What value do you get from your Financial Advisor?
Beaverton, OR · Member since 2014 · 118 posts · 119 votes
What value do you get from your Financial Advisor?
Most Popular Reply
Accountant · McKinney, TX · Member since 2023 · 393 posts · 580 votes
3yWhat someone seeks out an advisor for varies based on their age, risk tolerance, investment objectives, and most importantly, their goals. Some advisors are holistic in nature and some have a more singular focus. One thing that all advisors have to do is manage expectations and the psychological aspect of financial decisions. I think it's safe to say that we all can be our own worst enemy and make decisions that are not always rational. That's where the advisor comes into play. He or she should have adequate experience and training to help talk through various scenarios, make decisions on your behalf if there is discretion, and help build your wealth depending on your goals and things unique to you. You arguably will have a better chance of success if you don't go at it alone. It's like going to the gym or working out, if you have someone to work with your chances of sticking to it and motivating or having healthy competition increase and so your performance should be better. I think I'm reiterating what @Andrew Bosco is stating about piece of mind.
On a side note since we taking part in a real estate forum, an advisor that supports many different asset classes and is multi-faceted can help you with due diligence and seek out alternatives for you so once again, it's not all on you. Saving you time, giving you ideas, and helping you make the right asset class allocations over different periods of time is the value.
22 Replies
- 3yAndrew BoscoBusiness MemberRental Property Investor · NH · Member since 2023 · 440 posts · 416 votes
For me, it's confidence in someone else handling the money and putting it to good use in ways that I don't think of. My FA explains what he is doing, why he is doing it and is doing his best to futurecast with me. He's asking about my goals and cares about my timeline. All of that adds a sense of confidence in him that he has my best interest. The value there is that I don't have to think about it more than 4, 30 minute phone calls per year.
Andrew Bosco - Candor Investment Group529 Reviews - Accountant · McKinney, TX · Member since 2023 · 393 posts · 580 votes3y
What someone seeks out an advisor for varies based on their age, risk tolerance, investment objectives, and most importantly, their goals. Some advisors are holistic in nature and some have a more singular focus. One thing that all advisors have to do is manage expectations and the psychological aspect of financial decisions. I think it's safe to say that we all can be our own worst enemy and make decisions that are not always rational. That's where the advisor comes into play. He or she should have adequate experience and training to help talk through various scenarios, make decisions on your behalf if there is discretion, and help build your wealth depending on your goals and things unique to you. You arguably will have a better chance of success if you don't go at it alone. It's like going to the gym or working out, if you have someone to work with your chances of sticking to it and motivating or having healthy competition increase and so your performance should be better. I think I'm reiterating what @Andrew Bosco is stating about piece of mind.
On a side note since we taking part in a real estate forum, an advisor that supports many different asset classes and is multi-faceted can help you with due diligence and seek out alternatives for you so once again, it's not all on you. Saving you time, giving you ideas, and helping you make the right asset class allocations over different periods of time is the value.
- Beaverton, OR · Member since 2014 · 118 posts · 119 votes3y
Thank you, wonderful responses!
- Accountant · Franklin, TN · Member since 2023 · 204 posts · 91 votes3y
Very good responses. I focus on the value of the relationship. I am happy to pay a management fee if the advisor is bringing other relationships and resources to the table.
- 3yBryan MartinBusiness MemberAccountant · Springfield, IL · Member since 2022 · 189 posts · 100 votesYour last sentence is pretty much the best explanation on why to have a financial advisor. Instead of researching stocks, real estate, etc., you're able to set it and forget it.
Quote from @Andrew Bosco:
For me, it's confidence in someone else handling the money and putting it to good use in ways that I don't think of. My FA explains what he is doing, why he is doing it and is doing his best to futurecast with me. He's asking about my goals and cares about my timeline. All of that adds a sense of confidence in him that he has my best interest. The value there is that I don't have to think about it more than 4, 30 minute phone calls per year.
Are you potentially leaving money on the table? Sure. Is the money you're leaving on the table worth the time you would have to give up to handle the investing yourself? That's a personal decision for everyone. - Financial Advisor · Saint Paul, MN · Member since 2016 · 190 posts · 143 votes3y
As a financial planner myself, of course I think the costs are justified :) But in all seriousness, google "vanguard value of an advisor" & you'll see what calculate as value. It will echo what many others have said. Peace of mind, behavioral coaching, income strategies etc.
Reflecting personally... I think the most value I can bring is just the fact that I've been doing this for 15 years & have a deep breadth of experiences. I can pull from those experiences to help a client answer their questions, often times with a story of someone else who has gone through something similar.
Think of working with your mortgage rep or your realtor. You may be closing on your 5th, 10th or 20th property. But they may be closing on their 50th, 100th, or 200th property. The sheer vastness of that experience has value. Especially if they can use those experiences to find a way to put your mind at ease during difficult decisions.
- Contractor · Sheboygan, WI · Member since 2016 · 917 posts · 266 votes3y
@Jason Powell be a little bit more concise on what financial advice you are referring to.
Advice coming from advisors charging a fee for assets under management( stocks, bonds, mutual funds) get paid the 1% regardless of whether your investments make or lose money. It’s a hand holding service that should not be based on a percentage of your assets. It takes an advisor no more time to review $200k of mutual funds as it does $500k of mutual funds.An advisor charging an hourly fee is far more advisable for accounts worth more than a couple hundred thousand than a fee based account. Good luck finding one. There is a national association for hourly fee advisors.
Most financial advisors who charge a asset based fee will not tell you about RE investments because they can t charge a fee tied to securities on personally owned RE. They won t tell you about self directed retirement accounts like IRAs and Solo 401ks that allow investors to invest in assets that are non securities involving real estate or private loans.
Hourly fee advisors can and do advise clients on RE and other alternative investments.
There are other forums on BP that discuss self directed IRAs and Solo401ks and RE in detail.
- Contractor · Sheboygan, WI · Member since 2016 · 917 posts · 266 votes3y
@Daniel Murphy are you an asset based fee advisor or hourly fee based? If asset based how do you advise on Private RE investments as they are not securities and subject to a asset based fee?
Are you allowed to give advice on purchase of privately owned RE when it involves taking money out of the stock market and reducing your asset backed fee?
- Beaverton, OR · Member since 2014 · 118 posts · 119 votes3y
Thanks @Todd Goedeke. I think you hit the nail on the head with what I've largely been grappling with. That is, the more assets one has (not necessarily more complicated), the less and less an AUM based fee advisor seems to make sense....unless the AUM fee percentage drops rapidly. I'm not convinced that the average, moderately financially informed, person with say $3 million is better off by paying $25k - $30k annually for wealth management advice. Advisors who charge an hourly rate or annual retainer seem to make a lot of sense, but sure are far and few between. I suppose I'm scratching my head on why this business/fee model hasn't taken off more.
- Financial Advisor · Saint Paul, MN · Member since 2016 · 190 posts · 143 votes3y
Quote from @Todd Goedeke:
@Daniel Murphy are you an asset based fee advisor or hourly fee based? If asset based how do you advise on Private RE investments as they are not securities and subject to a asset based fee?
Are you allowed to give advice on purchase of privately owned RE when it involves taking money out of the stock market and reducing your asset backed fee?
I'm fully independent so I can bill however I prefer. The majority of my clients are AUM based but I can also do hourly or a retainer model.
And yes, I am allowed to give advice on assets outside of the stock market.I've been doing this for 15 years. I'm not struggling to pay my bills so I'm in a lucky position to give advice because I love to help others. I purposefully designed my fees to decrease (much faster than most other planners) as you have more assets. And to have the option to bill separately.
- Financial Advisor · Saint Paul, MN · Member since 2016 · 190 posts · 143 votes3y
Quote from
Thanks @Todd Goedeke. I think you hit the nail on the head with what I've largely been grappling with. That is, the more assets one has (not necessarily more complicated), the less and less an AUM based fee advisor seems to make sense....unless the AUM fee percentage drops rapidly. I'm not convinced that the average, moderately financially informed, person with say $3 million is better off by paying $25k - $30k annually for wealth management advice. Advisors who charge an hourly rate or annual retainer seem to make a lot of sense, but sure are far and few between. I suppose I'm scratching my head on why this business/fee model hasn't taken off more.
@Jason Powell, I completely agree with you. More assets do not necessarily equal more complicated. Luckily the financial industry has started to see this a bit. More firms are starting to decrease their fees as their assets get larger. Not enough in my opinion.
I purposefully structured my fee to step down dramatically & for any assets over $1M I only charge 0.1% additional. This is designed to be a relatively flat fee up to $1M.
The industry is changing though. I think you'll see that most larger or older firms have an older fee structure. Many younger advisors (XYPN Advisor Specifically) have more progressive & flexible fee structures. - 3yV.G JasonPro MemberInvestor · Member since 2022 · 3k+ posts · 3k+ votes
Quote from @Jason Powell:
I would love to hear from folks who use an advisor and are content to pay their 1%(ish) fee, what value are you getting that you feel is worth paying for?
My biggest plus from my financial advisor is he seems to be 1-2 steps ahead of the economy, just given his role in his position at his bank. It's extremely helpful to navigate other assets with his intel. We talk about 2-3 times a month to shoot the ****, and I learn a ton each time. For that value his fee is worth it.
In 2022, he scratched slightly positive and YTD he's up a decent amount. He underperformed against the market in 20-21 surprisingly, but those same bets paid off in 22 and currently. I tell him to take care of my portfolio appropriately for 80-90%, and go full spec for the other 10-20%.
Without his intel, I probably do not move the way I do. His advice these last 5 years + has been instrumental in my wealth. - Real Estate Consultant · Cleveland · Member since 2020 · 6k+ posts · 3k+ votes3y
Quote from @Jason Powell:
I would love to hear from folks who use an advisor and are content to pay their 1%(ish) fee, what value are you getting that you feel is worth paying for?
None, I like being in control of my money,
- Contractor · Sheboygan, WI · Member since 2016 · 917 posts · 266 votes3y
@Daniel Murphy I agree with your fee schedule and options. I will get in contact with you regarding RE clients looking for advice regarding RE purchases of short term vacation rentals.
- Member since 2019 · 7k+ posts · 4k+ votes3y
Quote from @Jason Powell:
I would love to hear from folks who use an advisor and are content to pay their 1%(ish) fee, what value are you getting that you feel is worth paying for?
These days there's Roboadvisor or brokerage that could compile a portfolio like M1.
I guess my M1 portfolio perform better than most "advisor". - Member since 2023 · 2 posts · 0 votes3y
Quote from @Jason Powell:
Thanks @Todd Goedeke. I think you hit the nail on the head with what I've largely been grappling with. That is, the more assets one has (not necessarily more complicated), the less and less an AUM based fee advisor seems to make sense....unless the AUM fee percentage drops rapidly. I'm not convinced that the average, moderately financially informed, person with say $3 million is better off by paying $25k - $30k annually for wealth management advice. Advisors who charge an hourly rate or annual retainer seem to make a lot of sense, but sure are far and few between. I suppose I'm scratching my head on why this business/fee model hasn't taken off more.
Totally agree. I do think having an advisor is extremely valuable, in large part to what Andrew said: confidence. But for areas that might not be as specific to my own personal situation, but simply accessing quality, actively managed portfolios there are other solutions coming available. I've been using echo trading. Subscription based, flat fee (~$20/mo) and I can just copy other asset managers. I also manage some of my own capital - I used to have a newsletter, so I like to look at charts, but I don't spend all day every day anymore so would rather allocate the majority of my capital to people who do.
- Financial Advisor · Saint Paul, MN · Member since 2016 · 190 posts · 143 votes3y
As a financial planner myself, I enjoy these conversations. Hopefully, this is helpful for some of you to know. The industry is changing...
The most common complaint I hear when someone talks about working with a planner is, "performance." It was mentioned multiple times in this thread. The truth is, if you think hiring a financial planner will get your portfolio better performance, you are measuring the incorrect expectation. In the past, when markets were less efficient, investment picking had value.
Now, the research widely points to index funds being the best performing funds over time. So hiring an advisor, paying their fee & expecting equal or greater investment performance will likely not happen. You buying 100 shares of SPY vs your planner buying 100 shares of SPY will result in lower net performance because of the advisors costs.
The good news is that the industry is realizing this & shifting more toward financial planning & comprehensive advice.
Think of the amount of knowledge you learn from your various internet or youtube gurus. Your rental guru. Airbnb guru. Investment guru. Mortgage guru. Business Planning guru. Real Estate Law guru etc.
A good, experienced financial planner with knowledge of your financial "pain point" should have a broad and fairly deep understanding of all of these various gurus. Add to that knowledge, years of experience actually doing the work with their clients at scale. This has incredible value.
Think of it as, hiring the youtuber who made a video about 1031 exchanges vs. an actual professional who has processed countless 1031 exchanges.
The financial industry has been shifting towards this advice-focused approach in recent years. There are a number of studies showing that there is plenty of Alpha (added value) to the client by working with an advice-focused planner. This (I hope) is where your expectations should be tied to.
Go have a good conversation with one of your gurus. At the end of the conversation hopefully, you feel smarter, and more confident about your financial decisions than you did before the conversation.
^^^^This is what your relationship with a good financial planner should look like^^^^
- Contractor · Sheboygan, WI · Member since 2016 · 917 posts · 266 votes3y
@Jeff Roth check out Morningstar if you want to compare managed mutual funds to non managed index funds. There are still a few funds that have beat indexes and index funds year after year.
If you want advice to bounce ideas off of find an advisor who charges $500/ hour or less. Do that twice a year for $1,000 or less.
Find an advisor who understands the value of income producing real estate and Solo 401ks being part of your investment portfolio.
- Member since 2023 · 3 posts · 0 votes3y
Quote from @Todd Goedeke:
@Jeff Roth check out Morningstar if you want to compare managed mutual funds to non managed index funds. There are still a few funds that have beat indexes and index funds year after year.
If you want advice to bounce ideas off of find an advisor who charges $500/ hour or less. Do that twice a year for $1,000 or less.
Find an advisor who understands the value of income producing real estate and Solo 401ks being part of your investment portfolio.
Which funds are beating the indexes year after year?
- Huntsville, AL · Member since 2018 · 577 posts · 864 votes3y
I agree with @Bob S. - I am never paying someone 1% of my "managed" assets with no guarantee of performance.
- Contractor · Sheboygan, WI · Member since 2016 · 917 posts · 266 votes3y
@Jack Gorman subscribe to trial subscription to Morningstar and screen funds. Do some homework.
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