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Investing/Strategies / Retirement Investing
|Subject: Re: Talk me out of a Financial Advisor||Date: 6/2/2013 10:09 AM|
|Author: Rayvt||Number: 72358 of 82001|
It kinda all depends on what you are looking for in a FA. Most of the ones we talked to wanted to manage our entire portfolio, and they wanted to do the 60/40 or 80/20 stocks/bonds thing. We always said, "Why would I want to pay a 1%-1.5% fee to you to put my money into a bond fund or CDs? I'll let you manage the equities and I'll put the money into a bond fund myself."
Are you considering having him manage a majority or significant percentage of your money? Or just a small piece. If the latter, then....why bother? If you give him 10% of your money, then whether he does good or he does bad, it will not make any real difference in your net worth.
Suppose you had $1,000,000. Would you put $500,000 under his management? (FWIW, that's Fisher's minimum account size.)
Would you put $100,000? Or only $50,000.
What level of personalized service is $50K or $100K going to get? A 1% fee on a $100K account is $1,000/yr. $83/mo. That's not enough for him to live on, so a small account is basically going to get no attention. Or it's going to be lumped together with 100 other accounts that are all handled identically.
To tell the truth, if I wanted to have somebody manage that level of money ($50k-$100k) for me, I'd put it with somebody like http://sweetspotinvestments.com/
I ran across them via the NAAIM Wagner Award http://www.naaim.org/resources/wagner-award/wagnerarchive/wa... and his paper http://www.naaim.org/wp-content/uploads/2012/04/L2011_The_Ab...
Every financial advisor claims that they can beat the market at lower risk. WHen you ask them how ... what it their method/procedure ... they generally say something like "we investigate and then we pick good stuff". Well, DUH!! To me, it's all handwaving. Or, perhaps he really is able to "pick good stuff". But that skill is a skill of that one person, and is not transferrable to somebody else, and it can't be backtested.
They can show you (maybe) how they performed in the last 10 years, but they can't show you how they would have performed in some *other* 10 year period.
And, of course, they performed GREAT in the last 10 years. Survivorship bias. If they had not performed great, they'd not be talking to you, they'd be waiting tables. How do you know if they were truly superior, or if they were just one of the lucky 50% that was above average?
But, suppose this guy *is* truly superior. Great. You invest with him and he does well for you for 5-10 years. And then he gets bored, or gets hit by a bus. Now you find your money is invested in a bunch of stocks & funds that you know nothing about, and you have no idea why you own them, other than Fred decided to buy them for you.
Now what do you do?
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