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There was a discussion recently on HD about the costs/benefit of a financial advisor.
I have more questions. Who needs a financial advisor and why? I have looked up the pros and cons and certainly a case can be made for using an advisor, but not always.
I have never used an advisor, but that doesn’t mean I wouldn’t be better off if I did. I asked at Fidelity, but the fee percentage – I think it was 1% a few years ago – turned me off.
How does your advisor add value for you? Does it go beyond just where to invest?
Is your financial situation better having used an advisor?
Does your advisor make specific investment recommendations and, if so, do you always follow them? Does your advisor have authority to make or change investments without your approval each time?
Any other thoughts on using an advisor these days?
My retirement income was planned for me-a pension and SS. Everything else we have accumulated is extra, backup if you will.
As a read about planning and investing for retirement income in the real world of 2024, not mine from the 1960s, I can certainly see how a retirement planner would be valuable.
One thing for sure, if the timing had been different I would have used Roth accounts and I should have added the Roth option to my employer 401k I was managing in 2006, but unfortunately we were mired in what turned out to be failed merger negotiations and changes were not going to be made.
Obviously an investment advisor can add value, but then again, sticking with an array of index and bond funds may minimize that need.
I’d sure like to hear Jonathan’s thought on this.
I was late to the game in understanding all the benefits of HSAs. I had read for several years about all the benefits, but it took speaking with a free financial planner paid for by my employer (Aetna) before I truly understood all the benefits. I tried to max out my contributions the last few years working. I accumulated about $25K before retiring. We use it primarily to pay our federal part B premiums, and other few acceptable medical expenses we incur. Not sure the reasoning by the government (if they even use reason) why HSA funds can NOT be used for traditional Medicare supplement premiums.
All should be ware that when a non-spouse inherits a Health Savings Account (HSA), the account loses its HSA status, and the beneficiary must pay income tax on the fair market value of the account in the year of the original owner’s death. This is unlike a spouse beneficiary, who can take over the HSA and treat it as their own. So make sure to utilize the funds heavily.
David, I have an HSA than I am currently using sparingly. My daughter will inherit in the future. I am keeping a detailed list of all health care expenses/receipts that I have accumulated and not tapped the HSA for. My goal is to see the account grow – hoping for at least another 10 years or so. The list is accessible, and my instructions are that she could reimburse the estate immediately for all the built-up expenses. So the funds would effectively ‘used up.’ I will keep an eye on it, though, in case I need to take this step in advance.
I seem to recall reading that only recent expenses could be reimbursed after death, so you may need to take that step in advance. HSAs are probably the worst kind of account to inherit, as non-spouse beneficiaries are taxed in one year for the whole amount as ordinary income. Much better to reimburse yourself into a taxable account which gets inherited.
Randy, yes as you can reimburse from years ago – you just have to have clear receipts and documentation that reimbursements didn’t occur with another account. I’m scanning receipts now and also keeping hard copies (ha). It will be a long term process that I’m curious to manage 🙂 , but I’ll keep an eye on the account and sell on occasion.
“You can reimburse yourself from your HSA for qualified medical expenses incurred in the past, even years ago, as long as the expenses were incurred after the HSA was established. There’s no time limit for requesting these reimbursements. However, you must have documentation (like receipts) to prove the expenses were qualified medical expenses and that they were not reimbursed from another source”.
Eileen, this can’t be done after death, according to https://www.kitces.com/blog/hsa-tax-benefits-withdrawal-qualified-medical-expenses-irs-records/.
Any amounts that the HSA owner incurred and paid themselves before death – and thus had ‘available’ to reimburse themselves for while they were still alive – are not excludible by the beneficiary.
Thanks for asking this. I do think advisors can help with tax efficient planning. We haven’t gone the advisor route despite having a complex situation for about a decade, but I did spend huge amounts of time reading up on it and moving funds around, and I’m sure I bored many cocktail parties with my blather about it. Now that we are past that period it’s smooth sailing, no need for paying 1%. However, we may finally take an advisor onboard once we hit 85 or so, or when I find myself sending checks to dubious charities.
Will you know when the checks you’re sending are to dubious charities, and if you are already at that point, will you be able make good decisions about who you hire and to do what?
I don’t have an advisor, but I expect the answer to these questions will often be no, so I fully appreciate the argument for having one.
I do not feel that I need an adviser for myself. However, I was always concerned about my late wife’s need for one if I died first. However, I setup a 50/50 AA using broad based, ultra low cost index funds for equity and a combination of TIPS, CDs and bond index funds for fixed income.
I explained this strategy to my daughter, who has a BS in Finance but is now a SAHM, and she was comfortable with that if she ever needed to step in and manage the portfolio.
The most important challenge is finding an adviser who is competent and trustworthy. I did find one, but I could never get comfortable with their approach, which would cost 80 basis points per year for AUM, and would be difficult to unwind if I decided to change that.
I believe that having a sound tax strategy is really important and often under emphasized in choosing advisers. That is one area that I could have done better on in managing our finances. If you decide on using an adviser, get one that can advise you on investments, AA, tax strategy, and estates. Also, get one that can talk you off the ledge when there is a really bad bear market.
Golly, wonder why there doesn’t appear to be any financial advisors that charge a % of PUM – profits under management? It could even be a tiered fee based on reaching higher levels of profit per year. Why would I give someone a cut of the money I’ve already earned and grown? I don’t suppose we’ll be seeing this anytime soon. That makes Fishers’ , “We do better when our clients do better”, more sensible, I think.
Back to reality…….Many great points presented here, especially for our later years, in utilizing a solid FA and others on a broader scale than just investments.
I don’t know the percentage of people who are NOT retired here (I am 52 and still run my business), but I think with advisors YMMV, and paying a percentage of assets makes absolutely no sense to me. I’d rather take that money each year and do bucket list trips.
I keep a portfolio of 30 dividend growth stocks, DRIP those, and some cash to invest as new opportunities arise. I don’t think it’s all that hard. If a company has been increasing dividends for over 50 years, it seems like a good bet they will be around for a while and doing the same thing. Yes, companies fall off the list, but a couple of times a year I just check-in and ensure my investment thesis still holds. Last I checked, people will be brushing their teeth, using deodorant, blowing their noses, and wiping their butts for the foreseeable future. 🙂
I know a lot of people in the comments mentioned the YouTube guys. Toby Mathis and Ari Taublieb are pretty good as well. Good luck all.
When speaking of a financial advisor, I take that to mean a fee only fiduciary, not limited to taxes or investment or estate plans.
The true benefit of a financial advisor comes from the questions they ask, seeking to understand my goals and avoid complications and traps in the path to those goals.
One of those questions led me to understand that making more Roth conversions was a tax planning decision affecting my heirs.
I agree most here can get by without a paid advisor, and we get by just fine. I suspect we would make better decisions if we had one, but also suspect the difference is not that great, which is why we don’t.
I enjoy thinking about financial questions, and on the point I probably do it too much. My wife does not. I think this kind of situation is a good reason to have an advisor in place in case the latter kind of person is the survivor. The potential for cognitive decline in one or both of us also strikes me as a good reason. It would be much better to have the relationship established in advance.
So I have thought about it from time to time, but in looking at some price tags, I haven’t not convinced the difference in performance, risk management or decision making would be worth the cost.
However…
Today I had a realization that may change my mind. I was reading a fitness professional I follow and was reminded of something about “energy” and “stress.” It’s been shown that seemingly very different demands (e.g., walking and doing math in your head) ultimately rely on the same energy sources, and likewise that stress of many different kinds accumulates and impacts our capacity for more. As some know, we live a nomadic lifestyle and are often thinking daily about where we will be X weeks or months in the future and how we’ll get there. I also take my physical fitness training seriously, and I my reminder was that even mental stressors impact that.
So today I’m wondering, do I really want to be thinking about finances as much as I do? Putting all the above together, if maybe it’s time to consider bringing someone on board and outsourcing more.
Hi Michael,
To me this statement is the key, “So I have thought about it from time to time, but in looking at some price tags, I haven’t not convinced the difference in performance, risk management or decision making would be worth the cost.”
When it comes to whether to hire an AUM financial advisor I ask myself, would a financial advisor be able to beat my return every year charging 1% fee, when my expense ratio is 0.05 ? That number is not an error, it is from my Morningstar premium membership X-ray. Also about once a year for the past few years I have compared my portfolio returns to both Vanguard’s and Fidelity’s target date 2020 funds, which is the year my wife and I retired. So far I’mwinning in a shutout!
Now if my cognitive function starts to slide I will most likely take advantage of Vanguard’s advisor as that is where my retirement assets are housed, and I know that their investing philosophy aligns with mine.
To me that performance comparison is really not the most important consideration. If I hired an advisor, I wouldn’t be looking to beat my historical performance. That might happen in some years, it might not in others, but anyone I would hire is likely to have an investment philosophy that would make our respective performance pretty close.
Rather, I would be hiring them to do something I no longer care to do, or that my spouse wouldn’t care to do, or that we might both be someday less able to do, and not be having to hunt for that person in a time of crisis or diminished capacity.
My wife and I use a fiduciary financial adviser from a very large and respected firm. Our cost is around one percent of assets a year. I can administer and monitor our finances myself but choose not to do so.
Here are my reasons for using an advisor:
1. Peace of mind – I monitor my accounts very closely but do not want to wade into deciding what funds or allocations are best for our situation at any given time. I would always be second guessing myself and have doubts about whether I have made the correct choices for the current market. I leave this up to my advisor’s experts to choose my blend of investments. They use very low-cost ETF’s and index funds and do not make many changes throughout the year at all but I let them build out and manage our diversified holdings. This is a task I would not enjoy doing myself.
2. As a reality check I have set up a spreadsheet that keeps tabs on a portfolio I would have set up for myself if I were doing my own investing. I would keep it very simple and just have four index or ETF funds. Total US stocks, total US bonds, total international stocks and total international bonds. I have been monitoring this for several years and my advisor account, even with the fee it charges, is outpacing the account I would have set up if on my own. We are ahead of the game using an advisor.
3. My wife has practically zero interest or ability to invest on her own. We have been retired now for around six years and in our mid-sixties. She feels very comfortable with having an advisor and I feel she will be well cared for if I am not around anymore.
4. I can contact my advisor if I have any questions and if they are not currently available, they call me back within minutes or a few hours every time. I like having a sounding board for financial questions.
5. Yes, one percent is a sizable amount for a fairly large account, but in our situation, I am fine with paying it and am able to sleep well at night and focus on things I enjoy more than self-guided investing; like travel and hobbies and family.
Randy, your posting could have been written by me as we match up on every one of your reasons for using a financial advisor! The only point of difference is that I used Yahoo Finance to set up a hypothetical portfolio using 3 index funds. And my experience also mirrors yours in that our actual portfolio value after fees is still tracking higher than my hypothetical one. The relative peace of mind from this is worth every penny!
Oops — My apologies, Doug, for calling you Randy. I’d correct it if I could but I don’t know how to edit my comments on here.
We use a financial advisor, but our situation may be a little different given we are in Australia. Firstly, we pay a flat yearly fee, not % of assets. The initial reason for us to have a financial advisor was some complexity around our finances due to ownership of a couple of small businesses. The key benefits have been re-arrangement of our business ownership structure to reduce taxes, as well as changing to a self-managed superannuation fund structure. Both these have provided significant benefits, mainly for tax reduction. Finally, having a financial advisor on board has provided peace of mind. We don’t need to agonise over every decision and feel like we have someone “in our corner” for any financial issues that arise.
The first article I wrote for HumbleDollar discussed the need to look at financial planning as more than just investment management. Since then I’ve seen many examples of people paying high fees for overly complicated managed portfolios, but no help with taxes, estates, insurance, and the other important parts of a financial plan. I’ve also see first-hand how a good, holistic planner can be a great help to someone who does not have the experience, education, or inclination to handle their own plan.
Most of us here on HD feel comfortable doing our own financial thing.
However, some people/couples are uncomfortable dealing with their own finances. I suppose a financial advisor helps them sleep better at night.
My spouse had an advisor for her 403b. Her fees were higher. There was an overall annual fee and then the fees for the mutual funds were higher than ETFs. The range for the funds was as high as 0.97%.
If I were to use an advisor I’d want a “one time fee only” approach. I’d also specify that low cost ETFs were to be included.
I’m of the opinion that the more information an advisor is give the better the advice. The challenge for a new investor might be formulating useful questions. For that, an education using AI might be helpful.
It took me years to break up with our advisor, but I finally did and we are much better off. However, I’ve been recently updating all of our records for my “Death File,” so my daughter has access to them. Suddenly, after 54 years of marriage, my husband (who wants nothing to do with money management) became curious. He asked, “Who’s the man that I call if I need money after you’re gone?” I tried to give him a brief lesson on the “order of operations,” and he said, “well, I’ll just transfer it all to bonds.” (!) He’ll need an advisor!
Perhaps, for HD folks who successfully self-manage, the question might be; under what circumstances would using a fixed-fee advisor be a good thing for you to do?
I can think of several situations where you might want to do this. First, you might be married, and your partner might be ignorant about investing and/or uninterested in doing it. If you are the current manager how do you plan for continuity if something were to happen to you the manager?
Or, the non-involved spouse might develop dementia and not be competent to take over the job. You may not be able to rely on children to fill the role either. You would want your assets managed so that the spouse would continue to be supported.
You might be the manager, but you have a family history with either parents or siblings who have dementia. How will you be able to judge your own competence? Having someone able to look over your shoulder could be a good thing.
Finally, you might be single, but with substantial assets and want good management to continue in the event of your own illness or incapacity.
I am single. My portfolio is almost entirely invested in indexed mutual funds. The only “management” I do is handling RMDs, an occasional rebalance, and transferring funds between my bank account and my money market fund. The rebalancing could be skipped. I have identified a “daily money manager” in my town, and intend to interview her to see what she would be willing to handle. I have given Financial Power of Attorney to my ex-stepdaughter, but need to have a conversation with her as well.
No advisor. There are fixed fee people out there that I think would provide value for service if you have $2.5M or more.
I’m planning on hiring a fee based planner that doesn’t charge or provide ongoing services to review my plans before retirement. (Look over things like IRMAA, Conversions, allocations, account spend downs, etc)
Not trying to be funny, but have you ever looked at the videos on YouTube on these subjects? Some of them are quite good. I like HolySchmidt who is an advisor.
Take a look before going to an advisor and you may be better equipped to discuss. Just a thought.
I like Holy Schmidt, I like Rob Berger, I read Mike Piper and the Finance Buff. I tend to think it’s better to pay some taxes early to avoid the potential of the widow’s trap (but only up to a point)
Do you read OnCourse Financial Plannings monthly newsletter? It’s not delivered, you have to open it on the website.
I like Boldin for the basic planning of things, it does so much of the legwork, let’s me concentrate on the big picture.
The true value in a professional financial advisor like ours IMO is the planning and advice provided and helping us meet our goals and not driving off the financial road (or a cliff), even though he also manages investments. At least partly because of that, the true value cannot be quantified. We have at least an understanding what is going to happen to our finances over our entire retirement barring a true financial shock of some sort which cannot be anticipated. We started with an extremely detailed financial plan based on household situation and it has been implemented with few tactical tweaks here and there for the last 8 years. In our case our advisor adds value in the following ways that I can think of: 1-Objective and professional analysis applied to our situation. 2-Management of our financial situation and investments strategically and tactically and we don’t need to spend lots of time on it. 3-Gets my wife and I on the same page. 4-Is a teacher and helps us understand complex financial concepts and information. 5-Peace of mind because we trust him and know our financial situation and future is secure with a well designed relatively conservative approach based based on retirement research. 6-Continuity of a professional as we age and face cognitive decline and death of a spouse. 7-A regular monthly report of 30-50 pages which we refer to frequently to understand our status, cash flow, tax efficiency, asset allocation, future expenses and income etc.8-Answers to all of our questions promptly. 9-Prevents me (not my wife) from making stupid mistakes and taking unnecessary financial risks as I have done in the past. 10-Provision of an estimated tax spreadsheet specifically designed for our situation which I use regularly and progress through the year. 11-Holistic advice provided a range of questions-insurance, annuities, estates, wills, tax planning, RMDs, Roth conversions, SS claiming, asset allocation and location, retirement risks and mitigation strategies etc.. Our advisor does select our investments which are aligned with the plan but they are not complex-they are mostly passive index funds and ETFs (although some people seem to feel like buying an individual TIPs once a year is complex.). He has authority as an agent to make transactions on our brokerage account (except withdrawals of course). If he plans to rebalance or make a transaction he always lets us know and I always acknowledge it. Occasionally I have questioned it and once in a while we agree on a different tactic but that is fairly rare. Really not much happens over the course of a year transaction-wise. With the investments being mostly passive with little activity other than the occasional rebalance and Roth conversion that is why the true value is the planning and advice, IMO. There is a very wide universe of financial “advisors” and different fee models. From folks that sell products, to large firms who work on Assets Under Management (AUM), limited services at large brokerages and smaller independents. Our person has a retirement credential and the fee model is flat fee only which is paid basically on retainer with 4 equal quarterly payments. Although our fees have gone up a bit since we first engaged him, the percentage relative to our assets has not kept up. I think when we started it was around 0.3% and now it is around 0.2%. I feel like smaller independent advisors like this provide great value and service. Other good models are Advice Only where they provide a plan and advise and the client manages their investments-Hourly can be a subset of Advice Only.
Rob, thank you for this detailed write up. I too have been a DIY guy and have done okay. I have been on the look out for a flat fee based FA for a few reasons. (1) making dispassionate investment decisions and (2) more importantly making sure management is done professionally if I were to pre-decease my spouse (my spouse is not as interested the management of the portfolio).
Been a struggle finding a (reasonable) flat fee FA, the only one I have been able to come up with is FACET.
Can I ask how you found your FA? Was it through word of mouth recommendation?
Thanks!
Hi-I am glad you appreciated my post. I just commented on your new post on this topic and mentioned my wife and I kissed a few frogs before finding our guy (tried one-bad fit, screened another (that one was AUM) and ran to the door with hand on wallet. Both of these folks were local because I was thinking F2F. The AUM person was recommended by a friend who still uses them and I am pretty sure they are paying > 20K a year for who knows what. We started looking 10 years ago about 3 years before planned retirement and it to two years because I was unaware of all the resources that I am aware of now (some of which I mentioned in my comment on your post). When I started searching I was doing a lot of reading about retirement finances and planning mostly intending to DIY but also becoming aware of retirement planners focused on retirement. One of the retirement blogs I was reading was written bit a smart guy with a conservative approach who happened to be local (still thinking local/F2F. I reached out to him and he wasn’t taking on new clients but mentioned there were just a handful of folks he knew that he would recommend. One was in FL which, while out of state, was a place we visited frequently. I reached out and by coincidence, he lived 15 miles away from a place we were planning to vacation so we met him and hired him to do a plan. We were so impressed with the plan we decided to retain him. He is getting older now (73) so succession is an emerging issue so we will see what happens.
Continuity of a professional as we age and face cognitive decline and death of a spouse. This is one of the best reasons to use a professional, even for DIYers like me.
I’m glad you mentioned the fee structure. .2% annually is fair and you know exactly what you are paying. My mother-in-law once told me that her advisor didn’t charge her anything. I think most people paying for AUM don’t know how much they are paying.
Thanks Dan. Everyone is different. I was a DIYer until I retired. Who knows I might go there again after my FA retires. As I noted the percentage is variable because is the fee model is flat fee. Hopefully it will go down further with more growth. I do think our fees are reasonable and fair for the services provided. AUM may or may not be reasonable depending on asset levels and services provided. If one gets good service and as an asset level of <1M and is paying 1%, the 10K is about standard these days. And >1M one is paying a good chunk.
Thank you for your comprehensive comment.
Sure. I tried to answer your questions and also provide a bit of bit of background as a client and what I have learnt in the last few years about advisors.
Sounds like you have a good one.
Personally I’d probably hate to be getting a 50 page report every month (even if it is just robo generated) – smacks of the big mass market “advisors in own expensive products” who blind unsophisticated customers with volume and boilerplate. But if you’re a detail guy it probably has value to you.
Your point on looking to their incentives as a guide to what sort of “advisor” you are getting is a good one.
We do think we have a good one thanks. Actually the report is seemingly quite different from what you have imagined. It isnt robo generated and has zero to do with mass marketing. It does make use of sophisticated software (that he mainly developed himself) and existing numbers. The report simply updates our retirement plan, projections and household situation on a monthly basis and its projections with a brief overview of any activity of the month and more often it is 30 pages, at least of which are charts and details about the macro environment that are FYI. Admittedly there is some duplication but it is done to provide a different way of looking at things which helps me understand. My wife never reads it. I dont read it in detail but I frequently end up looking at specific bits through the month. Since you commented Ill provide the TLDR version of what it includes: 1-Activity and Overview, 2 Account Balances and Risk Management Allocations 3 Pie Charts with high level asset allocations 4-a Page with details on the Growth allocation 5-allocations by account 6-Assets and Liabilities, 7 stack chars of net worth and asset liquidity 6-A 30 chart showing portfolio growth vs expenses-(I love this chart as it shows the widening gap) 7-A very detailed look at risk management allocations and accounts-the full picture 8-A page on Rebalancing done 9 A historical chart since we engaged him showing the history of growth including overall portfolio value and 3 main elements-Floor, Growth and Cash/Reserves 10-Cash flow on Income showing all income sources out 30 years-this is one of the pages I refer to most 11-Annual expenses (which we updated annually ourselves) 12 Cash flow on Taxes and Expenses 13 Cash Flow on Withdrawals out 30 years including RMDs 14 Estimated taxes in detail for the year based on tax spreadsheet widget he produced that I use throughout the year 15-Our Floor allocations with details about the rolling 10 year TIPs ladder 16 Bar charts with amounts in the 3 tax buckets and and the amounts in the 3 different asset types 17 some details about performance of the growth assets 18 Some details about the bond and fixed income assets 19 and 20 An overview of the Risk Management Policy statement which never changes but provides the explanation for the principles, strategy and tactics. Thats about it for the details specific to us and then the macro stuff comes-this month there was a report on the status of the dollar this year, jobs and hiring, inflation, and tariff impacts.
During my brief employment with a big insurance company, we used a planning software that produced a mind numbing amount of pages, but it seemed to be more useful in the selling process than its purported purpose.
Have a look at my response above. Nothing being sold. It may sound like a lot but its mostly updates and as I noted I frequently skim over it and then come back from time to check out specific bits, usually the cash flow section. I take what value it delivers and do use it. Ive told him he could probably do the report quarterly but he likes to work this way and we are good with it.
Rob, no, I wasn’t leveling an accusation or criticism toward your guy. Quite the opposite, your advisor sounds like one I would refer people to.
Thanks Dan, sorry for the miss and I appreciate your comments and also agree with your general comment about information overload.
The easiest way to convince people that they need assistance is to give them more data then they can possibly digest. It creates a feeling of helplessness.
Well I might suggest your comment has little to do with our situation even if there is some truth to it for some folks. When we engaged our FA we had no idea we would get monthly reports. We simply agreed to pay for a plan. We liked the plan and the approach so we decided to retain. There were no sales tactics or burying under a mountain of data. We decided to engage and then reports showed up and we found them useful and easily understood. As I said, I mostly skim them and refer to them from time to time.
We have a financial advisor and I’m glad we do, for many of the reasons stated by others. Primarily, it prevents me from trying to chase the hottest financial products, stocks or other alternative investments. We hired him and his firm after meeting with several others and felt aligned with our goals and his approach to meeting them.
And yes, he makes specific recommendations and can execute and change investments. When we do need to draw funds from our accounts, he determines the best places to draw from and executes these transactions seamlessly.
We have done well with our advisor and the fees are well worth the peace of mind and having more time to enjoy our family and retirement without having to research and manage our investments.
To paraphrase Buffett and other experts, while a basic understanding of investments and a reasonable level of intelligence are necessary, the most important quality is discipline. The ability to tune out noise in the financial media and to be able to resist making emotionally driven decisions which could be hazardous to your portfolio. “Know thyself”. I know of a couple highly educated executives much more knowledgable about business than I, who pay someone else to manage their investments. I suspect Humble Dollar self-selects for people who are comfortable making their own investing decisions. Many others, including some who are highly intelligent and educated, are not. I just tell those I know to be aware of how much they are paying and what they are getting for their fees.
In my mind, it is clear one downside is the fees, and 1-percent is a bit high.
However,
I like to think the use of an advisor helps me reduce the frequency of poor financial decisions. My retired-self has less margin for error as compared to when younger. I hope that I have vetted someone who is reliable, qualified, experienced, etc.
I feel my advisor does a better job of diversifying than I did previously. Intuitively, the lower risk is better, as my retired-self doesn’t have the appetite for alternative of required research & planning.
If I were to become sick, I would expect my spouse will appreciate having someone make investment decisions for her.
Like many HDers, I can get by without an advisor, but I have many friends and former clients who could never do it on their own. It’s sort of like not knowing how to, or being petrified of driving a car; you’d have to hire a driver. Hopefully one who wouldn’t get you killed along the way.
Pretty much this. However you still need someone who is a fiduciary and whose investment philosophies align with your own. I think it’s too easy to get into the foreign taxi and because the driver seems to be aggressive and dangerous think “I guess this is how driving is here” or appreciate the slick customer service until you get presented with the hefty end fare to find you’re in totally the wrong place.
Personally besides the fees, I’ve had plenty of advisors pitch with some variant of their “strategically active” approach and others telling me I’m not diversified enough with my equity when I’m basically in global indexes. Neither are particularly convincing pitches.
I’m a great believer in reversion to means so find it hard to believe an advisor can remain consistently hot in the long term if I can even find them in the first place.
Financial planners are a different thing I think. If you have an aversion to spreadsheets and tools they can provide a valuable service though I’d only recommend using them on an ad hoc fee for service basis. IMV investment advisory/management should be a separate activity.
At one time my employer paid for an annual visit with a “financial planner” – one of the big firms. This was a bad deal, as they recommended mutual funds with high fees. After I realized that I would tell them up front that I was only interested in an analysis and would not follow any recommendations.
More recently I have consulted a fee-for-service planner every few years to find out whether I am likely to run out of money. Once I see the fee increase for my CCRC for next year I will do so again.
My wife, Suzie, sought financial advice when her former banking employer, whom she hadn’t worked for in 15 years, made a surprisingly high cash offer to buy out her Defined Benefit (DB) pension rights.
Suzie’s existing pension was an older DB scheme with numerous benefits. Given the significance of the offer, we needed a detailed analysis to ensure the buyout was genuinely in our long-term best interest.
We were willing to pay top dollar for this advice; it would have been extremely foolish not to, considering the complexity and importance of the decision.
What was the result?
The recommendation was to accept the offer. And although I’ve saved about 15% of my income for nearly 40 years and Suzie hasn’t saved anything, her portfolio is actually 50% bigger!
Given she had another income stream with current pension, seems logical.