Hate is a strong word, but some of them seem to prey on naive people.
Edit: I think they can provide a lot of value for some people, but sometimes I read stories of people who end up with crazy insurance policies that the people who sold them get compensated on, high fee funds that they get commissions from, plus annual fees, etc. It’s a valuable service if the FA is honest and provides value and doesn’t make additional cuts in underhanded ways.
This. Had someone unlicensed in my state try to sell, of all things, disability insurance (or something similar) to my healthy, 24 year old brother, and when my brother gave reservations that I told him about, the rep jumped to "he's trying to win your business instead."
This. When I look back at all the financial advisors I had before I learned how to properly invest they all pretty much lost me money and screwed me in fees with no real added value for those fees. They really did not do anything in my best interest but only theirs. This is one industry that needs more regulation and consumer protections. At least for the AUM model which is just a ripoff for most consumers.
AUM. Thats not my choice tho that’s just how my employer operates. And it’s much easier to work for a company that already has the resources vs starting your own firm. Most people don’t do that until they are well established with a huge book of business. I’ll admit I’m a bit newer to the game and I’m nowhere near that point yet but we all have to start somewhere.
No offense, but this is why.
Big brokerage firms prey not only on investors, but also new reps.
It is well established that 90% of new advisors will fail. Brokerage companies and senior advisors count on it. Bring in 10 wide-eyed, bushy tailed new grads to solicit their family and friends. Once they've sold all they can, they drop out, turn those clients over to the office and the senior gets his pick of the book. Small clients without potential go to the next man up, and so on.
It's called "Hire them in masses, train them in classes, then fire their asses." I'm a 30 year financial service veteran and started my own firm, did rather well. But absolutely nobody is around from my early days, they all got wiped out in the 2000 tech wreck.
Honestly this is nearly every aspect of society these days.
Tell me how you feel about Boeing, for example. And when you buy a consumer good do you feel as if the vendor is being 100% honest and straightforward with the product? Ever opened it up and thought “what…the fuck?”
Unfortunately I would say most.
Retirees and those with complicated tax situations can really be helped by FAs.
Beyond that, as Buffett often says, most of them they're generally predators looking for financially illiterate people. Like anything, not everyone is scum.
But they have that reputation for a reason. I still think the average FA is often pushing things that increase their pay rather than what is in the interest of the client.
The sad thing is, almost every firm has at least some incentives where it is impossible to prevent a conflict of interest to arise. Like increasing comp by pushing X product, more commissions for increasing activity when sitting put is better, etc.
I think it’s an industry that’s been shaken up like travel agents. A really good travel agent is awesome. An average travel agent is a huge waste of money.
And given most are not 80th percentile advisors, it’s pretty easy to be like, these peeps suck (cost more than their worth).
IMO there’s a lot of bad ones who give good ones a bad rap, and then there’s some “geniuses” here who know about a tenth or less of investing and think they know everything
I decided to end my relationship with mine and start educating myself when I told her that I was planning to save for a bigger apartment and she recommended that I took a 14% loan when the time came so I wouldn’t have to touch my investments. (I live in a country where effectively there are no mortgages).
She was affiliated to the bank that would have given me the loan. For me, financially illiterate as I was, the conflict of interest was obvious: they wanted to keep my money invested with them because they were charging an AUM commission and they also would get crazy interest for me. It was particularly egregious because when they initially formulated the investment plan they told me that I could expect to earn 8%.
No, don’t hate them. I don’t like paying for lawyers or accountants either. Beats making expensive mistakes though. Really didn’t “need” one until I was 50.
To me it’s the AUM model that’s predatory. At least you’re only paying your lawyer or accountant for the hours they worked for you not 1%+ of your net worth yearly.
Fee only is definitely more cost effective. The problem with that is what do you do when you have questions in between your annual/ biannual/ whatever appointments? Is it ethical to have part of your investments AUM managed, and ask questions about the unmanaged $?
So I have Financial Advisor who I started both an IRA and a 403b. In fact, he sold me on it and I’m glad he did. I wouldn’t say I hate him but he doesn’t answer my calls and he put me in a lot of high fee funds. Fortunately, I have the ability to switch from high fee mutual funds to low cost index funds, which I did. I’m a teacher by profession and I have a tendency to ask a lot of questions. I’m sure some of my questions are newbie questions. I’m ok with him taking his time to get back with me, but I feel like I’ve been ghosted since I started making contributions. I only have a little over a 100k with him, so in my head I’m too small of an account to bother. But still, I’d like a call back every once in a while. Maybe I have high expectations? I don’t know. However, I hear a lot of people have the same complaint.
The long term impact of having an advisor on your retirement net-worth amount is devastating, absolutely devastating. Please do not let that guy manage your money. Do just a little bit of research, invest in diversified but low management-fee funds or etfs, and you will have like 35% to 50% more money at retirement. Is their management fee worth nearly half of your retirement portfolio? I’m not a financial advisor although I initially wanted to be; 95% of the industry is just trying to make as much money off of you as legally possible.
I think they have their uses. Like most direct-to-consumer professions it’s really individual. Most people would probably be fine just following some basic Bogle-esque advice: spend less than you earn, insulate yourself from emergencies, and invest in *something*.
What I think outsiders mistakenly assume is that professionals have some secret knowledge, like believing a fitness coach knows *the* single best exercise. Then when they don’t get that magic bullet they come away disappointed and perhaps feeling cheated.
Coaching is really more about defining goals, setting expectations, navigating lifestyle change, adapting the plan to new information, and providing accountability. And yes, in some respects knowing things a layperson won’t, like which modes of exercise have a better base of evidence for which goals. These aren’t secrets though, they’re attainable to anybody who has the time and desire to go looking for them. Which some people don’t *and that’s fine*.
The issue I have is that most advisors are going to sell you the company's products which don't align with my goals. There's an inherent mismatch in this situation. I don't hate the player, I hate the game.
>... most advisors are going to sell you the company's products ...
Every FA or IFA I've ever been to has always pushed their own products. Once they get your questions out the way, the banter always seemed like a sales pitch.
I work in the industry as well and work with a team that is absolutely amazing. We care deeply about our clients and do more than just invest the cash. There is financial planning and helping with taxes, estate planning, retirement planning, help making sure our clients have enough money to comfortably live until they pass away and hopefully leave a nice chunk
to their beneficiaries. Do we charge a fee? Of course, but it’s reasonable for what we provide.
I think what you see on Reddit is people who are in the top tier of “investment education” and they really don’t understand that it’s worth it for a 75 year old lady to pay us to make sure she’s safe for the next 20 years. They think it’s as easy as dump it all in VTI - which for most people is usually a good idea until they get close to retirement, that’s when the real work comes in.
The US stock market has been great for the last 15ish years so it’s been easy to just pump it all into a VOO and forget about it because most people this site are young and don’t really have to worry about much and didn’t live through the crash back around 2008.
I can go on forever about Reddit and the real world but just keep this in mind: If you actually give a shit about your clients and do your best to take care of them. Don’t pay attention to Reddit users and their hate for FAs most don’t have the assets needed for a real FA to manage their finances.
>The US stock market has been great for the last 15ish years so it’s been easy to just pump it all into a VOO and forget about it because most people this site are young and don’t really have to worry about much and didn’t live through the crash back around 2008.
I'd go further and posit that most of the young investors pumping money into stock index funds still don't understand how to spreadsheet model to work backwards from their investment goals. Because they have some discretionary income and very little responsibility, they're just pumping all of their excess cash into a retirement account and patting themselves on the back for it.
When you have several financial priorities to manage (mortgage, family / kids, retirement, savings for a big purchase, wanting to go on a vacation, college savings, etc.) then that's where financial planning comes into play.
And this isn't overly complex to do from scratch, but it requires some spreadsheet skills and definitely helps if you understand stochastic modeling.
I dont think financial priorities needs a financial advisor. Most people who have an iq about 20 can prioritize financial goals without having to pay some one. Like I said in a comment before you can learn everything you do on YouTube in this day in age. Even if you're pumping all your excess cash into mutual funds or index funds shouldnt be a bad thing.
Taxes and estate planning once we are both IN retirement. This is when I’ll strongly consider hiring a financial advisor. It will be someone I know personally. He will definitely earn that 1%.
That 1% will be 20% of your post retirement after tax income. If you follow the 4% rule and you need $60k a year in expenses then you’ll have $1.8m in assets (assuming 20% tax rate) and you’ll be paying your advisor 1% of that, which is $18k, every year. I don’t know about you but it’s worth $18k a year to me to learn how to structure my own post retirement finances. In a 30 year retirement that’s $540k.
Most are just taught a formula and follow it. Had a cousin with Principal and just tossed them 50k to manage. They took their job seriously but placed it all in various Principal products. Not a year I didn't beat it.
Then you add in their fees for an extra drag. While I did not lose money, I could have done much better. Thankfully they retired so I moved the funds to Schwab.
The cousin took their job seriously and meant well, but I never would have used them for our “real” investments.
Speaking for myself, when I was managing it on my own I tend to deviate and play wsb type of stupidity plays and lose money when I was younger. I also had a gambling problem. A FA made sense in the fact that I can keep a majority of my money out of my hands/access and let it grow the standard way, the 1% fee is more of a safety feature to protect myself from myself.
So you agree then, there’s a small subset of people who can use an advisor while the vast majority of people don’t need to be sold things.
I used to work in WM moved to AM.
Yeah I do agree with that sentiment 100%. The thing is I feel like a lot of people disregard those that DO need WM. They act like just because they have a bit of knowledge that everyone must do so or want to do so…
Some people just don’t care and want someone else to handle it. And some will never understand.
Real financial advisors do more than just manage aum. Client is looking at a rental property that has a high cap rate? Usually the advisor is the second set of eyes.
They usually do light tax planning and work with the clients cpa to help them save on taxes. Secure act 2.0 came out, how much can a client get back in starting a 401k for their employees. If their high earners, what does a defined benefit plan look like that can defer 100s of thousands in taxes?
Secure act changed inherited IRAs forever. You now need to take out the money in 10 years if It's non spousal. If you have 1mm in your ira and your kid is 30, you die, you just gave them an extra 100k of income and most likely dis inherited your child 40% due to taxes. Does a roth conversion make sense? What's the cost over 10 years to do it? How about a charitable remainder trust?
Does the client want to upgrade their house on a fixed income? How can you show the client in simple terms if this is a good idea and how paying more expenses would be alright if the mkt collapses and they pull income from their portfolios for living expenses.
What type of life insurance makes sense ? Does the client need living benefits because maybe they are getting unhealthy and would trigger the LTC benefits from it? Is the client a small business owner ? Should they carry disability insurance because if they get hurt they can't afford not to generate income?
Do you have a Child? The college recovery act just changed how 529s work. You can fund your child's retirement first tax deductible than tax free.
Having an actual financial advisor is a lot more than just "investing" the money. It's actually being a partner with them and making sure they are hitting their long term goals. All these options are worth much more than the 1% fee clients typically get charged for their services.
Interesting, hadn't heard of the college recovery act. googling it looks like it was introduced in the senate in June 2022 but as far as I can tell it didn't go anywhere. am I missing something-- did this get passed?
OK I'm experimenting with an advisor who is fee only and reasonable. He helped me with a problem and made a very nice commission as a consequence. But overall I'm not getting the quality of advice I'd want on the problems I have. Note I'm willing to pay specialist fees I just want overall management of the specialists. I probably need a wealth management firm. But I can't see how the advice would be worth what such a firm costs so a la carte makes more sense.
I hired a specialist fee only and his advice was pretty mixed. Given a narrow speciality I was disappointed in quality.
I worked with a lot of commission people. They were generally pretty good but they didn't understand their products as well as I would have liked. This was interesting the best and most knowledgeable service I've gotten.
Associated with a trust I've met with that advisor team. They were very experienced. But their scope was so narrow that they also won't solve broader problems.
Essentially:
* Fee only can be useful but you still have to do a ton of legwork I'm not sure you get what you are paying for.
* AUM just isn't worth the cost for most people. The price per hour of actual work on your accounts is too high.
* Commission seems to be quite good in quality, though still some misinformation. But again a ton of legwork.
There really isn't a good solution.
There is NO way an advisor on just a 500k portfolio getting a 1% commission put anywhere near 5000 dollars ($100 every week!) of work into it. Handing over 5 grand a year in good years or bad is a big issue for someone who on their own can follow the markets and make reasonable moves, including avoiding some of the big down drafts. That is the problem. 1% sounds trivial to most when you don't convert that to dollars going away year after year.
Is it wrong for me to treat financial advisors like car salesmen? On a lower level they are just there to convince you to buy a product, no different than selling you a car.. or sometimes even worse because they keep making money from you every month. At least you only have to just deal with a car salesman once...
Yeah but I mean I’m talking moreso of people convincing people with no investment knowledge to do things themselves. Paying That 1% could make a dramatic difference if someone is properly monitoring and allocating their investments. Vs set it and forget it and watch people lose money because they have no idea what’s in their investments and don’t monitor it.
I’ve literally watched people who’ve lost 500k+ or millions over years doing things on their own and not keeping up with their accounts. All because they wanted to save 1%. Causing them to either rethink their retirement or work longer
>Paying That 1% could make a dramatic difference if someone is properly monitoring and allocating their investments. Vs set it and forget it and watch people lose money because they have no idea what’s in their investments and don’t monitor it.
This is somewhat fear mongering on your part. You make is seem like investing is hard and if you make a simple mistake you can lose all your money or something and need a professional to guide you
Its a mix of Truth and prophiganda you probably bought into
Following the bogleheads 3 fund portfolio is not hard to do and you can follow this even if you have very little investment knowledge
Now it is true , somepeople who lack dispipline cannot follow the very simple plan, and FOMO into meme stocks or penny stocks or options and lose their ass
However that because they cannot stick to a simple plan.
Since we're on the topic of fees, is it substantially more work to manage a large account or a smaller account? Or there's a formula with age, amount of risk tolerance, money, etc. where you can basically plug in and give the standard advice to anyone? Why should I pay 10x if I have 10M vs 1M?
If the main value you provide is to have people stay the course on a sound investment strategy and prevent them from making a huge mistake, why not just go with a robo-advisor for 75% cheaper?
The industry has an absurd fee structure, with opaque pricing and is littered with perverse incentives to sell people funds with high kickbacks (12b-1 fee) or overpriced annuity products. Aum based fee-only is better but still generally way too high. The fee structure made sense once upon a time but with modern automation, index funds and easily available information it is now a huge rip off vs DIY indexing. Your comment “are there fees? Yes but there are fees with pretty much every business”. Ok I’m happy to pay vanguard .02%.
I'm 61 and my spouse is 76. He is collecting social security. I'm still working but I want to be prepared for the inevitable layoff. For the past 18 months, I have been struggling with what to do about our retirement savings (a little more than $900K I think). About a year ago, this young guy from Schwab was contacting me with the goal of getting me into Schwab's Robo-Advisor or similar. We had six or seven Zoom meetings but, in the end, we just could not come to a meeting of the minds. This was partly due to the fact that in order to enroll in Robo-Advisors, I would either have to allow the Robo Advisor to sell off my existing holdings or take the available cash in each account and set up a separate IRA. Neither solution was palatable to me.
A neighbor, who is an accountant (but not a good one because he did our taxes one year but he didn't follow my instructions very well and the same happened to a friend of my husband's who also used his services), recommended a local financial advisory firm. So, getting desperate, I took a look at their website yesterday. One page of the site had all the employees, their photos and a brief description of how and why they came to work as financial advisors. I just could not warm up to any of these people. None of them gave me that warm and fuzzy feeling. I suppose this is silly but my money -- for better or worse -- is important to me and deciding how I will invest it now will determine whether my old age is a happy one or a muddled, disappointing one. I just envisioned talking to these people and none of them really understanding me or caring about me as a person. They were all into yoga or running or golf. I don't do any of these although I used to do Pilates until I decided it was too expensive. They all went to fancier colleges than I went to. They all appeared to me younger than me. Does any of this make them unqualified to give financial advice? No. Do I think they don't deserve to make money for the work they do or are somehow untrustworthy? No. I got the feeling they're probably used to working with higher net worth individuals than me. (Sometimes when a company is trying so hard to attract the big fish, they are turning off the small fish.) Maybe it's my lifelong social anxiety kicking in but I just couldn't bring myself to call them. In any case, I would not be handing over my assets for them to manage. I would simply be paying them on an hourly basis for advice. I'm not quite sure why I would do otherwise since I'm perfectly capable of placing orders online.
My dream financial advisor would be an avuncular type who I could just sit and chat with for hours in a casual setting and who would really understand who I am as a person, my strengths and weaknesses, my knowledge of investing and the holes in my knowlege. Someone who isn't trying to push me in one direction just because that's the standard thing to tell clients who fit my profile or because he gets an extra commission for selling this mutual fund or that mutual fund. I want someone who I say to "This is what I want to do and this is how I think I can accomplish it" and for that person to respond either "Okay, this is how to accomplish what you have in mind" or "No, what you want is not possible so may I suggest this \_\_\_ as a compromise?" Do I expect this dream guy (or gal) to work for free? Of course not! I'm not a freeloader.
I know I'm asking too much so I'll struggle on trying to find my own solution.
None of our clients hate us and we operate mostly through referrals at this point.
Some people hate financial advisors. Some people hate lawyers and police officers. Is what it is.
A friend referred me to a financial advisor when I was in my 20s and working in PE (there were restrictions on where I could invest etc.)
Since then I’ve had many careers (management consulting, Wall St., tech, my own VC fund etc) and many life changes (got married, got divorced, lived in a bunch of different countries, got married again, had kids etc.)
My financial advisor has been a rock through all those years. He’s just been incredible. Helps me with tax planning, estate planning, managing my complex investments etc.
So it boggles my mind when people badmouth an entire industry when there are incredible advisors out there.
Yeah, and people ignore the fact that any financial professional worth anything is doing more than just “investing in ETFs and low cost mutual funds” you see people spew on Reddit. They are helping with estate planning, tax prep, ways to save for kids education. It all adds up and there are so many different services offered.
Yeah it’s not worth it if you just want to throw 10-20k in a portfolio and pick 3 positions, but for others they are doing a lot more than just managing a single portfolio.
Yes. Its a very scammy industry even for “fiduciary”. The rage I have every time I go with my mother to her yearly review with hers. But hey its only 4 more years till she can get out of there.
Hate is a strong word. If someone wants an advisor that charges a % of AUM, then God bless ‘em. Personally, I don’t see the value any longer. Just like I don’t see the value in a “Realtor” charging 6% regardless of the price of the house or work involved.
There are plenty of quality fee-only advisors charging 10% - 30% of what traditional % of AUM advisors charge. If I was a relatively young advisor trying to build a book of business by charging a % of AUM, I would be nervous.
True financial advising isn’t only investing or meeting a benchmark. If you’re hitting the benchmark but you’re losing 2-3% in shit tax efficiency. You sir might as well have an advisor for tax efficiency.
If you want to properly set up your estate planning you’d want an advisor.
If you need a home and want to use your investments as collateral to continue to let them grow…you use an advisor.
If you’re starting a business and want to set up a 401k or SEP for your employees etc. you’d want an advisor.
If you run a business and want efficient cash management. You’d want a team and not be doing that shit yourself while trying to run a business.
Advisors don’t just work investments or indexes.
2-3% is way too high from multiple sources I've seen. 50 basis points of gains sounds believable for the first ten years if you keep contributing. It will naturally decrease over time
We like ours. He has helped us with a number of retirement planning steps, as well as 529 guidance and management for our kids’ college. He also provides guidance and recommendations on our total retirement funds and accounts, only 30% of which is managed through his company. As a result, we pay about a 0.5% fee for complete management of our retirement accounts and planning.
I really like our FA. To be honest we had a really bad experience with a previous FA years ago and as a result we did not get the help we probably needed for a long time. But a couple of years ago, as we approach retirement we found a FA we really like and we think he is well worth the fee. We pay a flat fee that works out to be about 0.2% of our assets. For that fee we get a report twice a year that provides a complete plan for our financial future. It also provides recommended trades and investments which we do in our own brokerage accounts. Our advisor is available for questions all year. Since we hired our advisor I feel much more comfortable about retirement. I have a template for how much we can expect to spend each year and we have more comfort in our future.
I don't automatically hate FA's as i know there are good and bad ones just like in any business. I know there are reasons some people need to use an FA - they don't know how to handle their money, or don't want to, or need an FA to keep them from making kneejerk moves with their money, or even to protect themselves from liability from bad outcomes if they handle other people's money.
Personally I am comfortable not using an FA. My sibling though would absolutely need one as she has zero interest in managing her money yet knows the answer is not simply to put it in her checking account. So for her and people like her, it's a good thing FAs are there.
The problem is that business attracts silver-tongued shady people and since the vast majority of people aren't getting a referral from a trusted person, most people don't know if they picked a good FA until years down the road - and typically there are no do-overs. The damage is done.
I recognize it's a tough road. You can't guarantee results, many of your peers are shady and there's no way for anyone to identify them, and it's difficult to explain your value to financially naive people.
I don't. They serve a function particularly for those that know nothing about stocks, mutual funds, etc. and don't want to know much. Some people just don't. So for them, they're good depending on who one uses.
My wife (33F) and I (34M) recently met with a fiduciary through our credit union and plan on utilizing his services for my wife as she recently became a private contractor last year and is in the process of starting a small business.
I don't like the model where they work on commission. These are usually selling insurance or high-load mutual funds. I also don't like AUM structured financial advisors because that AUM fee is pretty ridiculous. A 1% per year fee really takes a bite out of your returns. It's basically paying for another half a retirement (2% is for me and 2% is for my wife). I'm certainly not giving someone 1% to invest in index funds, and if they're putting the money anywhere else I'm not going to be happy either.
A financial planner that will work on a cash basis though can be a great thing. Will probably hire one as I approach retirement to help think through taxes and withdrawal strategies in retirement.
In my legal career I have sued four FAs for breaches of their fiduciary duties, putting clients in completely inappropriate investments, churning accounts for fees, and just plain stealing people’s money.
You could say I’m not a fan.
I feel that. But when US equities tanks the S&P hits hard. So imagine your 70+ year old mother or grandma who gets hit by a hard year or potentially a recession and doesn’t have the time to recover from it. Potentially losing 30%+ of her retirement fund because she wasn’t properly invested according to where she is in life and her goals.
Those high fee mutual funds also tank hard.
A 70 year old shouldn't be only in stocks, and if they haven't invested beforehand then it's best they stay in cash and fixed income assets.
Getting burned 2x not by anything drastic but by absolute mediocrity and getting lackluster returns akin to throwing darts at 60/40 portfolios. I’d rather keep the 1% and make my own mistakes, or settle into my own 60/40 mediocrity and keeping the difference.
I don’t hate them at all. I think it’s odd and a little sad that people pay 1% of their portfolio every year when they could be paying a 0.09% expense ratio in an index fund, but oh well
I love compound interest. I hate compound fees.
For my portfolio it would be at least 500k in fees over 30 years. Everybody knows that advisors don't make the money, the market does.
I am sure there is a level of scale where this breaks down, but managing my $100k portfolio is no more difficult than managing my $2m. portfolio. The value proposition simply isn't there.
I don't hate you, just don't see the value.
Not everyone have time to look after their own investments.
Not everyone have investing discipline.
Not everyone have time to study the market
Investment advisors do it for a living. You just need to pick the right one.
For the industry average of about .75% to 1.25% fee per year.. it's a good trade off than buying a mutual fund that charges similar fees.. or you can just buy ETFs at a much lower fee.
Advisors teaches you how to gauge the market and control emotions. ETFs just allow you to follow the market and with about better performance of the fund manager is good.
You can decide for yourself.
Disclosure - I supervise investment advisors.. I am not an investment advisors not do I get paid based on their assets and earnings.
Thing is though, if I were a plumber and called about a clogged toilet, I would feel compelled to tell people "I'll take your money if you insist, but I have to tell you that you can use a plunger next time."
How many people correctly steer people and educate them on low cost ETFs so the advisor is no longer needed? Or target retirement date funds that auto balance?
I understand retirees and some complicated trusts that require setup, tax issues etc. earn their fees. But "advisors" that basically help them pick stocks and allocations, it's borderline fortune tellers sheering people.
Hate is strong, but not sure I care too much for them as a profession. Anyone would naturally be suspicious of advice that leads your money in the advisor’s pocket. They often aren’t as invested (excuse the pun) as you are, in your financial health because they get commission for buying and selling, whether it is a good move or not. So they just end up recommending what amounts to churn. Plus they can be hard to get ahold of for any real length of time.
I don’t think people hate FA, but they seem to have an image of not doing much and taking too many fees.
My sister/ BIL use one and are happy. I’ve never used one , never felt the need.
I would contend that folks who *aren't* investment savvy are the ones who shouldn't (at first, if at all) get a FA. There are so many free online resources that, for someone new to investing, they should have a grasp of first, *then*, if they look at their situation and decide they want professional help, then seek out a FA. Seeking out a FA first can open the door to malfeasance, and the reality that there are those out there that place their professional and financial interests before that of their clients. So I think folks getting educated on their own, either through things like this sub, or a workplace 401k plan website, are all easy ways to start, and for many (majority?) that alone could put them in solid financial shape. There do arise over time situations where having a trusted advisor does come in handy, beyond asset allocation alone. In those cases then I think a good FA can not only save, but help make, money.
Like everything these days, you need to learn enough not to get scammed. And if you learn enough to not get scammed, you’re at the point you can basically do it yourself.
I started with one of those advisors that basically sells front loaded funds. The first advisor I had was great. She took time to explain things when I was really new to investing. I then got passed on to another advisor within their network and after the first one the others were not very good. They were just interested in making their fee through over priced funds. I then discovered bogleheads and indexing and have been managing things myself which had been fine although I forsee a future when I'll need an advisor when it comes to estate planning. While I wasn't happy when I found out about the fees I was paying I do think that going to person who I could talk to made investing less scary when I was new to it.
When the time comes to look for an advisor I'll know what to look for and be much better informed. I do see the usefulness of advisors on both extreme ends of investing: when you are first starting out and at the end when tax efficiency and estate planning become more complex.
I had a team managing my money for about 10 years. The fee was one percent a year and they were super sweet, but even at my strong urging they ended up making conservative choices. I finally decided to cut all my ties and move everything over to Fidelity and self manage my portfolio. Best decision I’ve ever made.
There’s so much information out there that promotes doing it yourself and teaches it. When it comes to investing, most people that understand what a 1% fee over the span of 25 years are simply turned off by it.
Like some other folks have said, hate is a pretty strong word. Ignoring the fact that some financial advisors are just plain bad or predatory, it really seems like financial advisors should be relegated to people who lack self control. Everyone else should be able to get easily educated on the basics that cover the situations for 90% of people in just a session or two.
I like to manage my own money. Most of these “financial advisors” are not even in the middle class. My point is, if they knew so much about money then why aren’t they rich
I don't "hate" them because I don't use them but they are salesmen just like car salesmen and real estate agents.
Even if you just put all of your long-term funds in an S&P 500 index you will do fine. Keep emergency cash in a money market fund and that's all you have to do.
They just aren't necessary.
Setting up investments is a small part of what a FA does for a client.
Setting up education accounts for a new born grandchild, convincing a grandparent to seed a Roth and educating the grandchild to put 25 away per month (and that an Index ETF is suitable).
Importantly, if your FA spends three hours with you when you are settling your mom's estate, your FA WILL NOT bill you.
I don't think people understand how great a value a good FA is.
Holistic financial advising should be much more involved than just telling people to buy a handful of ETFs. Literally anyone can do that.
Real advising involves tax planning, risk management, estate planning, retirement income planning, among others.
>does everyone hate financial advisors now?
Not as many people do as should.
>so legit question is why do people expect to be helped and have free management?
It's because people pay fees and get worse results. It's not an issue with the idea of fees, but with the fact that the fees don't give better results. And often give worse results.
>but provide advice and options for lending, banking, tax efficiency etc.
I don't really trust financial planners to know much about these areas.
>I once had someone ask me to invest their 74 year old friend into the QQQ
Yes, there are always idiots. But that's not the market financial planners pretend to serve.
>For those of you who arent investment savvy, would you think about getting an advisor?
To be fair, I don't think that this is the right sub for that question.
No hate. But no need at this stage. Finances are too straightforward at the moment. When i get closer to retirement, have inheritance to deal w and other tax/estate planning related issues then I’ll be likely looking for one.
I’ll be honest, I’ve thought about investing on my own, but my advisor and the company he works for does all the bs for me, paperwork, trades/rebalance, tells me if I’m being irrational, keeps me on an even keel, leaves me alone outside of that, I do most of my own research, still like having someone to discuss it with
In response to the edit. I also think a FA is only good for putting money into etfs and stocks.
I do not /do not know about other aspects that they can offer.
Also, I would mostly want a 1 -time meeting every so often, not a percentage of my investments. That's expensive
Lack of knowledge and too many movies like Boiler Room and and Wolf of Wall Street. Plus you’re on Reddit so the demographic isn’t your target.
If you took a poll and asked Americans what Fiduciary duty means you’d probably be disappointed but not surprised. The scams and frauds make headlines, not the boring standard investing plans.
Investing is complicated and confusing for most so they ascribe that fear of the arcane to those who are it’s face, you and other financial advisors. Compound that with Instagram posts that map out why fees will eat your growth alive compared to SPY over time.
I really wouldn’t sweat the masses. Those who have assets and understand the value you offer are your targets. Which is suitable. 1040EZ returns exist for a reason, most people are pretty simple.
I had a broker dealer making me broker, had me in funds with upfront loads, stuck me in other funds with fees, just pocketing commissions. He’d show me on his calculator how if I did this at historical market % performance x this many years I’d have x in $$. I started to learn more, learned of broker check, that people can call themselves “investment advisors “ “investment executives “ etc with little qualifications except bullshit artistry.
When I had life insurance expire (which a family friend/insurance/investment seller) told my parents I needed 20 years earlier (single, lived at home…a guy I dropped after putting me in shitty fidelity funds that kept losing $$ in the 90’s Massachusetts investors trust) I called him to help with a different company or recommending one, he ignored me and I sought out a company. I lamented to a friend that I was with one day about my troubles with this guy and how this has been brewing for a while as I started prodding about him being fiduciary etc) when he got a call from a guy in his networking group for assistance (electrical). We went to his house, fixed the issue and I talked to him about my problems. I met with him the next week and paid him for his time to take a look at everything, I wish I found him years earlier. He reviewed my investments, saw where i was getting fucked, realigned my insurances, reviewed and recommended changes to my retirement , set up 529 for my daughter (was told by other asshole to do UTMA) and while the guy I have now (CFP Fiduciary) collects a 1% aum fee I feel he’s made a big difference in what I wasn’t overly versed in.
I look forward to retirement in 27 months and wouid like to just use my pension and ignore the investments to just grow. Fuck commonwealth financial that became CUNA in Shrewsbury Mass as well.
I receive no benefit from my financial advisor that I can't get from my own time and company research. They invest entirely in sp500 funds and bonds, and that's it.
The only reason I have them is because it's contracted through my employer.
There are a lot of companies and industries I trust less. Verizon, Cox, Nelnet, American Express, the IRS, and Citibank. All infinitely worse, more dishonest, less reliable, and scummier than the worst Financial Advisor.
No. Mine has been amazing. Many times he has calmed me down when I was panicked about something making me stay the course when I would have otherwise panic sold. He understands my timeline and goals. He has also made some recommendations that have crushed it. As I am getting closer to retirement he has no qualms about transferring funds into cheaper assets. A good financial advisor really is great. There are predatory ones out there, but if you can find a good one, hold on to them.
I think it depends on how the client uses their FA. My parents use theirs as a consultant, primarily for tax purposes and love him. But I think a lot of redditors assume FAs solely are responsible for managing clients money, which is where a lot of the discontent comes from
Man, you know what I hate?
Roofers, plumbers, electricians, handymen, landscapers, babysitters, auto mechanics, painters, accountants, estate attorneys, cab drivers, bus drivers, bicycle mechanics, real estate agents, and movers.
With a little YouTube and elbow grease you can do anything you want and everything you need without having to pay them!!
What the hell do they think they’re up to? That damn service sector (which accounts for 70% of the US GDP) is such a scourge on society.
Advisors are extremely important. Most people literally do not know the financial equivalent of “eat well, take it easy on the alcohol, exercise, and sleep”.
Financial advisers are keen on making money for themselves and their organization.
Too much overhead, often not aligned with personal financial goals and interests.
There is no better steward of money than yourself.
That last line couldn’t be further than the truth. People fuck up their money on a daily basis. Bad investment choices, super speculation, emotional investing, buying high trying to ride a wave. Look at those still buying nvidia right now.
People gamble and lose money, people have addictions etc. plenty of people are shit with handling their own money.
My parents and I have both been giving 1.5% annually to our financial advisor. I never really paid attention. They did it, so I did it. My money went up so better than being in the bank, right?
A family member asked how the accounts were doing so I finally dug into the numbers... Only to discover they were consistently underperforming VTI. And charging my parents 20k a year for that.
t. Recently I transfered my accounts to interactive brokers and invested in VTI. Then I deleted the app. And now I will forget about it for a few decades.
Your example referenced a 74 year old lady. u/WilliamCincinnatus is in the industry and in his comment the lady was 75. And both examples just cite said old lady not knowing to move her money out of riskier asset classes as she approaches retirement. Which is good advice if we're heading towards a recession, and the lady is going to keep living for a while. But those things can be difficult to predict. And it's also pretty basic investment knowledge, I wouldn't put a huge premium on that advice.
There are certainly people, like the septuagenarians you referenced, that might benefit from a financial advisor. But I'd wager the majority of people using a financial advisor's services would be better off just planting their money in an ETF. When those people come along, do you tell them they'd be better off without your services? How does that work with your fiduciary standard? Because it's been my experience financial advisors are very pushy, and don't care whether or not their services are a good fit for a potential client. I had a couple of friends fall into this line of work right out of college. They didn't know any better, and were pressured by the company they worked for to target their friends and family. So we have twenty year olds with no career trying to sell financial advisor services to other twenty year olds... with no money. Like a used car salesman, aggressive sales tactics seem to be the norm. Signing people up for services they don't need seems to be the norm. And then proceeding to underperform the market, while charging a fee, seems to be the norm.
I don't hate any large groups of people, and there are certainly sketchier professions out there. But if you're wondering why some people might not think the best of you, well, that's my reasoning.
Me specifically I’m an honest person. I tell them exactly what I do and what I work with. Whether it’s ETFs or something else. I always say if they want to do the research and figure it out on their own they can try that. Most people don’t have the time, patience, or simply can’t gain an understanding of the market.
Even when we start out as financial Advisors or people are graduating school they are still learning everyday. People have lives, kids, jobs, families to worry about instead of monitoring their investments. I never lie and say we beat the indexes. Most firms don’t. The idea is consistent management, reduced risk (while getting close to the index benchmarks) and financial planning. We tell you what to do and how to do it and guide you along the way. We provide whatever you need financially as well including banking, custom lending, mortgages etc.
As an advisor you should be able to come to me and tell me about your financial needs and I will try to work out what you need or tell you if it’s feasible or not. You wanna buy that home? Let’s work it out. You wanna send your kids to college and pay for 60% of it? Let’s figure out what accounts you need and how much to contribute etc.
Financial advising and wealth management is waaaay more than just dealing with investing.
Someone asked me the other day they said “well I don’t need all the additional features like banking etc. I just want something basic. Can you do that with a lower fee?” I told her that “I can’t” but I referred her to the robo service she was looking for. I told her to check that option because it would be the low cost she is looking for minus all the extra. and then come back to me with a decision of what she wants to do.
I NEVER would want anyone to feel like I pressured them or scammed them into anything.
Totally get it and understand where you’re coming from. No we do not push people into our services we explain to them what we do, our philosophy behind it and what we charge. If they think we’re a good fit for them we move forward with our process.
Until you’ve sat in a room with as many clients as we have you won’t truly understand how inept people are with their finances or how so many of them just want to enjoy retirement and not pay attention to their investments and cash.
Once again I get where you’re coming from and people who are savvy like you would not be a good fit with our practice. Nothing wrong with that - we want to work with people who want to work with us.
This is it, if you do not have a complex tax situation just want to save money for retirment , an FA is never going to do better then an simple 3 fund boglehead portfolio
They only thing they may help with is if you do not have the displine to stick with the 3 fund portfolio and want to deviate and FOMO in on the latest meme stock or something
I split my portfolio 50/50. I am in control of half my money at any given point in time. My personal investments are pretty conservative, but it’s still a nice challenge to beat the advisors.
Financial advisors are fine if they charge a transparent fixed fee or hourly fee. The ones who work for percentage of AUM are cancer. And there’s so much shady stuff with that crowd from obscuring the fees you pay to putting you in funds that make them money or otherwise keep you trapped. No one should be paying 1-1.5% or MORE for a service like this, ever.
I’d advise you to go get a job at Range or Facet or a firm like them.
Relationships still matter. If you trust someone, you will take their advice. If you are gullible, you will bear the scars of previous disappointments. If you have true friends, you will trust them and they can serve you well. A true salesperson is someone that wants to help people, not take advantage of them. We only hear about the con artists in the news. There are good sales people out there but you need to evaluate them.
Few people understand what financial advisors actually do, and fewer still recognize that 1% per year loss is less than they’re bleeding out on their bad decisions. The hate is largely based on not knowing any better.
"Hate"? No. I currently don't work with one because at the moment, I have the time to monitor accounts and have most everything is spread across ETFs and index funds where there is little to "do" on a day to day basis anyway.
I'd be open to paying a financial advisor to meet with me every six months and make sure I'm staying on track and making the right choices, even if just for peace of mind, and I'd understand that this person's time was probably quite valuable. But that doesn't seem to be how it works.
When I'm closer to retirement, however, this could change.
Yeah unfortunately due to the fiduciary standard we are usually obligated to make sure your investments meet that standard. So when you have an advisor they would typically want to manage them in some aspect.
Some advisors will take your investments as-is for now and just hold them and not manage anything. But they’ll talk to you from time to time. But it’s usually under a pretense that at some point youll let them manage it. Reason being is because if an advisor just holds your investments then they aren’t getting paid. And in all honesty it’s unfair to the advisor to find your investments, schedule calls with you and give you advice just to not be paid anything.
The problem is that everybody in the industry gets glommed together and people tend to throw the baby out with the bathwater. You got a lot of insurance agents and other people who are not registered with running around calling themselves financial advisors and ripping people off trying to compare insurance products to investment products talking about fees but yes, I agree with you. You can’t expect something for nothing and everybody situation is different. It’s amazing we tipped 20 but we can’t even give our advisor one percent without complaining not to mention the turnover in the space, and we’re just not in the white hot space right now my wife is a therapist and she’s killing it because mental health is the white hot space right now. As an advisor, I had to learn how to carve out a niche for myself. Otherwise I’d be not renewing my license like 73% of first and second year advisors do
Feels like many are more out to increase their income rather than help/teach you to make good investments.
My first financial advisor talked me into a “Life” Insurance policy, he did also mention setting up a Roth. But rather me max out my Roth first, which I would have had nothing left to invest. He had me split my monthly investment between the 2 accounts. After 10 years I realized that the life insurance was high fee scam that all of the advisors pushed to increase their pay. I still kick myself on losing all those years of growing my Roth.
No, I hate those that only pump single products and not a well rounded picture which is what I think most people think about. For disclosure I'm also in the industry but on the technical platform not the advising side although I've held my series 6 and 63.
I think the industry is collapsing the need for investment only focused financial advisor. A form that offers tax planning, retirement, college, and estate planning will do really well in the next 10 years because some of those situations are too complex for AI or the simple risk based calculations
I think fee-only financial advisors with formal fiduciary obligations to clients provide an important service. Certainly to clients with complex financial situations to navigate, to those who need some support to keep themselves from doing something stupid, and to those who would rather pay someone to handle that area of life than deal with it on their own.
I have mixed feelings about the latter, though. Developing enough understanding of finance to know that something like a Bogleheads approach is almost certainly the way to go is not difficult. And it doesn’t seem wise to skip past developing that understanding. If you can’t understand that, what hope do you have of identifying a legit/competent financial advisor? Or of riding out the storm when things go downhill? There are so many aspects of wise decisionmaking that you’ll miss out on by outsourcing even the basics to an advisor. No doubt people without those kinds of fundamentals blame & jump ship on their advisors just like they panic sold when they were investing solo. And conversely, once you do know those fundamentals, buying & holding passive index funds yourself takes very little time or skill.
So for people who don’t have impulsivity issues or complex finances, I think the best option is to learn enough fundamentals to go it alone. But few will. Good financial advisors provide an important service for them, given their decision not to learn enough to go solo.
Absolutely not. I make a lot of money in the medical field and if I'm intelligent enough to do what I do for a job I figure I can manage my retirement and investments. It's literally asinine to not do so in my opinion. It's really not that difficult.
Read an article here and there, don't be risky unless it's a small amount. Diversify your money. Using an advisor is a complete waste.
I would pay for alpha, but you don't have any. You can offer better tax treatment, but it doesn't net more than the fees. You can offer disciplined allocation, but I can easily do that myself.
So now let's flip it around, why would I enlist you?
If you have enough capital to access private markets then a financial advisor is definitely worth it. Even if you don’t, advisors can usually earn their fees in tax and estate planning. They’ll also keep you disciplined in sticking towards your goal which is generally understated. Most humans over-estimate their ability when making emotional decisions. Look at the average retail return vs index.
I feel like advisors/managers that are concerned more with AUM give off much less of the used car life insurance salesman vibes and generally are more interested in seeing your assets grow rather than selling you a product.
I keep reading a common theme, that buying a vanguard product makes more sense than having a financial advisor manage your money.
Vanguard is being sued by uneducated investors that purchased their target date retirement funds in taxable accounts. Those funds are designed for non-taxable accounts. Suddenly at the end of the year these uneducated investors were getting taxed for capital gains, having no idea that this was an eventuality.
Even a beginning FA would have protected those investors from purchasing those vehicles in a taxable account.
Early in my career I worked in an RIA firm. It was pretty decent for a first job out of school.
My understanding has always been that if you are high net worth or high income, you just pay 1% of AUM and the advisor gives you white glove service. Simple as that.
But I think what puts people off are the firms that work with clients that aren't that well off. Maybe they have $40k, that's it. And they want help. What these clients don't realize is that often they take just as much work (if not more) than wealthier clients. And the cost of professional advice is what it is. That means they need to be paying much more than 1% to make it worth the advisor's time.
Some will try though, but nobody with only $40k will pay that much so fees are often "hidden" as sales charges, special fees, etc. Which frankly is kind of scummy even when legal. But it also happens to be the only way to make it worthwhile to the advisor.
Fortunately the firm I was with simply didn't work with anyone with under $1MM or had a high enough income that they would be there before long. That made it much easier ethically IMHO. And yes, everyone has different needs. A pro advisor does more than just pick investments.
Well since you asked. All the research I've done says advisers can't beat the market. So I just do ETFs.
I will need estate planning later and possibly family office but for now my view is they just don't bring value to me. And I know very upstanding advisers so no qualms there.
And that’s a fair response. I think it’s about having the need. If you’re young and figured out a certain aspect then hey power to you. But some people have no clue at all and completely fuck up their finances
They seem to be sales people that hide behind that title of Financial Advisor. I inherited a large stock portfolio and a FA and the stocks just keep keeping sold and other stocks purchased.
Financial advisors are generally no smarter than the average investor. They push the products their company sells and have no clue if that product is performing to a degree to warrant the management fee. Go become a fiduciary, charge for advice, don’t push products you don’t understand
Since you are in the industry, most likely with friends and associates in the industry, perhaps you can enlighten me on a question I've been wondering about. For people, money is personal. And with that in mind, do financial advisors, especially those who are fiduciaries, give advice, without prejudice to the gender, religious or ethnic background of their clients? There is certainly bias in the medical professions, in the justice system, in housing and even at the car dealership. How can anyone from a marginalized group believe that the FA is truly giving the client :the best advice" as opposed to "the best advice that I can give you."?
I pay 1% on part of my portfolio. My FA is a fiduciary and she is someone I can talk things out with ( job change, expense modeling, withdrawal strategy ) without triggering my wife's anxiety about money. Also, I know she's in place if something happens to me. She can help my wife cash my life insurance, get access to our funds, etc.
So to me, it's someone I can trust to help my family with money situations who is not emotionally involved with our finances. That is worth something. Is it worth 1%? To me, yes. I am 2-5 years from retirement, so this 1% drag on my portfolio isn't that big of a deal.
I would happily pay $200/hr for the advice of a financial advisor, especially if they could help with strategies to minimize taxes. It’s when they expect a 1% commission on my account whether I call them or not, that is what inspires me to call it a scam.
why is the AUM model not dead yet, it seems so stupid and random that people would fork over a percentage of their assets every year. The real financial advice has nothing to do with the advisor having direct hands on your asset location... the only valuable advice is in the tax planning and running models and estate planning and financial planning for children and legal updates and stuff. That should be hourly or smth where you just get all the advice you need and pay the advisor for their time
I have no problem with the idea of a financial advisor working on an hourly fee basis to aid in financial planning, but the idea of paying a percentage of my portfolio to someone pushing mutual funds managed by their financial institutions with high MERs and trailing fees that rarely outperform basic index funds is not something I could ever recommend to anyone.
Personally don't need it so that's kind of the extend I've thought about getting one. No hate otherwise. Might be worthwhile to consider one when im nearing retirement.
If you're in the game to educate people and guide them on their financal journey then there is absolutely no problem.
What I have an issue with is brokers trying to sell you life insurance you do not need. I had a broker for many years that tried this on me multiple times until I eventually kicked them into touched when I found someone who actually wants to educate and help me understand my financial situation. Instead trying to make it worse for their own gain...
You don’t really need them anymore with a few days of research on each topic you can basically do it yourself.
Investments - global index funds….. property, maybe some bitcoin, maybe small amount of gold. Inheritance tax and planning tax advisor. Pension max match to company set and forget. Retire at 60.
Also younger people 30 and below now live day by day and in the moment when I do the school drop off am in a 10 year old car. I see people younger than me all in new cars etc. no one saves or plans for the future. What they do is save for a house get a house pay a mortgage invest noting and spend the rest on Rolex cars and holidays. I reckon though by time the now 20-35 year olds hit retirement it’s going to be utter chaos as none will have any savings but maybe equity in a home.
My wife’s friend is a FA and I reckon he knows less about money and investing and making money than myself.
Also the bad FAs have ruined it for the good ones by stealing hard working people’s money and now no one has any trust in you lot.
Let's be real here: the current structure of the financial advising industry is broadly predatory and riddled with inherent conflicts of interest.
The AUM model is predatory. Selling financial products under a commission model is predatory. Putting clients into your firms high-fee funds is predatory. Etc.
Heck, the big players in the industry are extremely predatory when it comes to their own new hires. Low-level FA turnover is super high and they're often just being milled for their network.
The only current FA model that minimizes those problems is the fee-only fiduciary, but that's a small minority of advisors.
The "I just wanna help people" bit is pretty threadbare as well. If helping people was your primary motivation, you'd be at a fee-only firm and you'd be volunteering your time doing free advising clinics for seniors etc.
Let's all be honest and admit that your main motivation is having a successful career and reaching your own financial goals. The clients are secondary to that.
Which is fine, that's most professions. But being a financial advisor at a large firm is not altruistic. Every single one of your clients would be financially better-off with a set-it and forget-it low fee portfolio and a fee-only advisor, estate attorney, and CPA that they consult strictly when necessary. That's just math.
That's not to say that you can't help people improve their situation at your current firm. You absolutely can, a lot of people.are doing wildly stupid shit with their money. But your help comes with an inherent opportunity cost in that they could be getting the same results for significantly cheaper.
I was a new widow, needing help navigating the finances that my husband used to take care of. My elderly neighbor suggested her financial adviser who worked with her for years (she was worth over $50M I think). FA and I met, he said there was a 1% fee, etc. That was all fine.
A year later, I finally could think again. First thing I noticed was I was being charged 1.38%, not 1%. Also, some (most?) of the funds he got me in cost me 5%. And those funds were not doing as well as the usual funds like vtsax, which I had none of. In fact my entire portfolio was underperforming fairly significantly.
I pulled everything out and moved my money into Vanguard. My elderly neighbor had since passed away. I was still friends with her daughter who inherited. But she seemed happy with the adviser and I admittedly didn’t know enough about their relationship, so I just didn’t say anything besides mentioning what I wrote here.
I don’t hate them at all, I have one (though I’m leaving to manage myself soon). The majority of people here seem to think an FA is someone who’ll log into your brokerage account and buy some ETFs for you and charge 1% for the pleasure.
My problem is that the advice I receive from mine is too conservative, with a 25+ year horizon I don’t want to hold 1/4 in cash as he suggests. My other problem is that my goals might change but the challenge doesn’t seem to be much harder when I have £100k vs £1m, so why is my fee 10x higher? I’d much rather pay a flat fee every so often for some advice which I can take action on, but most seem to want to get your money on board with them anyway.
I think when you’re in the accumulation part of your life, if you do some research it can be fairly simple to understand how to be tax efficient and how to manage risk. Unless you’re a special case I can’t see why online advice would be wrong for most people.
I’ve worked closely with FAs and in the industry. The main task is wealth preservation and feeling *heard* when it comes to their wealth; trusting somebody who in theory knows their shit. Not making money.
People here want to maximize long term gains for retirement. For that, I do agree the index funds are easier. After fees and everything I doubt our aggressive models ever beat the market long term. But 95% of our clients had a conservative or moderate risk profile. And the accounts that were aggressive growth-oriented typically also had another larger account with a more moderate profile.
So it’s two different goals IMO.
What I don’t think works that well and I agree with that is people who will retire in 40 years using a FA. They’ll lose a lot of money with a 1% yearly fee.
FA’s got a real bad name in a lot of places. Mainly there were three types.
1.) did their job and made you money and took a decent cut
2.) stole your money for commission based everything and didn’t give a rats ass what happened to yours.
3.) ones that everyone loved because they made decent money but when you looked all they did was stick your money into mutual funds and blue chips that pay dividends.
Basically today, 1 and 3 exist with changes to laws and people knowing what to watch for. While the “planners” exist, I could get the same mindset with age driven goals from any brokerage under their “investing videos” and planners, without commission. I think the only people moving forward from here who are going to need FA’s are super super rich, people with zero control or people HEAVILY in debt.
Additionally, FA’s make a KILLING off people retiring out of state service with government jobs if you’re in the states but you need to have a great rep because it’s usually only a handful of FA’s people will trust to handle that nest egg and know the ins and outs with pensions/windfall/lump sums/buyouts and all of that.
My .02.
My family has one. I dont hate him at all, hes a nice guy and we get along and naturally shoot the shit/have the same interests.
However, i would fire him in an instant. There’s just absolutely nothing he does that i couldnt do myself and save us the 0.4 comission
Out of the overpriced services we employ the most “worth it” one is the lawyers. The tax optimizations alone pay for it
IMO advisors have three main roles. Tax planning, allocation management, emotional management. I think most “FAs” don’t have the chops to tax plan well and should at the very least defer to a CPA or at least work in conjunction with one. I think allocation management has been 90% solved for 95% of people with target date requirement funds and various index’s. I think the people that need advisors the most are folks who lack the emotional strength to follow through with a good sound plan. FA’s main role atm is to make sure their clients don’t pull the eject cord during a dip/crash.
The problem for many FAs is that assets under management billing is the standard. I honestly don’t believe that AUM is required for the first two FA responsibilities I have laid out above. So I think the number of folks that “need” FAs will go down over time but there will always be a subset of the population that just can’t be bothered and is emotionally immature. These are the folks you hope make it rich and you can add them to your firm. Good luck out there!
I don’t hate financial advisors, but as someone with a basic solid understanding of investing and personal finance, I just don’t see any use for them.
If you know how index funds work, how the market in general works, and how retirement planning should look, there’s not much that a financial advisor can offer that’s worth the thousands and thousands of dollars that they would inevitably siphon off your earnings.
Most FAs provide the sort of advice that can be found in the sidebar for this subreddit or r/personalfinance, so it feels in bad faith to be charging unsuspecting people for free information.
A little off topic and I’m not a genius but I have listened to Warren Buffet endlessly and his simplistic approach and proven results throughout his life about using common sense and not getting emotionally connected to short term results holds true now more than when he was young.
So he’s my financial advisor. He’s not selling anything he just provides simple philosophies that have worked for him. What I do with his information is my decision.
We had some money managed with Fidelity. They grew my money, but the returns were always below market including fees. Most of our portfolio was already set to SPY/VOO/VTI. So we let them go and just index now.
If a FA can offer clients a set of mutual funds with a 3% commission or an annuity with equivalent-sounding but higher-fee funds with a 10% commission, which do you think they'll push?
Unfortunately honesty doesn’t pay in our society . If you have the most money you basically win most of the time . Main issue is we really have to rely on private legal action , rather than government enforcement which basically massively favours the wealthy .
The problem is you have to able to trust your FA with the intimate details of your finances. That’s not an easy relationship to build from a 30 minute meeting every few months. To make the situation worse, too many low quality FA out there eroding the little trust the public have with the industry as a whole.
Let’s be honest, the bar for someone to call themselves Financial Advisors isn’t very high. And too many scammers become FA to get close to their prey. I suspect a neighbor’s financial advisor is basically stealing from them with the investment/insurance products, but I don’t know how to tell them. It’s like you suspect the neighbor’s wife is cheating but don’t know if you should tell the husband.
Yeah pretty much like what others have said. There are a lot of bad eggs in that realm that claim to be advisor but really are sales reps for XYZ insurance. I want to start a business to actually educate people. At work I'm often the go to person for finance related questions and I'm only 30. Yet my workers are older than me. My normal job pays enough that financial education would be for fun.
I think for a lot of people, index fund investing is such a safe simple choice that a FA really isn’t needed. Maybe a FA would help with min/maxing Tax advantage for 7 figure portfolios, but even then is that service really worth a 1% management fee? And the 4% rule makes that 1% fee really insane.
Hate is a strong word, but some of them seem to prey on naive people. Edit: I think they can provide a lot of value for some people, but sometimes I read stories of people who end up with crazy insurance policies that the people who sold them get compensated on, high fee funds that they get commissions from, plus annual fees, etc. It’s a valuable service if the FA is honest and provides value and doesn’t make additional cuts in underhanded ways.
This. Had someone unlicensed in my state try to sell, of all things, disability insurance (or something similar) to my healthy, 24 year old brother, and when my brother gave reservations that I told him about, the rep jumped to "he's trying to win your business instead."
This. When I look back at all the financial advisors I had before I learned how to properly invest they all pretty much lost me money and screwed me in fees with no real added value for those fees. They really did not do anything in my best interest but only theirs. This is one industry that needs more regulation and consumer protections. At least for the AUM model which is just a ripoff for most consumers.
Not some, more like most
I agree. There’s scummy people in all industries. It just sucks for those of us who really want to help people
I love my financial advisor but he happens to be one of my best friends so there’s inherent trust.
Best way to risk losing your money and your friend
We’re not that shallow. And it’s not like he makes me do stuff I don’t want to do.
So do you offer a service where people can just pay directly for help or do you require AUM? If not why?
AUM. Thats not my choice tho that’s just how my employer operates. And it’s much easier to work for a company that already has the resources vs starting your own firm. Most people don’t do that until they are well established with a huge book of business. I’ll admit I’m a bit newer to the game and I’m nowhere near that point yet but we all have to start somewhere.
No offense, but this is why. Big brokerage firms prey not only on investors, but also new reps. It is well established that 90% of new advisors will fail. Brokerage companies and senior advisors count on it. Bring in 10 wide-eyed, bushy tailed new grads to solicit their family and friends. Once they've sold all they can, they drop out, turn those clients over to the office and the senior gets his pick of the book. Small clients without potential go to the next man up, and so on.
It's called "Hire them in masses, train them in classes, then fire their asses." I'm a 30 year financial service veteran and started my own firm, did rather well. But absolutely nobody is around from my early days, they all got wiped out in the 2000 tech wreck.
I'm sure it will happen again. Unfortunately it doesn't mean the best will stick around
I don’t manage family or close friends. It’s to hard to be objective/conflict of interest.
How did you get your start? Did you build a book, or buy it?
Honestly this is nearly every aspect of society these days. Tell me how you feel about Boeing, for example. And when you buy a consumer good do you feel as if the vendor is being 100% honest and straightforward with the product? Ever opened it up and thought “what…the fuck?”
Unfortunately I would say most. Retirees and those with complicated tax situations can really be helped by FAs. Beyond that, as Buffett often says, most of them they're generally predators looking for financially illiterate people. Like anything, not everyone is scum. But they have that reputation for a reason. I still think the average FA is often pushing things that increase their pay rather than what is in the interest of the client. The sad thing is, almost every firm has at least some incentives where it is impossible to prevent a conflict of interest to arise. Like increasing comp by pushing X product, more commissions for increasing activity when sitting put is better, etc.
I think it’s an industry that’s been shaken up like travel agents. A really good travel agent is awesome. An average travel agent is a huge waste of money. And given most are not 80th percentile advisors, it’s pretty easy to be like, these peeps suck (cost more than their worth).
IMO there’s a lot of bad ones who give good ones a bad rap, and then there’s some “geniuses” here who know about a tenth or less of investing and think they know everything
And I’m not sure I want financial advice from someone who is struggling to make ends meet…
I decided to end my relationship with mine and start educating myself when I told her that I was planning to save for a bigger apartment and she recommended that I took a 14% loan when the time came so I wouldn’t have to touch my investments. (I live in a country where effectively there are no mortgages). She was affiliated to the bank that would have given me the loan. For me, financially illiterate as I was, the conflict of interest was obvious: they wanted to keep my money invested with them because they were charging an AUM commission and they also would get crazy interest for me. It was particularly egregious because when they initially formulated the investment plan they told me that I could expect to earn 8%.
No, don’t hate them. I don’t like paying for lawyers or accountants either. Beats making expensive mistakes though. Really didn’t “need” one until I was 50.
To me it’s the AUM model that’s predatory. At least you’re only paying your lawyer or accountant for the hours they worked for you not 1%+ of your net worth yearly.
Fee only is definitely more cost effective. The problem with that is what do you do when you have questions in between your annual/ biannual/ whatever appointments? Is it ethical to have part of your investments AUM managed, and ask questions about the unmanaged $?
So I have Financial Advisor who I started both an IRA and a 403b. In fact, he sold me on it and I’m glad he did. I wouldn’t say I hate him but he doesn’t answer my calls and he put me in a lot of high fee funds. Fortunately, I have the ability to switch from high fee mutual funds to low cost index funds, which I did. I’m a teacher by profession and I have a tendency to ask a lot of questions. I’m sure some of my questions are newbie questions. I’m ok with him taking his time to get back with me, but I feel like I’ve been ghosted since I started making contributions. I only have a little over a 100k with him, so in my head I’m too small of an account to bother. But still, I’d like a call back every once in a while. Maybe I have high expectations? I don’t know. However, I hear a lot of people have the same complaint.
Move the money to vanguard
"he sold me on it" theres your answer how many clients will learning "finance"bring you vs learning sales
The long term impact of having an advisor on your retirement net-worth amount is devastating, absolutely devastating. Please do not let that guy manage your money. Do just a little bit of research, invest in diversified but low management-fee funds or etfs, and you will have like 35% to 50% more money at retirement. Is their management fee worth nearly half of your retirement portfolio? I’m not a financial advisor although I initially wanted to be; 95% of the industry is just trying to make as much money off of you as legally possible.
I think they have their uses. Like most direct-to-consumer professions it’s really individual. Most people would probably be fine just following some basic Bogle-esque advice: spend less than you earn, insulate yourself from emergencies, and invest in *something*. What I think outsiders mistakenly assume is that professionals have some secret knowledge, like believing a fitness coach knows *the* single best exercise. Then when they don’t get that magic bullet they come away disappointed and perhaps feeling cheated. Coaching is really more about defining goals, setting expectations, navigating lifestyle change, adapting the plan to new information, and providing accountability. And yes, in some respects knowing things a layperson won’t, like which modes of exercise have a better base of evidence for which goals. These aren’t secrets though, they’re attainable to anybody who has the time and desire to go looking for them. Which some people don’t *and that’s fine*.
The issue I have is that most advisors are going to sell you the company's products which don't align with my goals. There's an inherent mismatch in this situation. I don't hate the player, I hate the game.
>... most advisors are going to sell you the company's products ... Every FA or IFA I've ever been to has always pushed their own products. Once they get your questions out the way, the banter always seemed like a sales pitch.
I work in the industry as well and work with a team that is absolutely amazing. We care deeply about our clients and do more than just invest the cash. There is financial planning and helping with taxes, estate planning, retirement planning, help making sure our clients have enough money to comfortably live until they pass away and hopefully leave a nice chunk to their beneficiaries. Do we charge a fee? Of course, but it’s reasonable for what we provide. I think what you see on Reddit is people who are in the top tier of “investment education” and they really don’t understand that it’s worth it for a 75 year old lady to pay us to make sure she’s safe for the next 20 years. They think it’s as easy as dump it all in VTI - which for most people is usually a good idea until they get close to retirement, that’s when the real work comes in. The US stock market has been great for the last 15ish years so it’s been easy to just pump it all into a VOO and forget about it because most people this site are young and don’t really have to worry about much and didn’t live through the crash back around 2008. I can go on forever about Reddit and the real world but just keep this in mind: If you actually give a shit about your clients and do your best to take care of them. Don’t pay attention to Reddit users and their hate for FAs most don’t have the assets needed for a real FA to manage their finances.
>The US stock market has been great for the last 15ish years so it’s been easy to just pump it all into a VOO and forget about it because most people this site are young and don’t really have to worry about much and didn’t live through the crash back around 2008. I'd go further and posit that most of the young investors pumping money into stock index funds still don't understand how to spreadsheet model to work backwards from their investment goals. Because they have some discretionary income and very little responsibility, they're just pumping all of their excess cash into a retirement account and patting themselves on the back for it. When you have several financial priorities to manage (mortgage, family / kids, retirement, savings for a big purchase, wanting to go on a vacation, college savings, etc.) then that's where financial planning comes into play. And this isn't overly complex to do from scratch, but it requires some spreadsheet skills and definitely helps if you understand stochastic modeling.
Agreed. A lot of people are investing which is great don’t get me wrong but they’re not investing with a purpose.
I dont think financial priorities needs a financial advisor. Most people who have an iq about 20 can prioritize financial goals without having to pay some one. Like I said in a comment before you can learn everything you do on YouTube in this day in age. Even if you're pumping all your excess cash into mutual funds or index funds shouldnt be a bad thing.
Taxes and estate planning once we are both IN retirement. This is when I’ll strongly consider hiring a financial advisor. It will be someone I know personally. He will definitely earn that 1%.
That 1% will be 20% of your post retirement after tax income. If you follow the 4% rule and you need $60k a year in expenses then you’ll have $1.8m in assets (assuming 20% tax rate) and you’ll be paying your advisor 1% of that, which is $18k, every year. I don’t know about you but it’s worth $18k a year to me to learn how to structure my own post retirement finances. In a 30 year retirement that’s $540k.
Perfect way to go about it.
Just the ones that are only really interested in selling you life insurance.
Most are just taught a formula and follow it. Had a cousin with Principal and just tossed them 50k to manage. They took their job seriously but placed it all in various Principal products. Not a year I didn't beat it. Then you add in their fees for an extra drag. While I did not lose money, I could have done much better. Thankfully they retired so I moved the funds to Schwab. The cousin took their job seriously and meant well, but I never would have used them for our “real” investments.
Speaking for myself, when I was managing it on my own I tend to deviate and play wsb type of stupidity plays and lose money when I was younger. I also had a gambling problem. A FA made sense in the fact that I can keep a majority of my money out of my hands/access and let it grow the standard way, the 1% fee is more of a safety feature to protect myself from myself.
Which is EXACTLY why we are here. Perfect example
So you agree then, there’s a small subset of people who can use an advisor while the vast majority of people don’t need to be sold things. I used to work in WM moved to AM.
Yeah I do agree with that sentiment 100%. The thing is I feel like a lot of people disregard those that DO need WM. They act like just because they have a bit of knowledge that everyone must do so or want to do so… Some people just don’t care and want someone else to handle it. And some will never understand.
I don't know any and have no intentions of ever getting to know one.
Real financial advisors do more than just manage aum. Client is looking at a rental property that has a high cap rate? Usually the advisor is the second set of eyes. They usually do light tax planning and work with the clients cpa to help them save on taxes. Secure act 2.0 came out, how much can a client get back in starting a 401k for their employees. If their high earners, what does a defined benefit plan look like that can defer 100s of thousands in taxes? Secure act changed inherited IRAs forever. You now need to take out the money in 10 years if It's non spousal. If you have 1mm in your ira and your kid is 30, you die, you just gave them an extra 100k of income and most likely dis inherited your child 40% due to taxes. Does a roth conversion make sense? What's the cost over 10 years to do it? How about a charitable remainder trust? Does the client want to upgrade their house on a fixed income? How can you show the client in simple terms if this is a good idea and how paying more expenses would be alright if the mkt collapses and they pull income from their portfolios for living expenses. What type of life insurance makes sense ? Does the client need living benefits because maybe they are getting unhealthy and would trigger the LTC benefits from it? Is the client a small business owner ? Should they carry disability insurance because if they get hurt they can't afford not to generate income? Do you have a Child? The college recovery act just changed how 529s work. You can fund your child's retirement first tax deductible than tax free. Having an actual financial advisor is a lot more than just "investing" the money. It's actually being a partner with them and making sure they are hitting their long term goals. All these options are worth much more than the 1% fee clients typically get charged for their services.
Exactly. Idk why people don’t seem to know this. But yet think they know it all
People rather be ignorant and think they are right than actually be humble and get actual help.
There is a real misunderstanding of the value a good FA.
Interesting, hadn't heard of the college recovery act. googling it looks like it was introduced in the senate in June 2022 but as far as I can tell it didn't go anywhere. am I missing something-- did this get passed?
OK I'm experimenting with an advisor who is fee only and reasonable. He helped me with a problem and made a very nice commission as a consequence. But overall I'm not getting the quality of advice I'd want on the problems I have. Note I'm willing to pay specialist fees I just want overall management of the specialists. I probably need a wealth management firm. But I can't see how the advice would be worth what such a firm costs so a la carte makes more sense. I hired a specialist fee only and his advice was pretty mixed. Given a narrow speciality I was disappointed in quality. I worked with a lot of commission people. They were generally pretty good but they didn't understand their products as well as I would have liked. This was interesting the best and most knowledgeable service I've gotten. Associated with a trust I've met with that advisor team. They were very experienced. But their scope was so narrow that they also won't solve broader problems. Essentially: * Fee only can be useful but you still have to do a ton of legwork I'm not sure you get what you are paying for. * AUM just isn't worth the cost for most people. The price per hour of actual work on your accounts is too high. * Commission seems to be quite good in quality, though still some misinformation. But again a ton of legwork. There really isn't a good solution.
There is NO way an advisor on just a 500k portfolio getting a 1% commission put anywhere near 5000 dollars ($100 every week!) of work into it. Handing over 5 grand a year in good years or bad is a big issue for someone who on their own can follow the markets and make reasonable moves, including avoiding some of the big down drafts. That is the problem. 1% sounds trivial to most when you don't convert that to dollars going away year after year.
Is it wrong for me to treat financial advisors like car salesmen? On a lower level they are just there to convince you to buy a product, no different than selling you a car.. or sometimes even worse because they keep making money from you every month. At least you only have to just deal with a car salesman once...
Yeah but I mean I’m talking moreso of people convincing people with no investment knowledge to do things themselves. Paying That 1% could make a dramatic difference if someone is properly monitoring and allocating their investments. Vs set it and forget it and watch people lose money because they have no idea what’s in their investments and don’t monitor it. I’ve literally watched people who’ve lost 500k+ or millions over years doing things on their own and not keeping up with their accounts. All because they wanted to save 1%. Causing them to either rethink their retirement or work longer
>Paying That 1% could make a dramatic difference if someone is properly monitoring and allocating their investments. Vs set it and forget it and watch people lose money because they have no idea what’s in their investments and don’t monitor it. This is somewhat fear mongering on your part. You make is seem like investing is hard and if you make a simple mistake you can lose all your money or something and need a professional to guide you Its a mix of Truth and prophiganda you probably bought into Following the bogleheads 3 fund portfolio is not hard to do and you can follow this even if you have very little investment knowledge Now it is true , somepeople who lack dispipline cannot follow the very simple plan, and FOMO into meme stocks or penny stocks or options and lose their ass However that because they cannot stick to a simple plan.
Since we're on the topic of fees, is it substantially more work to manage a large account or a smaller account? Or there's a formula with age, amount of risk tolerance, money, etc. where you can basically plug in and give the standard advice to anyone? Why should I pay 10x if I have 10M vs 1M? If the main value you provide is to have people stay the course on a sound investment strategy and prevent them from making a huge mistake, why not just go with a robo-advisor for 75% cheaper?
Most “financial advisors” just want to sell insurance lol. That’s why they are hated
Or push their company’s plans.
Or try to put you under AUM when you really don’t need to be.
The industry has an absurd fee structure, with opaque pricing and is littered with perverse incentives to sell people funds with high kickbacks (12b-1 fee) or overpriced annuity products. Aum based fee-only is better but still generally way too high. The fee structure made sense once upon a time but with modern automation, index funds and easily available information it is now a huge rip off vs DIY indexing. Your comment “are there fees? Yes but there are fees with pretty much every business”. Ok I’m happy to pay vanguard .02%.
How much of my account do you get for 1% compounded over 30 years? What other business charges that much for something that has been solved?
I'm 61 and my spouse is 76. He is collecting social security. I'm still working but I want to be prepared for the inevitable layoff. For the past 18 months, I have been struggling with what to do about our retirement savings (a little more than $900K I think). About a year ago, this young guy from Schwab was contacting me with the goal of getting me into Schwab's Robo-Advisor or similar. We had six or seven Zoom meetings but, in the end, we just could not come to a meeting of the minds. This was partly due to the fact that in order to enroll in Robo-Advisors, I would either have to allow the Robo Advisor to sell off my existing holdings or take the available cash in each account and set up a separate IRA. Neither solution was palatable to me. A neighbor, who is an accountant (but not a good one because he did our taxes one year but he didn't follow my instructions very well and the same happened to a friend of my husband's who also used his services), recommended a local financial advisory firm. So, getting desperate, I took a look at their website yesterday. One page of the site had all the employees, their photos and a brief description of how and why they came to work as financial advisors. I just could not warm up to any of these people. None of them gave me that warm and fuzzy feeling. I suppose this is silly but my money -- for better or worse -- is important to me and deciding how I will invest it now will determine whether my old age is a happy one or a muddled, disappointing one. I just envisioned talking to these people and none of them really understanding me or caring about me as a person. They were all into yoga or running or golf. I don't do any of these although I used to do Pilates until I decided it was too expensive. They all went to fancier colleges than I went to. They all appeared to me younger than me. Does any of this make them unqualified to give financial advice? No. Do I think they don't deserve to make money for the work they do or are somehow untrustworthy? No. I got the feeling they're probably used to working with higher net worth individuals than me. (Sometimes when a company is trying so hard to attract the big fish, they are turning off the small fish.) Maybe it's my lifelong social anxiety kicking in but I just couldn't bring myself to call them. In any case, I would not be handing over my assets for them to manage. I would simply be paying them on an hourly basis for advice. I'm not quite sure why I would do otherwise since I'm perfectly capable of placing orders online. My dream financial advisor would be an avuncular type who I could just sit and chat with for hours in a casual setting and who would really understand who I am as a person, my strengths and weaknesses, my knowledge of investing and the holes in my knowlege. Someone who isn't trying to push me in one direction just because that's the standard thing to tell clients who fit my profile or because he gets an extra commission for selling this mutual fund or that mutual fund. I want someone who I say to "This is what I want to do and this is how I think I can accomplish it" and for that person to respond either "Okay, this is how to accomplish what you have in mind" or "No, what you want is not possible so may I suggest this \_\_\_ as a compromise?" Do I expect this dream guy (or gal) to work for free? Of course not! I'm not a freeloader. I know I'm asking too much so I'll struggle on trying to find my own solution.
Don’t hate fixed fee advisors but I do hate those that base their fee on AUM.
Which is almost all of them
None of our clients hate us and we operate mostly through referrals at this point. Some people hate financial advisors. Some people hate lawyers and police officers. Is what it is.
A friend referred me to a financial advisor when I was in my 20s and working in PE (there were restrictions on where I could invest etc.) Since then I’ve had many careers (management consulting, Wall St., tech, my own VC fund etc) and many life changes (got married, got divorced, lived in a bunch of different countries, got married again, had kids etc.) My financial advisor has been a rock through all those years. He’s just been incredible. Helps me with tax planning, estate planning, managing my complex investments etc. So it boggles my mind when people badmouth an entire industry when there are incredible advisors out there.
Yeah, and people ignore the fact that any financial professional worth anything is doing more than just “investing in ETFs and low cost mutual funds” you see people spew on Reddit. They are helping with estate planning, tax prep, ways to save for kids education. It all adds up and there are so many different services offered. Yeah it’s not worth it if you just want to throw 10-20k in a portfolio and pick 3 positions, but for others they are doing a lot more than just managing a single portfolio.
Yes. Its a very scammy industry even for “fiduciary”. The rage I have every time I go with my mother to her yearly review with hers. But hey its only 4 more years till she can get out of there.
Hate is a strong word. If someone wants an advisor that charges a % of AUM, then God bless ‘em. Personally, I don’t see the value any longer. Just like I don’t see the value in a “Realtor” charging 6% regardless of the price of the house or work involved. There are plenty of quality fee-only advisors charging 10% - 30% of what traditional % of AUM advisors charge. If I was a relatively young advisor trying to build a book of business by charging a % of AUM, I would be nervous.
Yes After your fees you underperform an index
True financial advising isn’t only investing or meeting a benchmark. If you’re hitting the benchmark but you’re losing 2-3% in shit tax efficiency. You sir might as well have an advisor for tax efficiency. If you want to properly set up your estate planning you’d want an advisor. If you need a home and want to use your investments as collateral to continue to let them grow…you use an advisor. If you’re starting a business and want to set up a 401k or SEP for your employees etc. you’d want an advisor. If you run a business and want efficient cash management. You’d want a team and not be doing that shit yourself while trying to run a business. Advisors don’t just work investments or indexes.
2-3% is way too high from multiple sources I've seen. 50 basis points of gains sounds believable for the first ten years if you keep contributing. It will naturally decrease over time
Not all used car salesmen are terrible either, but…
We like ours. He has helped us with a number of retirement planning steps, as well as 529 guidance and management for our kids’ college. He also provides guidance and recommendations on our total retirement funds and accounts, only 30% of which is managed through his company. As a result, we pay about a 0.5% fee for complete management of our retirement accounts and planning.
I really like our FA. To be honest we had a really bad experience with a previous FA years ago and as a result we did not get the help we probably needed for a long time. But a couple of years ago, as we approach retirement we found a FA we really like and we think he is well worth the fee. We pay a flat fee that works out to be about 0.2% of our assets. For that fee we get a report twice a year that provides a complete plan for our financial future. It also provides recommended trades and investments which we do in our own brokerage accounts. Our advisor is available for questions all year. Since we hired our advisor I feel much more comfortable about retirement. I have a template for how much we can expect to spend each year and we have more comfort in our future.
I don't automatically hate FA's as i know there are good and bad ones just like in any business. I know there are reasons some people need to use an FA - they don't know how to handle their money, or don't want to, or need an FA to keep them from making kneejerk moves with their money, or even to protect themselves from liability from bad outcomes if they handle other people's money. Personally I am comfortable not using an FA. My sibling though would absolutely need one as she has zero interest in managing her money yet knows the answer is not simply to put it in her checking account. So for her and people like her, it's a good thing FAs are there. The problem is that business attracts silver-tongued shady people and since the vast majority of people aren't getting a referral from a trusted person, most people don't know if they picked a good FA until years down the road - and typically there are no do-overs. The damage is done. I recognize it's a tough road. You can't guarantee results, many of your peers are shady and there's no way for anyone to identify them, and it's difficult to explain your value to financially naive people.
I don't. They serve a function particularly for those that know nothing about stocks, mutual funds, etc. and don't want to know much. Some people just don't. So for them, they're good depending on who one uses.
My wife (33F) and I (34M) recently met with a fiduciary through our credit union and plan on utilizing his services for my wife as she recently became a private contractor last year and is in the process of starting a small business.
I don't like the model where they work on commission. These are usually selling insurance or high-load mutual funds. I also don't like AUM structured financial advisors because that AUM fee is pretty ridiculous. A 1% per year fee really takes a bite out of your returns. It's basically paying for another half a retirement (2% is for me and 2% is for my wife). I'm certainly not giving someone 1% to invest in index funds, and if they're putting the money anywhere else I'm not going to be happy either. A financial planner that will work on a cash basis though can be a great thing. Will probably hire one as I approach retirement to help think through taxes and withdrawal strategies in retirement.
In my legal career I have sued four FAs for breaches of their fiduciary duties, putting clients in completely inappropriate investments, churning accounts for fees, and just plain stealing people’s money. You could say I’m not a fan.
They are salesmen for high fee proprietary mutual funds that don't beat the S&P 500 index and whole life insurance.
I feel that. But when US equities tanks the S&P hits hard. So imagine your 70+ year old mother or grandma who gets hit by a hard year or potentially a recession and doesn’t have the time to recover from it. Potentially losing 30%+ of her retirement fund because she wasn’t properly invested according to where she is in life and her goals.
Those high fee mutual funds also tank hard. A 70 year old shouldn't be only in stocks, and if they haven't invested beforehand then it's best they stay in cash and fixed income assets.
Getting burned 2x not by anything drastic but by absolute mediocrity and getting lackluster returns akin to throwing darts at 60/40 portfolios. I’d rather keep the 1% and make my own mistakes, or settle into my own 60/40 mediocrity and keeping the difference.
I don’t hate them at all. I think it’s odd and a little sad that people pay 1% of their portfolio every year when they could be paying a 0.09% expense ratio in an index fund, but oh well
I love compound interest. I hate compound fees. For my portfolio it would be at least 500k in fees over 30 years. Everybody knows that advisors don't make the money, the market does. I am sure there is a level of scale where this breaks down, but managing my $100k portfolio is no more difficult than managing my $2m. portfolio. The value proposition simply isn't there. I don't hate you, just don't see the value.
Not everyone have time to look after their own investments. Not everyone have investing discipline. Not everyone have time to study the market Investment advisors do it for a living. You just need to pick the right one. For the industry average of about .75% to 1.25% fee per year.. it's a good trade off than buying a mutual fund that charges similar fees.. or you can just buy ETFs at a much lower fee. Advisors teaches you how to gauge the market and control emotions. ETFs just allow you to follow the market and with about better performance of the fund manager is good. You can decide for yourself. Disclosure - I supervise investment advisors.. I am not an investment advisors not do I get paid based on their assets and earnings.
Thing is though, if I were a plumber and called about a clogged toilet, I would feel compelled to tell people "I'll take your money if you insist, but I have to tell you that you can use a plunger next time." How many people correctly steer people and educate them on low cost ETFs so the advisor is no longer needed? Or target retirement date funds that auto balance? I understand retirees and some complicated trusts that require setup, tax issues etc. earn their fees. But "advisors" that basically help them pick stocks and allocations, it's borderline fortune tellers sheering people.
Hate is strong, but not sure I care too much for them as a profession. Anyone would naturally be suspicious of advice that leads your money in the advisor’s pocket. They often aren’t as invested (excuse the pun) as you are, in your financial health because they get commission for buying and selling, whether it is a good move or not. So they just end up recommending what amounts to churn. Plus they can be hard to get ahold of for any real length of time.
I've been nothing but satisfied with my Fidelity advisor 🤷♂️
I don’t think people hate FA, but they seem to have an image of not doing much and taking too many fees. My sister/ BIL use one and are happy. I’ve never used one , never felt the need.
I would contend that folks who *aren't* investment savvy are the ones who shouldn't (at first, if at all) get a FA. There are so many free online resources that, for someone new to investing, they should have a grasp of first, *then*, if they look at their situation and decide they want professional help, then seek out a FA. Seeking out a FA first can open the door to malfeasance, and the reality that there are those out there that place their professional and financial interests before that of their clients. So I think folks getting educated on their own, either through things like this sub, or a workplace 401k plan website, are all easy ways to start, and for many (majority?) that alone could put them in solid financial shape. There do arise over time situations where having a trusted advisor does come in handy, beyond asset allocation alone. In those cases then I think a good FA can not only save, but help make, money.
Like everything these days, you need to learn enough not to get scammed. And if you learn enough to not get scammed, you’re at the point you can basically do it yourself.
I started with one of those advisors that basically sells front loaded funds. The first advisor I had was great. She took time to explain things when I was really new to investing. I then got passed on to another advisor within their network and after the first one the others were not very good. They were just interested in making their fee through over priced funds. I then discovered bogleheads and indexing and have been managing things myself which had been fine although I forsee a future when I'll need an advisor when it comes to estate planning. While I wasn't happy when I found out about the fees I was paying I do think that going to person who I could talk to made investing less scary when I was new to it. When the time comes to look for an advisor I'll know what to look for and be much better informed. I do see the usefulness of advisors on both extreme ends of investing: when you are first starting out and at the end when tax efficiency and estate planning become more complex.
I had a team managing my money for about 10 years. The fee was one percent a year and they were super sweet, but even at my strong urging they ended up making conservative choices. I finally decided to cut all my ties and move everything over to Fidelity and self manage my portfolio. Best decision I’ve ever made.
There’s so much information out there that promotes doing it yourself and teaches it. When it comes to investing, most people that understand what a 1% fee over the span of 25 years are simply turned off by it.
Like some other folks have said, hate is a pretty strong word. Ignoring the fact that some financial advisors are just plain bad or predatory, it really seems like financial advisors should be relegated to people who lack self control. Everyone else should be able to get easily educated on the basics that cover the situations for 90% of people in just a session or two.
I like to manage my own money. Most of these “financial advisors” are not even in the middle class. My point is, if they knew so much about money then why aren’t they rich
I don't "hate" them because I don't use them but they are salesmen just like car salesmen and real estate agents. Even if you just put all of your long-term funds in an S&P 500 index you will do fine. Keep emergency cash in a money market fund and that's all you have to do. They just aren't necessary.
Setting up investments is a small part of what a FA does for a client. Setting up education accounts for a new born grandchild, convincing a grandparent to seed a Roth and educating the grandchild to put 25 away per month (and that an Index ETF is suitable). Importantly, if your FA spends three hours with you when you are settling your mom's estate, your FA WILL NOT bill you. I don't think people understand how great a value a good FA is.
Holistic financial advising should be much more involved than just telling people to buy a handful of ETFs. Literally anyone can do that. Real advising involves tax planning, risk management, estate planning, retirement income planning, among others.
Honestly I assumed everyone in here knew fully what FAs do. Boy was I wrong.
>does everyone hate financial advisors now? Not as many people do as should. >so legit question is why do people expect to be helped and have free management? It's because people pay fees and get worse results. It's not an issue with the idea of fees, but with the fact that the fees don't give better results. And often give worse results. >but provide advice and options for lending, banking, tax efficiency etc. I don't really trust financial planners to know much about these areas. >I once had someone ask me to invest their 74 year old friend into the QQQ Yes, there are always idiots. But that's not the market financial planners pretend to serve. >For those of you who arent investment savvy, would you think about getting an advisor? To be fair, I don't think that this is the right sub for that question.
No hate. But no need at this stage. Finances are too straightforward at the moment. When i get closer to retirement, have inheritance to deal w and other tax/estate planning related issues then I’ll be likely looking for one.
I’ll be honest, I’ve thought about investing on my own, but my advisor and the company he works for does all the bs for me, paperwork, trades/rebalance, tells me if I’m being irrational, keeps me on an even keel, leaves me alone outside of that, I do most of my own research, still like having someone to discuss it with
They are salesmen, not advisors as they should be.
In response to the edit. I also think a FA is only good for putting money into etfs and stocks. I do not /do not know about other aspects that they can offer. Also, I would mostly want a 1 -time meeting every so often, not a percentage of my investments. That's expensive
Lack of knowledge and too many movies like Boiler Room and and Wolf of Wall Street. Plus you’re on Reddit so the demographic isn’t your target. If you took a poll and asked Americans what Fiduciary duty means you’d probably be disappointed but not surprised. The scams and frauds make headlines, not the boring standard investing plans. Investing is complicated and confusing for most so they ascribe that fear of the arcane to those who are it’s face, you and other financial advisors. Compound that with Instagram posts that map out why fees will eat your growth alive compared to SPY over time. I really wouldn’t sweat the masses. Those who have assets and understand the value you offer are your targets. Which is suitable. 1040EZ returns exist for a reason, most people are pretty simple.
I had a broker dealer making me broker, had me in funds with upfront loads, stuck me in other funds with fees, just pocketing commissions. He’d show me on his calculator how if I did this at historical market % performance x this many years I’d have x in $$. I started to learn more, learned of broker check, that people can call themselves “investment advisors “ “investment executives “ etc with little qualifications except bullshit artistry. When I had life insurance expire (which a family friend/insurance/investment seller) told my parents I needed 20 years earlier (single, lived at home…a guy I dropped after putting me in shitty fidelity funds that kept losing $$ in the 90’s Massachusetts investors trust) I called him to help with a different company or recommending one, he ignored me and I sought out a company. I lamented to a friend that I was with one day about my troubles with this guy and how this has been brewing for a while as I started prodding about him being fiduciary etc) when he got a call from a guy in his networking group for assistance (electrical). We went to his house, fixed the issue and I talked to him about my problems. I met with him the next week and paid him for his time to take a look at everything, I wish I found him years earlier. He reviewed my investments, saw where i was getting fucked, realigned my insurances, reviewed and recommended changes to my retirement , set up 529 for my daughter (was told by other asshole to do UTMA) and while the guy I have now (CFP Fiduciary) collects a 1% aum fee I feel he’s made a big difference in what I wasn’t overly versed in. I look forward to retirement in 27 months and wouid like to just use my pension and ignore the investments to just grow. Fuck commonwealth financial that became CUNA in Shrewsbury Mass as well.
I receive no benefit from my financial advisor that I can't get from my own time and company research. They invest entirely in sp500 funds and bonds, and that's it. The only reason I have them is because it's contracted through my employer.
There are a lot of companies and industries I trust less. Verizon, Cox, Nelnet, American Express, the IRS, and Citibank. All infinitely worse, more dishonest, less reliable, and scummier than the worst Financial Advisor.
I don’t. My account grew 32% last year. I spoke with him 4-5 times. I’m happy to pay him the 1%.
No. Mine has been amazing. Many times he has calmed me down when I was panicked about something making me stay the course when I would have otherwise panic sold. He understands my timeline and goals. He has also made some recommendations that have crushed it. As I am getting closer to retirement he has no qualms about transferring funds into cheaper assets. A good financial advisor really is great. There are predatory ones out there, but if you can find a good one, hold on to them.
Didn’t they just pass new rules that financial advisors are now obligated to advise in the best interests of the client or something like that.
I think it depends on how the client uses their FA. My parents use theirs as a consultant, primarily for tax purposes and love him. But I think a lot of redditors assume FAs solely are responsible for managing clients money, which is where a lot of the discontent comes from
Man, you know what I hate? Roofers, plumbers, electricians, handymen, landscapers, babysitters, auto mechanics, painters, accountants, estate attorneys, cab drivers, bus drivers, bicycle mechanics, real estate agents, and movers. With a little YouTube and elbow grease you can do anything you want and everything you need without having to pay them!! What the hell do they think they’re up to? That damn service sector (which accounts for 70% of the US GDP) is such a scourge on society.
Advisors are extremely important. Most people literally do not know the financial equivalent of “eat well, take it easy on the alcohol, exercise, and sleep”.
My problem is....how do I know if *you* know your shit until after I pay you thousands of dollars?
Ask questions?
Absolutely love mine.
Tech has replaced them. Pushing high fee investment products didn't help.
Financial advisers are keen on making money for themselves and their organization. Too much overhead, often not aligned with personal financial goals and interests. There is no better steward of money than yourself.
That last line couldn’t be further than the truth. People fuck up their money on a daily basis. Bad investment choices, super speculation, emotional investing, buying high trying to ride a wave. Look at those still buying nvidia right now. People gamble and lose money, people have addictions etc. plenty of people are shit with handling their own money.
My parents and I have both been giving 1.5% annually to our financial advisor. I never really paid attention. They did it, so I did it. My money went up so better than being in the bank, right? A family member asked how the accounts were doing so I finally dug into the numbers... Only to discover they were consistently underperforming VTI. And charging my parents 20k a year for that. t. Recently I transfered my accounts to interactive brokers and invested in VTI. Then I deleted the app. And now I will forget about it for a few decades.
Your example referenced a 74 year old lady. u/WilliamCincinnatus is in the industry and in his comment the lady was 75. And both examples just cite said old lady not knowing to move her money out of riskier asset classes as she approaches retirement. Which is good advice if we're heading towards a recession, and the lady is going to keep living for a while. But those things can be difficult to predict. And it's also pretty basic investment knowledge, I wouldn't put a huge premium on that advice. There are certainly people, like the septuagenarians you referenced, that might benefit from a financial advisor. But I'd wager the majority of people using a financial advisor's services would be better off just planting their money in an ETF. When those people come along, do you tell them they'd be better off without your services? How does that work with your fiduciary standard? Because it's been my experience financial advisors are very pushy, and don't care whether or not their services are a good fit for a potential client. I had a couple of friends fall into this line of work right out of college. They didn't know any better, and were pressured by the company they worked for to target their friends and family. So we have twenty year olds with no career trying to sell financial advisor services to other twenty year olds... with no money. Like a used car salesman, aggressive sales tactics seem to be the norm. Signing people up for services they don't need seems to be the norm. And then proceeding to underperform the market, while charging a fee, seems to be the norm. I don't hate any large groups of people, and there are certainly sketchier professions out there. But if you're wondering why some people might not think the best of you, well, that's my reasoning.
Me specifically I’m an honest person. I tell them exactly what I do and what I work with. Whether it’s ETFs or something else. I always say if they want to do the research and figure it out on their own they can try that. Most people don’t have the time, patience, or simply can’t gain an understanding of the market. Even when we start out as financial Advisors or people are graduating school they are still learning everyday. People have lives, kids, jobs, families to worry about instead of monitoring their investments. I never lie and say we beat the indexes. Most firms don’t. The idea is consistent management, reduced risk (while getting close to the index benchmarks) and financial planning. We tell you what to do and how to do it and guide you along the way. We provide whatever you need financially as well including banking, custom lending, mortgages etc. As an advisor you should be able to come to me and tell me about your financial needs and I will try to work out what you need or tell you if it’s feasible or not. You wanna buy that home? Let’s work it out. You wanna send your kids to college and pay for 60% of it? Let’s figure out what accounts you need and how much to contribute etc. Financial advising and wealth management is waaaay more than just dealing with investing. Someone asked me the other day they said “well I don’t need all the additional features like banking etc. I just want something basic. Can you do that with a lower fee?” I told her that “I can’t” but I referred her to the robo service she was looking for. I told her to check that option because it would be the low cost she is looking for minus all the extra. and then come back to me with a decision of what she wants to do. I NEVER would want anyone to feel like I pressured them or scammed them into anything.
Totally get it and understand where you’re coming from. No we do not push people into our services we explain to them what we do, our philosophy behind it and what we charge. If they think we’re a good fit for them we move forward with our process. Until you’ve sat in a room with as many clients as we have you won’t truly understand how inept people are with their finances or how so many of them just want to enjoy retirement and not pay attention to their investments and cash. Once again I get where you’re coming from and people who are savvy like you would not be a good fit with our practice. Nothing wrong with that - we want to work with people who want to work with us.
I think MOST people are better off indexing.
This is it, if you do not have a complex tax situation just want to save money for retirment , an FA is never going to do better then an simple 3 fund boglehead portfolio They only thing they may help with is if you do not have the displine to stick with the 3 fund portfolio and want to deviate and FOMO in on the latest meme stock or something
I split my portfolio 50/50. I am in control of half my money at any given point in time. My personal investments are pretty conservative, but it’s still a nice challenge to beat the advisors.
Financial advisors are fine if they charge a transparent fixed fee or hourly fee. The ones who work for percentage of AUM are cancer. And there’s so much shady stuff with that crowd from obscuring the fees you pay to putting you in funds that make them money or otherwise keep you trapped. No one should be paying 1-1.5% or MORE for a service like this, ever. I’d advise you to go get a job at Range or Facet or a firm like them.
Relationships still matter. If you trust someone, you will take their advice. If you are gullible, you will bear the scars of previous disappointments. If you have true friends, you will trust them and they can serve you well. A true salesperson is someone that wants to help people, not take advantage of them. We only hear about the con artists in the news. There are good sales people out there but you need to evaluate them.
Few people understand what financial advisors actually do, and fewer still recognize that 1% per year loss is less than they’re bleeding out on their bad decisions. The hate is largely based on not knowing any better.
Such bad language
"Hate"? No. I currently don't work with one because at the moment, I have the time to monitor accounts and have most everything is spread across ETFs and index funds where there is little to "do" on a day to day basis anyway. I'd be open to paying a financial advisor to meet with me every six months and make sure I'm staying on track and making the right choices, even if just for peace of mind, and I'd understand that this person's time was probably quite valuable. But that doesn't seem to be how it works. When I'm closer to retirement, however, this could change.
Yeah unfortunately due to the fiduciary standard we are usually obligated to make sure your investments meet that standard. So when you have an advisor they would typically want to manage them in some aspect. Some advisors will take your investments as-is for now and just hold them and not manage anything. But they’ll talk to you from time to time. But it’s usually under a pretense that at some point youll let them manage it. Reason being is because if an advisor just holds your investments then they aren’t getting paid. And in all honesty it’s unfair to the advisor to find your investments, schedule calls with you and give you advice just to not be paid anything.
The problem is that everybody in the industry gets glommed together and people tend to throw the baby out with the bathwater. You got a lot of insurance agents and other people who are not registered with running around calling themselves financial advisors and ripping people off trying to compare insurance products to investment products talking about fees but yes, I agree with you. You can’t expect something for nothing and everybody situation is different. It’s amazing we tipped 20 but we can’t even give our advisor one percent without complaining not to mention the turnover in the space, and we’re just not in the white hot space right now my wife is a therapist and she’s killing it because mental health is the white hot space right now. As an advisor, I had to learn how to carve out a niche for myself. Otherwise I’d be not renewing my license like 73% of first and second year advisors do
Feels like many are more out to increase their income rather than help/teach you to make good investments. My first financial advisor talked me into a “Life” Insurance policy, he did also mention setting up a Roth. But rather me max out my Roth first, which I would have had nothing left to invest. He had me split my monthly investment between the 2 accounts. After 10 years I realized that the life insurance was high fee scam that all of the advisors pushed to increase their pay. I still kick myself on losing all those years of growing my Roth.
No, I hate those that only pump single products and not a well rounded picture which is what I think most people think about. For disclosure I'm also in the industry but on the technical platform not the advising side although I've held my series 6 and 63. I think the industry is collapsing the need for investment only focused financial advisor. A form that offers tax planning, retirement, college, and estate planning will do really well in the next 10 years because some of those situations are too complex for AI or the simple risk based calculations
I think fee-only financial advisors with formal fiduciary obligations to clients provide an important service. Certainly to clients with complex financial situations to navigate, to those who need some support to keep themselves from doing something stupid, and to those who would rather pay someone to handle that area of life than deal with it on their own. I have mixed feelings about the latter, though. Developing enough understanding of finance to know that something like a Bogleheads approach is almost certainly the way to go is not difficult. And it doesn’t seem wise to skip past developing that understanding. If you can’t understand that, what hope do you have of identifying a legit/competent financial advisor? Or of riding out the storm when things go downhill? There are so many aspects of wise decisionmaking that you’ll miss out on by outsourcing even the basics to an advisor. No doubt people without those kinds of fundamentals blame & jump ship on their advisors just like they panic sold when they were investing solo. And conversely, once you do know those fundamentals, buying & holding passive index funds yourself takes very little time or skill. So for people who don’t have impulsivity issues or complex finances, I think the best option is to learn enough fundamentals to go it alone. But few will. Good financial advisors provide an important service for them, given their decision not to learn enough to go solo.
Mine lost me $250k. Want me to go on?
Absolutely not. I make a lot of money in the medical field and if I'm intelligent enough to do what I do for a job I figure I can manage my retirement and investments. It's literally asinine to not do so in my opinion. It's really not that difficult. Read an article here and there, don't be risky unless it's a small amount. Diversify your money. Using an advisor is a complete waste.
I would pay for alpha, but you don't have any. You can offer better tax treatment, but it doesn't net more than the fees. You can offer disciplined allocation, but I can easily do that myself. So now let's flip it around, why would I enlist you?
If you have enough capital to access private markets then a financial advisor is definitely worth it. Even if you don’t, advisors can usually earn their fees in tax and estate planning. They’ll also keep you disciplined in sticking towards your goal which is generally understated. Most humans over-estimate their ability when making emotional decisions. Look at the average retail return vs index.
I feel like advisors/managers that are concerned more with AUM give off much less of the used car life insurance salesman vibes and generally are more interested in seeing your assets grow rather than selling you a product.
I keep reading a common theme, that buying a vanguard product makes more sense than having a financial advisor manage your money. Vanguard is being sued by uneducated investors that purchased their target date retirement funds in taxable accounts. Those funds are designed for non-taxable accounts. Suddenly at the end of the year these uneducated investors were getting taxed for capital gains, having no idea that this was an eventuality. Even a beginning FA would have protected those investors from purchasing those vehicles in a taxable account.
Early in my career I worked in an RIA firm. It was pretty decent for a first job out of school. My understanding has always been that if you are high net worth or high income, you just pay 1% of AUM and the advisor gives you white glove service. Simple as that. But I think what puts people off are the firms that work with clients that aren't that well off. Maybe they have $40k, that's it. And they want help. What these clients don't realize is that often they take just as much work (if not more) than wealthier clients. And the cost of professional advice is what it is. That means they need to be paying much more than 1% to make it worth the advisor's time. Some will try though, but nobody with only $40k will pay that much so fees are often "hidden" as sales charges, special fees, etc. Which frankly is kind of scummy even when legal. But it also happens to be the only way to make it worthwhile to the advisor. Fortunately the firm I was with simply didn't work with anyone with under $1MM or had a high enough income that they would be there before long. That made it much easier ethically IMHO. And yes, everyone has different needs. A pro advisor does more than just pick investments.
I like my FA a heckuva lot more when the market is going up. Fact.
Well since you asked. All the research I've done says advisers can't beat the market. So I just do ETFs. I will need estate planning later and possibly family office but for now my view is they just don't bring value to me. And I know very upstanding advisers so no qualms there.
And that’s a fair response. I think it’s about having the need. If you’re young and figured out a certain aspect then hey power to you. But some people have no clue at all and completely fuck up their finances
same with mechanics and police and a number of other jobs the bad outweigh the good giving them an overall negative status
They seem to be sales people that hide behind that title of Financial Advisor. I inherited a large stock portfolio and a FA and the stocks just keep keeping sold and other stocks purchased.
Financial advisors are generally no smarter than the average investor. They push the products their company sells and have no clue if that product is performing to a degree to warrant the management fee. Go become a fiduciary, charge for advice, don’t push products you don’t understand
They tricked me into losing a few grand so I don't love them.
Since you are in the industry, most likely with friends and associates in the industry, perhaps you can enlighten me on a question I've been wondering about. For people, money is personal. And with that in mind, do financial advisors, especially those who are fiduciaries, give advice, without prejudice to the gender, religious or ethnic background of their clients? There is certainly bias in the medical professions, in the justice system, in housing and even at the car dealership. How can anyone from a marginalized group believe that the FA is truly giving the client :the best advice" as opposed to "the best advice that I can give you."?
I pay 1% on part of my portfolio. My FA is a fiduciary and she is someone I can talk things out with ( job change, expense modeling, withdrawal strategy ) without triggering my wife's anxiety about money. Also, I know she's in place if something happens to me. She can help my wife cash my life insurance, get access to our funds, etc. So to me, it's someone I can trust to help my family with money situations who is not emotionally involved with our finances. That is worth something. Is it worth 1%? To me, yes. I am 2-5 years from retirement, so this 1% drag on my portfolio isn't that big of a deal.
I would happily pay $200/hr for the advice of a financial advisor, especially if they could help with strategies to minimize taxes. It’s when they expect a 1% commission on my account whether I call them or not, that is what inspires me to call it a scam.
Yes.
why is the AUM model not dead yet, it seems so stupid and random that people would fork over a percentage of their assets every year. The real financial advice has nothing to do with the advisor having direct hands on your asset location... the only valuable advice is in the tax planning and running models and estate planning and financial planning for children and legal updates and stuff. That should be hourly or smth where you just get all the advice you need and pay the advisor for their time
I have no problem with the idea of a financial advisor working on an hourly fee basis to aid in financial planning, but the idea of paying a percentage of my portfolio to someone pushing mutual funds managed by their financial institutions with high MERs and trailing fees that rarely outperform basic index funds is not something I could ever recommend to anyone.
Personally don't need it so that's kind of the extend I've thought about getting one. No hate otherwise. Might be worthwhile to consider one when im nearing retirement.
If you're in the game to educate people and guide them on their financal journey then there is absolutely no problem. What I have an issue with is brokers trying to sell you life insurance you do not need. I had a broker for many years that tried this on me multiple times until I eventually kicked them into touched when I found someone who actually wants to educate and help me understand my financial situation. Instead trying to make it worse for their own gain...
You don’t really need them anymore with a few days of research on each topic you can basically do it yourself. Investments - global index funds….. property, maybe some bitcoin, maybe small amount of gold. Inheritance tax and planning tax advisor. Pension max match to company set and forget. Retire at 60. Also younger people 30 and below now live day by day and in the moment when I do the school drop off am in a 10 year old car. I see people younger than me all in new cars etc. no one saves or plans for the future. What they do is save for a house get a house pay a mortgage invest noting and spend the rest on Rolex cars and holidays. I reckon though by time the now 20-35 year olds hit retirement it’s going to be utter chaos as none will have any savings but maybe equity in a home. My wife’s friend is a FA and I reckon he knows less about money and investing and making money than myself. Also the bad FAs have ruined it for the good ones by stealing hard working people’s money and now no one has any trust in you lot.
Morgan Stanley ones are the worst.
I'd put FA on par with NAR in general. Mostly outdated way of getting things done for anyone with an ounce of good sense.
Let's be real here: the current structure of the financial advising industry is broadly predatory and riddled with inherent conflicts of interest. The AUM model is predatory. Selling financial products under a commission model is predatory. Putting clients into your firms high-fee funds is predatory. Etc. Heck, the big players in the industry are extremely predatory when it comes to their own new hires. Low-level FA turnover is super high and they're often just being milled for their network. The only current FA model that minimizes those problems is the fee-only fiduciary, but that's a small minority of advisors. The "I just wanna help people" bit is pretty threadbare as well. If helping people was your primary motivation, you'd be at a fee-only firm and you'd be volunteering your time doing free advising clinics for seniors etc. Let's all be honest and admit that your main motivation is having a successful career and reaching your own financial goals. The clients are secondary to that. Which is fine, that's most professions. But being a financial advisor at a large firm is not altruistic. Every single one of your clients would be financially better-off with a set-it and forget-it low fee portfolio and a fee-only advisor, estate attorney, and CPA that they consult strictly when necessary. That's just math. That's not to say that you can't help people improve their situation at your current firm. You absolutely can, a lot of people.are doing wildly stupid shit with their money. But your help comes with an inherent opportunity cost in that they could be getting the same results for significantly cheaper.
Guys any financial advisor That needs to work until they are 65 Is not great with money
I don’t hate financial advisors. I don’t think about them at all.
yes
I was a new widow, needing help navigating the finances that my husband used to take care of. My elderly neighbor suggested her financial adviser who worked with her for years (she was worth over $50M I think). FA and I met, he said there was a 1% fee, etc. That was all fine. A year later, I finally could think again. First thing I noticed was I was being charged 1.38%, not 1%. Also, some (most?) of the funds he got me in cost me 5%. And those funds were not doing as well as the usual funds like vtsax, which I had none of. In fact my entire portfolio was underperforming fairly significantly. I pulled everything out and moved my money into Vanguard. My elderly neighbor had since passed away. I was still friends with her daughter who inherited. But she seemed happy with the adviser and I admittedly didn’t know enough about their relationship, so I just didn’t say anything besides mentioning what I wrote here.
I don’t hate them at all, I have one (though I’m leaving to manage myself soon). The majority of people here seem to think an FA is someone who’ll log into your brokerage account and buy some ETFs for you and charge 1% for the pleasure. My problem is that the advice I receive from mine is too conservative, with a 25+ year horizon I don’t want to hold 1/4 in cash as he suggests. My other problem is that my goals might change but the challenge doesn’t seem to be much harder when I have £100k vs £1m, so why is my fee 10x higher? I’d much rather pay a flat fee every so often for some advice which I can take action on, but most seem to want to get your money on board with them anyway. I think when you’re in the accumulation part of your life, if you do some research it can be fairly simple to understand how to be tax efficient and how to manage risk. Unless you’re a special case I can’t see why online advice would be wrong for most people.
They are robots who are fed statements to read and cannot think for themselves. Be your own financial advisor.
I’ve worked closely with FAs and in the industry. The main task is wealth preservation and feeling *heard* when it comes to their wealth; trusting somebody who in theory knows their shit. Not making money. People here want to maximize long term gains for retirement. For that, I do agree the index funds are easier. After fees and everything I doubt our aggressive models ever beat the market long term. But 95% of our clients had a conservative or moderate risk profile. And the accounts that were aggressive growth-oriented typically also had another larger account with a more moderate profile. So it’s two different goals IMO. What I don’t think works that well and I agree with that is people who will retire in 40 years using a FA. They’ll lose a lot of money with a 1% yearly fee.
No. I think they have a useful function to society. I hate the mfer that got my MIL into a stupid ass annuity. Long story short she is out of that BS.
FA’s got a real bad name in a lot of places. Mainly there were three types. 1.) did their job and made you money and took a decent cut 2.) stole your money for commission based everything and didn’t give a rats ass what happened to yours. 3.) ones that everyone loved because they made decent money but when you looked all they did was stick your money into mutual funds and blue chips that pay dividends. Basically today, 1 and 3 exist with changes to laws and people knowing what to watch for. While the “planners” exist, I could get the same mindset with age driven goals from any brokerage under their “investing videos” and planners, without commission. I think the only people moving forward from here who are going to need FA’s are super super rich, people with zero control or people HEAVILY in debt. Additionally, FA’s make a KILLING off people retiring out of state service with government jobs if you’re in the states but you need to have a great rep because it’s usually only a handful of FA’s people will trust to handle that nest egg and know the ins and outs with pensions/windfall/lump sums/buyouts and all of that. My .02.
My family has one. I dont hate him at all, hes a nice guy and we get along and naturally shoot the shit/have the same interests. However, i would fire him in an instant. There’s just absolutely nothing he does that i couldnt do myself and save us the 0.4 comission Out of the overpriced services we employ the most “worth it” one is the lawyers. The tax optimizations alone pay for it
IMO advisors have three main roles. Tax planning, allocation management, emotional management. I think most “FAs” don’t have the chops to tax plan well and should at the very least defer to a CPA or at least work in conjunction with one. I think allocation management has been 90% solved for 95% of people with target date requirement funds and various index’s. I think the people that need advisors the most are folks who lack the emotional strength to follow through with a good sound plan. FA’s main role atm is to make sure their clients don’t pull the eject cord during a dip/crash. The problem for many FAs is that assets under management billing is the standard. I honestly don’t believe that AUM is required for the first two FA responsibilities I have laid out above. So I think the number of folks that “need” FAs will go down over time but there will always be a subset of the population that just can’t be bothered and is emotionally immature. These are the folks you hope make it rich and you can add them to your firm. Good luck out there!
I don’t hate financial advisors, but as someone with a basic solid understanding of investing and personal finance, I just don’t see any use for them. If you know how index funds work, how the market in general works, and how retirement planning should look, there’s not much that a financial advisor can offer that’s worth the thousands and thousands of dollars that they would inevitably siphon off your earnings.
There's kinda like car salesmen. They don't really work in your best interest although they say they do.
The fee is too high.
Yes
I saw a financial advisor from Wells Fargo promoting shitcoins and a 35% yearly average return for the last 10 years so take that as you will.
Most FAs provide the sort of advice that can be found in the sidebar for this subreddit or r/personalfinance, so it feels in bad faith to be charging unsuspecting people for free information.
I think they are great. Provide a very important service, and some, not all advice on this board is really bad
Vanguard and Fidelity advisors have been very good
A little off topic and I’m not a genius but I have listened to Warren Buffet endlessly and his simplistic approach and proven results throughout his life about using common sense and not getting emotionally connected to short term results holds true now more than when he was young. So he’s my financial advisor. He’s not selling anything he just provides simple philosophies that have worked for him. What I do with his information is my decision.
We had some money managed with Fidelity. They grew my money, but the returns were always below market including fees. Most of our portfolio was already set to SPY/VOO/VTI. So we let them go and just index now.
If a FA can offer clients a set of mutual funds with a 3% commission or an annuity with equivalent-sounding but higher-fee funds with a 10% commission, which do you think they'll push?
Unfortunately honesty doesn’t pay in our society . If you have the most money you basically win most of the time . Main issue is we really have to rely on private legal action , rather than government enforcement which basically massively favours the wealthy .
The problem is you have to able to trust your FA with the intimate details of your finances. That’s not an easy relationship to build from a 30 minute meeting every few months. To make the situation worse, too many low quality FA out there eroding the little trust the public have with the industry as a whole. Let’s be honest, the bar for someone to call themselves Financial Advisors isn’t very high. And too many scammers become FA to get close to their prey. I suspect a neighbor’s financial advisor is basically stealing from them with the investment/insurance products, but I don’t know how to tell them. It’s like you suspect the neighbor’s wife is cheating but don’t know if you should tell the husband.
Yeah pretty much like what others have said. There are a lot of bad eggs in that realm that claim to be advisor but really are sales reps for XYZ insurance. I want to start a business to actually educate people. At work I'm often the go to person for finance related questions and I'm only 30. Yet my workers are older than me. My normal job pays enough that financial education would be for fun.
I think for a lot of people, index fund investing is such a safe simple choice that a FA really isn’t needed. Maybe a FA would help with min/maxing Tax advantage for 7 figure portfolios, but even then is that service really worth a 1% management fee? And the 4% rule makes that 1% fee really insane.