UnThreaded | Threaded | Whole Thread (124) | Ignore Thread Prev | Next
Author: Watty56 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76398  
Subject: Re: Talk me out of a Financial Advisor Date: 6/2/2013 12:42 PM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 2
...His 10 year return for a portfolio size I'm looking at was 9.79% ending in March with a lower dip in 2009. Again, after fees. By my calculations, that's over a percent better than the S&P with dividends..
Most likely he was not just invested stocks that are in the S&P 500. Compare his returns to a combination of a total (US) stock market index fund and a Total International Stock Market index fund. Comparing performance to the incorrect index is a common way to mislead people.
...I've often heard this, but the 4% rule is based on historic returns of a simple portfolio. If a more complex portfolio can be structured to either increase the average annual return or smooth out the valleys at the same return, both after fees, wouldn't the SWR be higher?...
Mutual funds try to beat the simple index funds and especially after fees very few of them succeed over the long term. If this advisor could do this then he would be making a seven or eight figure salary working on Wall Street.

...I guess I'm having trouble accepting the prevailing wisdom here that ALL FAs are bad...

Not at all. It is just that most of the people who call themselves financial advisors are really salesmen that are misleading you.

There are many times when a financial advisor is a good choice but there problem is that they have a huge conflict of interest when there are so many ways for them to get paid for putting you in less than ideal investments. When I get ready to retire I will likely hire one that I pay by the hour to review my situation. A good financial advisor would be willing to ;

1) Provide an understandable written statement of how they are compensated that states that they will not take any compensation other than what you are paying them. Remember "fee based" is not the same as "fee only".

2) Provide a written statement that they have a "fiduciary responsibility" (Google this) to do what is in your best interest.

Financial advisors can do a lot of good things like;
1) Setting up the right asset allocation.
2) Helping to minimize your taxes.
3) Helping you decide on the right amount to save or spend each year.
4) Making sure that you have things like the right wills, estate plans and working with a lawyer when needed.
5) Help figure out when to start social security and which pensions options to take

Unfortunately picking superior performing stocks and mutual funds is not something that you can expect them to do.

Since you want to use one I would highly suggest that you interview several real financial planners that charge by the hour and pick one to draw up a financial plan for you. You can then use them as needed in future years to update the plan each year. This is assuming that you have a fairly large portfolio where cost would be in the same ballpark as paying a 1% fee for a year or two.
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (124) | Ignore Thread Prev | Next

Announcements

The Retire Early Home Page
Discussion on accelerating retirement day.
Foolanthropy 2014!
By working with young, first-time moms, Nurse-Family Partnership is able to truly change lives – for generations to come.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Post of the Day:
Macro Economics

Economic Implications of Cuba
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and "#1 Media Company to Work For" (BusinessInsider 2011)! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement