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No for 99% of us. See Chap 12 in Harry Sit’s concise 200 page: My Financial Toolbox: The Nuts and Bolts of Managing Your Money. Very practical, recent (Sept 2020), and full of useful information. And $10 for Kindle edition which reads fine even for diagrams, etc. I am 75, PhD in biostatistics, very interested in finance and I still picked up 8 new tricks and confirmed other items I was already doing. Harry also has a blog for late breaking news like I-bond purchases right now.
1% of your assets for investment management only? Nah, not likely. For real-life financial planning? To me, yep!
For context, I’m 39 and have paid the 1% percentage point for the services my planner, a CFP(R) professional, provides since 2006. She has been my rock for soooo many things over the years for things that have nothing to do with asset management. She and her firm have saved me and my family likely more than I’ve paid her, particularly tax planning and insurance (she does not sell). We have a real relationship with her that evolves so paying her on a continued basis is warranted because we don’t just “turn her on and off.”
Using the 1% as a proxy to charge for the complexity of your situation and how much planning you need seems appropriate to me (insert Behavior Gap here). Others not so much I guess. Humble Dollar readers likely are skewed toward “no” in my opinion. We cannot lose sight that many many people do not like this stuff like we do, and they’ll gladly pay a fee we view as silly. It’s when the fee is silly and mired in conflict of interest that gets my hackles up.
The flat-fee or fee-only argument is certainly a good one. Kitces and his folks have some stats out there about how most folks prefer their payment to an advisor comes out in the assets under management form (and never really seeing it come out) and not paying as an auto-draft or individual transaction. I dunno. All of em have their flaws. An advisor working on commission by selling me things has too much conflict of interest to me. So how about % of net worth, % of income using Line 9 of your 1040, a % of your NFT portfolio? Honestly if you’ve set a fair fee for fair work and it’s reciprocal, isn’t that what’s best for you?
I am a veterinarian and I view myself as a guide to helping people with their furry loved ones achieve the greatest return on emotional investment in the form of happy, pain-free, disease-free years with their pets. Achieving this is the pinnacle of what success looks like to me. I just recently completed the CFP(R) coursework and plan to sit for the exam in March; not so I can do a career change (but hey who knows), but so I can better understand the awesome things planning can do and so I can be a better guide and advisor for my patients. I cost more. I provide more. What Steve or Danielle or Filbert down the road charge should be irrelevant.
*I wish everyone could take the coursework. The breadth is amazing. The industry just hangs on managing assets and it’s hard for them to scale real financial planning. My opinions of course.
Investing is simple math. So the first question needs to be “Do you need an advisor because you truly can’t do this yourself or are just “refusing” to do this yourself?
Our kids will tell you that I’m always preaching that nobody cares more about your money than you do.
I’m currently trying to “guide” my sister-in-law through the “advisor decision”. She has about $750,000 most of which is managed by a big investment house. The 51 (!!!) mutual and ETF funds they have her in cost almost $600/year. The advisor fee adds another $5500. Yes, that’s $61,000 over the next 10 years and $120,000 plus by the time she is 77 (!!!). And I haven’t even addressed the capital gains taxes as they rebalance monthly.
So if you insist on burying your head in the sand when someone utters the word “investing” then sure pay the 1%. Or suck it up buttercup, learn how to invest in a lazy portfolio, and pay yourself $6 grand a year.
No, if you follow the advice that over the long haul you can’t likely beat the returns from investment in no load Index Funds.
Only if it’s keeping you from making big mistakes. If we assume you were going to put your money in a Target Date Fund appropriate to your age, then under almost any scenario that 1% will cost you over 15% of your final portfolio balance. It’s a pretty steep cost to pay for 30 or 40 years.
If all they are doing is move you’re money around using a robo system, they aren’t adding any value. I would much rather pay a fee for the service provided rather than pay a percentage of assets.
No. There are fee-only financial advisors who can do the job equally well. Mine charged $1200 for three sessions, well under a percentage of my portfolio.
Only if your own investing impulses really need restraint and you have less than $1 million in assets. If you are prone to shooting yourself in the foot, you probably are costing yourself well more than 1% a year. Following the advice of an advisor may help steer you away from the typical costly mistakes many investors make.
This depends on your level of assets. The larger your financial assets, the more likely the answer to this question is no. A good financial advisor can be worth it if she 1) puts your interests ahead of hers; 2) does more than just manage your portfolio; 3) keeps investment expenses very low; and (especially) 4) keeps you from making major behavioral mistakes.
Right on! Also nobody mentioned the time it takes to manage a portfolio. I would rather be spending time with my grandchildren than going over financial information. Which you can’t get back no matter how much money you have.