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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.”