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Last year I decided to try the advice of a “Financial Advisor”. This trial was to be for a three month period at no cost to me. What could go wrong. The advisor is associated with a long running newsletter that deals primarily with Fidelity products, but they are as far as I know, NOT representatives nor endorsed by Fidelity.
My wife and I each have our separate Fidelity accounts, since she like her independence, but I have managed her investments since our marriage 37 years ago. She agreed to let another person manage her account, just in case this 81 year old passes on prior to her.
Initially, there not many changes to the account and the results were marginally doing well. Then he suddenly he sold a fund that we had owned for a very long time, without my knowledge or consent. This particular fund, Fidelity Contrafund, had been out performing many other similar funds and had a five year annual return of 20%. Sadly, this one sale resulted in a long term capitol gain of $56,801. I was shocked and dismayed to say the least. When I contacted the advisor, his response was “You hired us to manage your account, that’s what we do.”
Of course it was to late to cancel the transaction, so I was left with a unacceptably large tax bill. I immediately canceled his “free service”.
My advise – if possible manage your own stocks and mutual funds, no one cares about your bottom line more than you do.
Respectfully,
Robert Fay, Nevada
Another case of problematic financial advisor relationships is one I’ve heard a few times including I think here. That of the one known through the church, other similar religious group. To me that’s a big red flag if someone is using spirituality as a networking tool for their book of business and seems to be ripe for conflicts of interest (like how hard is it for church friend to walk away from the relationship).
Caveat – I am sure that there are advisors with complete integrity who always put the friendship first above their own interest but its the potential for conflict that seems risky,
I’ve spent a fair amount of time thinking about this, particularly because of my health issues since 2022. My spouse had a 403b with an employer mandated firm as advisor. Yet, that employer contributed nothing to the account. After 20 years the firm decided to make structural changes. In December 2024 this triggered a response by G and she decided to pull the plug and did a rollover IRA, making it self-directed. The firm wasn’t pleased by this and there were some harsh words for her.
For one thing, she has had a self-directed Roth since 2004 which has done well as a comparative tool. I guess she concluded she really could do this.
I guess she took her cue from me, as I’ve been largely self-directed. For 25 years I provided her with updates on all of the accounts including “growth of” projections. We met a few years ago with Fisher Investments and she agreed that wasn’t a good fit for us. I think she has also realized after comparing results that there wasn’t much purpose in having an advisor. Furthermore, their selected funds had substantially higher fees than equivalent ETFs.
Perhaps more important has been retaining a good accounting firm over that same 25 year period.
I’ve never pressured her about her retirement accounts. For one thing, she has to be comfortable with what she was doing. She’s younger and it is in her best interest to have some acumen in this. It has been a gradual learning experience.
Yes, her fees have been higher and this has been a drag on her account but for some having an advisor is a comfort blanket. I think that has been the way it has been for my spouse. It seems she has gradually reached a point where she is ready to move on.
I’ve increased cash to accommodate RMDs but G is still a few years away from this, so she won’t have to alter her allocation which is a moderate one with a core style. The only near-term change is to make is to move her to lower fee ETFs.
Anecdotally, G has a brokerage account and some years ago the broker was Edward Jones. They had taken over her account during a period of brokerage consolidations. I had been giving her some allocation pointers and that broker made the mistake of telling her “You need to decide to choose me or your husband” and she did. That was the end of that broker relationship.
As a financial coach, not an advisor, I often explain that it is necessary for advisors to provide a great enough level of complexity and activity to convince their clients they are doing something worthwhile. I find that tends to be about 10 funds for a fund-based advisor and at least 10 transactions a year. Generally they also generate PR/educational materials that arrive at least that often, indicating or inferring that ongoing adjustments are needed.
Since these are practice-building activities, I would suggest they are more essential to successful advisors than things like simplicity and inaction people are recommending in these comments.
I recall the title of a great article in Money magazine written many years ago by the editor with a similar theme—“No one cares as much about your money as you do.”
I would like to point out that there are advisory firms who operate on a relatively low fixed fee basis, and invest in Vanguard or Fidelity, or Schwab low fee index funds, just like most folks at HD. This could be an important alternative for couples which have one person who is uninterested/unwilling/unable to deal with investments, and children who don’t have the time or knowledge or interest in helping a surviving spouse.
I recently caught wind of this site, the Advice-Only Network, from the Teach and Retire Rich podcast. It looks like it’s in its early stages, but it has a network of about 80 fee-only financial advisors across the country. Seems like they either charge a one time fee for a plan ($300-5k) or hourly/monthly (usually around $300-500). Just thought I’d throw that out there.
I have always thought I would never use a “financial advisor” – and I work for a firm that has financial advisors. It’s stories like this that will cause me to keep that mindset. I don’t have many skills in this world, but I can do a credible job of managing personal assets. I worry about those who can’t. I can’t fix cars or do home repairs, but generally the worst-case scenarios there are you lose a few hundred or thousand bucks. With bad financial advice, you could lose tens of thousands or more.
My employer farmed out our retirement investment administration to TIAA. They still let us use Vanguard funds, but don’t enable this with simple portfolio allocation and rebalancing tools. My suspicion that TiAA is biased towards their annuity and real estate funds is now being evaluated in the courts. I tried out the advice tool with some imaginary scenarios and couldn’t stop it from recommending these funds:
Litigation Regarding TIAA Investment Advice
There is pending litigation regarding the TIAA Retirement Advisor Field View (RAFV) investment advice tool, which includes the following allegations that TIAA has publicly denied and is defending against:
TIAA developed the RAFV tool to increase the flow of assets into two of TIAA’s most profitable proprietary investment vehicles, the TIAA Traditional Annuity and the TIAA Real Estate Account. (Only the TIAA Traditional Annuity, not the TIAA Real Estate Account, is currently available in the core investment menu.)
Regardless of the participant’s individual circumstances, the RAFV tool is coded to recommend the TIAA Traditional Annuity and the TIAA Real Estate Account.
TIAA financial consultants are incentivized through their compensation structure to advise participants to implement the increased allocation to the TIAA Traditional Annuity and the TIAA Real Estate Account recommended by the RAFV tool.
My employer farmed out our retirement investment administration to TIAA. They still let us use Vanguard funds, but don’t enable this with simple portfolio allocation and rebalancing tools. My suspicion that TiAA is biased towards their annuity and real estate funds is now being evaluated in the courts. I tried out the advice tool with some imaginary scenarios and couldn’t stop it from recommending these funds:
Litigation Regarding TIAA Investment Advice
There is pending litigation regarding the TIAA Retirement Advisor Field View (RAFV) investment advice tool, which includes the following allegations that TIAA has publicly denied and is defending against:
TIAA developed the RAFV tool to increase the flow of assets into two of TIAA’s most profitable proprietary investment vehicles, the TIAA Traditional Annuity and the TIAA Real Estate Account. (Only the TIAA Traditional Annuity, not the TIAA Real Estate Account, is currently available in the core investment menu.)
Regardless of the participant’s individual circumstances, the RAFV tool is coded to recommend the TIAA Traditional Annuity and the TIAA Real Estate Account.
TIAA financial consultants are incentivized through their compensation structure to advise participants to implement the increased allocation to the TIAA Traditional Annuity and the TIAA Real Estate Account recommended by the RAFV tool.
I have noticed a similar thing with my TIAA account. They include “guaranteed income” (aka annuities) in their portfolio recommendations as if it were its own asset class, and nearly every preset portfolio includes an annuity portion, which feels very misleading to me. As we’ve mentioned, the right annuity can do wonders for the stability of one’s retirement income, but this is just an algorithm pushing a product. I’m not at all surprised that TIAA is being looked into for these and similar practices. I believe they’ve settled out of similar issues before, back in 2019.
Too bad that happened to you. The term FA has no real basis and just about anyone call themselves one, unfortunately. For a potential client, it’s caveat emptor and requires a lot of knowledge and potentially diligence, to screen and ultimately chose one. There are good ones out there-we have one.
I agree with your comment — but it raises a big, big issue: If I’m sufficiently uncertain about the financial world that I need an advisor’s help, picking an advisor raises the same dilemma. In other words, instead of floundering around trying to pick investments and potentially making a huge mistake, I’m floundering around trying to pick an advisor — and, yes, potentially making a huge mistake.
What a litany of “advisor” horror stories! I have two to add:
Despite the above, I recently decided to utilize a flat fee CFP now that I’m in my decumulation years. Juggling IRMA, Roth conversions, SS taxation, tax brackets, creating a paycheck while rebalancing…convinced me to get a bit of help. I still keep the accounts and do the actual transactions, but follow what he recommends if it makes sense to me.
I’m the sucker who keeps going back to a jilted lover. I’ve had several nightmares with advisers, one big one is never use a friend as an advisor. My sole reason for using one is to keep me from making stupid mistakes or emotional mistakes. I don’t fully trust my judgment .
Right now I have a young guy who seems to be very smart, doesn’t churn my account, but his communication is almost zero unless I initiate it. He’s got till the end of this year for his 3 year probation, then I will decide once whether or not to go it alone.
The hang up is my wife she has no interest in investing at all and would have to have someone when I pass. So I’m trying to find that someone now.
Sadly, the ineffable truth of most asset managers is, that in order to justify their fees, they have to be doing something. In my experience, however, it is sometimes better to do nothing.
That said, what I don’t understand is the lack of tax planning in what was apparently a taxable account. Realizing taxable gains is not, per se, bad, but large unanticipated taxable gains can have painful consequences in both the current and following tax years.
At a minimum, this manager should have discussed the sale and possible tax consequences with the client before pressing the Sell button. That he didn’t justifies his firing.
Several comments have suggested self management as a solution. This might be a good idea IF someone has the time and inclination to learn a few of the basic skills of asset management. However, for a great many people, hiring someone to help manage their assets will always be necessary.
There is nothing complicated about a basic three fund portfolio. What matters is the ability to hold on through market declines.
Yes, just a three portfolio is simple, but most people here talking about wanting an advisor don’t seem to be looking for help in picking their funds. As someone mentioned, there’s still such things as “Juggling IRMA, Roth conversions, SS taxation, tax brackets, creating a paycheck while rebalancing”
Well, it may come down to definitions, but if I want to know if it makes sense to do a Roth conversion this year I ask my tax accountant, not a financial advisor. A person entering retirement might well benefit from a few sessions with a financial planner, without getting into the clutches of a financial advisor who is going to want to run their portfolio.(And how much rebalancing are you going to do to a three fund portfolio?)
Well said: “My advise – if possible manage your own stocks and mutual funds, no one cares about your bottom line more than you do.”
Assets Under Management (AUM) Financial Advisors are much like a parasite, sucking outrages sums of money for questionable services, month after month. Having had numerous FA’s over the years, I will never, ever, let anyone else manage my money… for better or worse. In the new world of on-line financial flat fee-based advisory services & no/low-fee brokers, there are few reasons to not take charge of your own assets.
Hmm… I’ve come to appreciate that a good financial advisor could probably increase my wealth or at least keep me about level with greater diversification of risk even after fees.
However I’ve also come to be sceptical about finding that advisor among all the “advice by the numbers”, unnecessary churners and less scrupulous types out there. So bearing in mind that you don’t really have a throat to choke on management of your personal portfolio (i.e. all consequences fall on you as principal, except maybe the worst cases of mismanagement and even then can you prove enough to get a settlement?), I feel that I’m the one most interested in low costs, acceptable returns and yes accepting of downside movements.
I think I can stomach beating myself up about greed about being too much in a stock or whatever on a major fall. What I’d find harder would be eating the fall and knowing that my advisor had put me there.
“at least keep me about level with greater diversification of risk even after fees”
Have you ever figured out what a 1% AUM on, say, a million dollar portfolio would come to over 20 or 25 years?
Yes. Real world investments with variable inflows, inflation and fluctuating interest rates makes the math too tricky for me. But, to grasp the idea, consider giving an advisor a one time lump sum of $1,000 which will be invested for 30 years at 10%. At the end of each year, the advisor takes 1%. After 30 years your account is worth $12,907. If you had invested it yourself in the same fund, it would have been worth $17,449, so the advisor (assuming he simply transferred the 1% each year into an identical fund for himself) earned $4,542 for his trouble.
Or put another way, the initial investment earned a total of $16,449, of which you received $11,907( and of course the original $1,000 capital is returned to you) and he received $4,542
Math: (1.100)^30=17.449
(1.100) X (0.99) = 1.089
(1.089)^30=12.907
You earned 10% less 1% each year, which is not 9% but rather (1.100) X (0.99) = 1.089 or 8.9%
If one does the math, some people who have the ability to manage their funds, but lack the motivation to learn, might feel differently after running such an exercise.
I also omitted taxes to keep the illustration simple.
Unless you want to allow for lost compounding the math is very simple. One percent of one million is $10,000. Multiply that by 25 years and you get $250,000. Does anyone really think an advisor is worth a cool quarter of a million?
I certainly don’t. In my (very) hypothetical example above, $1 Million would have grown to about $10.83 Million without fees. With 1% paid out each year, it would be worth about $8.43 Million. The fee taken out just for that year alone would be about $84,000.
Total fees paid over 25 years: $1,314,555
gains on fees invested: $1,092,685
Total earned by advisor: $2,407,240
I know many people who benefit from professional advice. My only concern is how much they are paying for it and what value they get. Many folks have modest sums to invest, but for those with large amounts, I think a fee based planner would likely be a better value.
I agree with you time to travel.
Correction to above post:
Total fees paid after 25 yrs: $917,989
Gains on those fees invested: $1,489,251
Total earned by advisor: $2,407,240
And just as bad is the complexity many “advisors” build up in your portfolio to justify their fee. These expensive funds can eat up even more than the AUM fee.
I agree very much with your last point. The main reason why I’ve been self advised most of my life is because I’d rather own my mistakes than be angry at an advisor for making mistakes on my behalf. My other reason is having had a bad experience, when I started investing, with an advisor focused on his commissions, not my best interests.
“You hired us to manage your account, that’s what we do.” This sounds like Fisher Investments.
Apparently, you had this in a taxable account. What did they replace FCNTX with? Are there any losses to offset the capital gains?
I immediately canceled his “free service”. Was it really free? Was FCNTX sold because they could make a commission?
My experience with financial advisors is that they provide misinformation, or communication is misunderstood, and the customer ends up being dinged.
No, not Fisher Investments, it was Bowers Wealth Management advisor Karsten Dornseif. They did sell FCNTX and purchased FEQIX – Fidelity Equity Income. I have no idea how the commission structure works on “no load” funds. Last month (April 2025) Contra was up.8% and Equity Income was down 1.9%. It will be interesting to compare at the end of this year.
It’s unfortunate this turned out the way it did. Hopefully, the advisor gave more of an explanation as to why the exchange of funds instead of ‘that’s what we do.’
I wasn’t familiar with Bowers Wealth Mgt., but when I searched on Jack Bowers, then I remembered his connection to the Fidelity Monitor & Insight.
There are different objectives between those two funds:
FCNTX – Seeks capital appreciation.
FEQIX – Seeks reasonable income.
Leads me to believe there was a misunderstanding somewhere along the lines of communication. Glad you shared the story.
There is no commission when selling one of these funds from Fidelity. Maybe their firm has some sort of agreement with Fidelity, but that would be weird. Advisors make their money on fees, but this was during the trial period.
Yikes!
Looking the ticker FCNTX up on Morningstar’s 5 year chart as of 5/2/25 indicates a +126.49% for the five year period then ended. The fund, started in 1967, currently has Morningstar’s highest star rating and beat the Vanguard S&P 500 VFIAX for the same five year period. Many use the S&P 500 as a benchmark to compare results against their own investment choices. The FCNTX fund is mostly a diverse very large cap blend with a slight lean to growth. The fund does have a 0.63% expense ratio which is a little higher than typical low cost funds.
I have seen broker’s trade in a new client’s account to get out of a single stock holding to get diversification or to trade to get to an agreed upon asset allocation. The first does appear to apply to your wife and the second is unknown based on the information you presented.
From your commentary it seems likely that she consented to a trading authorization through a formally documented agreement that granted the broker the right to make such trades in her account. I see why you are beyond unhappy with the broker’s decision.
I also do not understand the decision when I think of your wife and her likely age being close to yours. The gain she realized if she was planning to never sell the fund during life would have disappeared at her death as the investment would have gotten a step up in basis to who ever she named as beneficiary.
Thanks for posting your experience. Your article has made me think more about what I and my wife should do and not do in our planning. I hope your post will keep others from a similar experience.
It sounds like there was a major communication breakdown somewhere along the line here, and probably before that transaction occurred. I’m sorry you had this awful experience.
From the information from this post alone, I suspect there is a mismatch in expectations regarding investment goals and approach. Any relationship breakup is painful, and I hope my reply brings a little light from someone not emotionally involved. Please disregard if it causes any unpleasant feeling.
The process of choosing a financial advisor that matches one’s objectives requires a lot of forethoughts and considerations beyond fees. A good advisor would need to find (1) your risk tolerance psychology, (2) your capacity to take market risk, and (3) your need to take a certain risk in order to achieve your goals. Any of these 3 factors would constrain your investments to some selections and not others.
For example, if your risk tolerance is lower than average, then Fidelity Contrafund does not belong in your portfolio (with 9 tech stocks accounting for over 55% of the fund total asset- way too much concentration). Even if your risk tolerance and risk-taking capacity are high, there might be no reason to take the risk with the Fildelity Contrafund when the consensus for US economic recession is about 60% now. Bloomberg has reported that institutions (so-called smart money) were selling tech stocks over past month, while retail traders (so-called dumb money) kept buying. Capital gain tax may be painful, but loss of that gain in 6 months, or worse, a capital loss at end of 2025 would bring far worse suffering. My points are these:
1) it is not possible in early May of 2025 to figure out whether the sale of your Fidelity Contrafund is a brilliant foresight or a dumb move. 2) it is too early to estimate the tax liability for all of 2025.
“The future ain’t what it used to be”, Yogi Berra
At age 81 it would be best to hold on and pass to wife with stepped up basis. It would have to go down very much for this type of loss, and it will come back if that happens. Also, the ‘consensus’ of a recession is a good reason to stay put. These experts are usually wrong.
Several friends inherited significant money from their parents and trusted the wrong financial advisor. None had investing experience. They were all highly trusting individuals—and each placed their trust in the wrong person. These five lost everything.
What a horror story. I haven’t used an advisor in decades so I’m not up on all the ins and outs. Wouldn’t there be available a type of relationship where the client has to give consent in advance to any trades?
I might be wrong, but I believe that a client must consent in writing for the advisor to trade on their behalf.