Opinions on Retirement Advisors

[Andrew23]

Completely forgot about this site and came across an email for it lol thinking about my future and if I am saving enough for it and I am curious what are your opinions on financial/retirement advisors? (Edward Jones, Ameriprise, Wells Fargo, Etc.) Would you recommend them for retirement planning if you already take care of your own retirement besides your work 401k? For instance, I started invested my own Vanguard index fund for my goal retirement year which I’ve had for years and since starting that fund like almost a decade or so ago I have been at 3 different companies and it’s the same fund they recommend when they used Vanguard funds for their 401k (if you were to choose that) so my hesitation comes from would it be overkill to go and waste time and money with a financial advisor?

[disneysteve]

RUN FAST AND FAR AWAY! Do not respond. Do not answer calls or emails or texts. Do not engage with them in any way, shape, or form. They will destroy you.

[kork13]

To clarify Steve's somewhat panicked response.... Those 3 companies you mentioned are high on the list of the WORST possible options in the financial services world. They churn your account (needlessly buying & selling merely to generate fees for themselves), put you into questionable, costly investments that tend to under-perform the market, and generally have a terrible track record of not looking out for their clients 'best interests.

This is not to say that ALL financial advisors are crooks & cheats who will swindle you out of your money. But sometimes the good ones can be hard to find. In any case, their fees tend to be significant (at least 1% of managed assets, every year), and in many/most cases, their services do not lead to higher returns to offset their fees. In fact that almost never happens.

If you have a functional understanding of how investments work & have a reasonable degree of discipline/self-control, it would probably be best to just handle your assets yourself. There can be some benefit to some folks in having an advisor, who can answer questions, provide analysis or instruction, or advise on specific issues. But note that the difference is that this advisor would provide advice only, not control your investments, and you'd only pay a flat fee for their time.

Not all financial services folk are scummy .... But a large portion of them sadly tend to be.

[disneysteve]

To clarify Steve's somewhat panicked response....

I wanted to be perfectly clear.

Of course, I agree with everything you said. Advisors can't do ANYTHING for you that you can't do better and way cheaper yourself.

I was clearly being a little over dramatic. Advisors can get you decent returns, but not any better than you could get on your own. That 1% fee may not sound like a lot but it can add up really quickly. Not only do your investments have to match the market, they need to outperform it for you to even break even with the people not using an advisor.

Just don't do it.

[kork13]

Yeah, it's definitely best to handle it yourself.

I think the few circumstances where I actually would recommend someone use an advisor to actually manage your assets is when:

(1) You're an independent minor or completely lost/overwhelmed adult who knows absolutely nothing about finances or investments. Even then, you should only have the advisor manage things long enough for them to teach you how to competently handle things yourself. Ask questions, learn how to handle your investments with a simple, reasonable plan, then give the advisor his pink slip (or at most, keep him on under a fee-for-time arrangement.

(2) Someone who is incapable/incompetent of handling their finances on their own. Like someone who is incarcerated/institutionalized, has mental deficits, or is so old & infirm that they're no longer capable. In this case, minimizing the ongoing cost of management is less of a priority.

(3) You truly have so many assets or so little time to manage your finances that it makes more sense to outsource the day-to-day management of your assets. Many people might (incorrectly) think they "don't have the time" to manage their own assets, but more likely they just don't have the knowledge or interest... but if you can spare 1hr a month to check on your accounts, make sure nothing has gone sideways, it's not hard to adequately keep an eye on everything, and stay aware of any big changes in the space.

But these are all fairly fringe cases, applying to probably less than 2% of the population. Somebody else shouldn't manage your money ... You need to. Getting advice & instruction from somebody is a just fine (if not a good idea). But only you can truly have your own best interests at heart.

Another big note: Any financial advisor that doesn't make financial instruction a significant part of their services is not worth your time or money.

[ua_guy]

Anecdotal tidbit... my parents... I consider my father to be financially savvy, however, he's kept an advisor of sorts around for years. In the early days, it was an accountant who did their taxes and also provided asset management services, before the internet. I believe he was a true fiduciary. I don't get down to specifics, but my dad maintains that his "advisor" is worth the spend. I smile and nod, not having a leg to stand on. I certainly don't have an advisor, and my investment strategies are very basic at best. Even then, I'm doing it, and the returns say I'm doing at least OK at it.

The advisor has taken them to baseball games among other things. Again, I just smile and nod. You know exactly how that expense is paid and how the advisor earns his salary. But, whatever strategy my father is employing IS/has/will carry them through retirement very comfortably, so again, I just...smile and nod.

[disneysteve]

My cousin who passed away a couple of years ago used a Wells Fargo advisor. What a MESS I had to deal with when it came time to settle his estate. The advisor had him in 23 mutual funds. Some were commercially available funds, some were exclusive to WF so some could be transferred in kind but others had to be liquidated and then the cash transferred. We're not talking about a multi-million dollar portfolio so with 23 funds, some of them held less than $10,000. It was insane. The amount of overlap was significant and the fund fees on top of the management fee was ludicrous. Thankfully, he retired 11 years earlier and enjoyed a long bull market so when he died, he actually had more money than he started with despite living on that money, but I'm sure he would have had far more had he instead used a simple 3 or 4 fund portfolio at Vanguard on his own.

[srblanco7]

Another big note: Any financial advisor that doesn't make financial instruction a significant part of their services is not worth your time or money.

Just wanted to highlight this line as I think it's important. It's your money and all decisions regarding how it's invested should be made by you. The financial advisor should be educating you on options.

FINRA.org (the Financial Industry Regulatory Authority website) allows you to do broker checks, provides guidance on questions to ask a potential financial advisor, and provides some insight on all the various acronyms that finance industry professionals use (there's an astonishing number of acronyms). A couple of the important inquiries to ask of a potential advisor is regarding their disclosure events (roughly translated this is the financial industry term for formal complaints) as well as how they are compensated.

I don't have a Financial Advisor, but were I to consider, I'd only work with someone who was held to a fiduciary standard (meaning they must put their client's interest above their own).

[Andrew23]

To clarify Steve's somewhat panicked response.... Those 3 companies you mentioned are high on the list of the WORST possible options in the financial services world. They churn your account (needlessly buying & selling merely to generate fees for themselves), put you into questionable, costly investments that tend to under-perform the market, and generally have a terrible track record of not looking out for their clients 'best interests.

This is not to say that ALL financial advisors are crooks & cheats who will swindle you out of your money. But sometimes the good ones can be hard to find. In any case, their fees tend to be significant (at least 1% of managed assets, every year), and in many/most cases, their services do not lead to higher returns to offset their fees. In fact that almost never happens.

If you have a functional understanding of how investments work & have a reasonable degree of discipline/self-control, it would probably be best to just handle your assets yourself. There can be some benefit to some folks in having an advisor, who can answer questions, provide analysis or instruction, or advise on specific issues. But note that the difference is that this advisor would provide advice only, not control your investments, and you'd only pay a flat fee for their time.

Not all financial services folk are scummy .... But a large portion of them sadly tend to be.

Thank you all. I have a similar story to what ua_guy describes. My parents have questioned if I want to sit down with their guy and my Vanguard fund is an index fund so its doing what its supposed to be doing and returning what the index is so I am not sure what benefit I would have as well as fear I may be missing out but I guess I am not! Just trying to make sure I make the right decisions for saving for retirement

[Jluke]

Read this. And read it again.

https://www.etf.com/docs/IfYouCan.pdf

[Andrew23]

Read this. And read it again.

https://www.etf.com/docs/IfYouCan.pdf

Thank you! Printed and have the next week off and will read it.