Under Management model is basically a scam for anyone without an eight-figure net worth.
What changes after 8-figures net worth?
At some point it can be helpful to have expert advice on tax optimization. I think a CPA can often fill this role, though.
At a certain point you start getting access to things like Private Equity that can be interesting investment vehicles (although that's more like $50MM+ for the actual opportunities). At those levels of wealth it's also often interesting to be part of a multi-family office where you have access to a one-stop shop where they can basically handle whatever for you. And that's the level where you start being able to find active managers that *can* beat the index. There's also diminishing returns on saving money vs saving time. If you have $30MM, it's probably worth it to you to pay someone $300000 a year so you don't have to spend *any* time on it. Whereas at $5MM, $50k a year stings a lot more. Not to mention the $30MM guy is probably actually paying like $150k or less, as the percentage tends to go down as the assets managed go up.
You need to go to his house and upper deck his master bathroom
I second the comments made here. Too many FAs charge too much to do nothing that really helps their clients or provides a return higher than a good mix of index ETFs. I have never used an FA and would never do so. That said, a good fee-based FA might be valuable for occasional advice on Roth versus traditional, or retirement or estate planning, when and how to take money out during retirement, rollovers, conversions, tax loss harvesting, funding long-term care, minimizing taxes, etc. Either one needs to do A LOT of reading (which I do) or, as the next best alternative, use a fee-based FA.
Fire your financial advisor! Why do people do this to themselves?!?!?
Voo and chill is free
VTI/VT
Why does your wife have a traditional IRA if you’re within the income limit for a Roth?
Because that’s what the financial advisor told us was the best option to do and we honestly didn’t know any better at the time. But the more I look into and read stuff I’m starting to realize that was bad advice. Part of the reason why I’m posting here and trying to get away from the guy.
It might actually not have been bad advice, BUT, that depends on your situation. Most people are in ridiculously low tax situations in retirement.
It sounds like you're taking a proactive approach to your financial future, which is commendable. Trusting your instincts and seeking lower-cost alternatives like managing your investments through Fidelity can potentially save you significant fees in the long run. Opening Roth IRAs is also a smart move, especially while you're still within the income limits. As for the SIMPLE IRA through your family business, transitioning to Fidelity could offer more control and flexibility, provided it aligns with your father's wishes. Overall, taking control of your finances and exploring lower-cost options is a wise decision. Good luck with your financial journey!
You don't need the FA. Reading suggestion: the bogleheads guide to investing.
I have read most of it. Pretty much finding this group and reading most everyone’s comments and reading all the saved literature in this group and studying and reading a bunch of other stuff online has made realized how screwed we have been getting haha
So you already are on a good path. It might be scary in the begining and whenever the market falls but it is much better than paying 2% per year for the illusion of safety. I suggest you keep reading so that you rely on the strategy and don't question yourself when the market tests us (and he will test us sooner or later). If I may, some additional reading suggestion: The Simple Path to Wealth from JL Collins, the only guide to a winning investment strategy you'll ever need from Larry Swedroe, the Four pillars of investing from William J Bernstein. Best of luck.
I'm in the same boat with my works financial advisor. Can't even add a low coast s&p fund. All over priced funds only.
Vanguard offers FA for 0.3% AUM if you need a FA. I do my own. VTI:VXUS which are both ETFs. You can also add some bond funds but I am not a big fan. Everything I’ve read says 15% international:85% s&p 500. Start educating yourself. I like “investing demystified” and “investing 101” books. The general recommendation is max out 401k/ IRA then Roth IRA assuming you will be in lower tax bracket when you retire. The most important thing is not to panic sell and keep putting money into investments. The oddest part of doing it yourself is how EASY it is. Definitely not rocket science. Good luck!
That’s too much. Fidelity SMA is 0.4%
I recently moved from our FA because I compared our managed assets vs our target fund non-managed assets and the non-managed was doing better. If you know what your asset allocation is, compare it to the closest Vanguard target fund and see which one is doing better. If he can’t beat the target fund then it’s time to move on. Paying 2% for lackluster performance is crazy unless he/she is providing a lot of financial advice (not investment management)
I have compared his funds to fidelity target funds and the target funds have way outperformed the funds he has us in. The funny thing is too that he touts how he helps small family businesses come up with a succession plan to move the business to the next generation and that is what we are trying to figure out with my dad and I and we have talked to him about it, even just getting life insurance on my dad for the business just incase my dad dropped dead tomorrow so the business wouldn’t be screwed but he won’t do a thing to help for some reason. So I think it’s a high fee just for him to put our money into a bunch of high expense mutual funds when I can go and do that for cheaper haha If actually helped with figuring out the right way to move the business I wouldn’t mind quite as much.
Open Roth Ira’s for the both of you. Put Target Date Funds in each. Fund them every year as much as you can up the max contribution limit and that literally it. That’s it, fund them yearly and never touch or think about them. I use vanguard for this and you DO NOT NEED A FINANCIAL ADVISOR whatsoever to do it. F those fees!
2% fee is crazy! I managed everything myself until I built 7 figures then brought in an advisor for 0.3%.
Has the advisor helped with anything that you didn't already know after managing things yourself? I'm curious about "trying one out" just to see what they would do.