Are wealth advisors worth it?

[Anonymous]

Let's say you had something like $15 million and aren't an investment expert but know some of the basics (i.e., diversification to protect against major losses). should you use a wealth advisor? The fees can be between 0.5% - 1.0% annually regardless of whether the portfolio goes up or down. That can range between $75k - $150k per year in this example!

[Anonymous]

Not to me.

It strikes me as another rip off of the rich and gullible (or lazy, who farm out most non-fun aspects of their lives).

My friends swear by them, but I am more frugal (and have super simple finances).

[Anonymous]

No. Read Bogleheads. Invest in Index funds. Do not wasted your money on this.

[Anonymous]

NP (and not a financial advisor). It depends on your financial situation. If it is simple - a tax advantaged retirement program and a taxable program, no RE, not a business owner, not a lot of money to donate/charity, not a big pot that you plan to give to your kids, etc, you don't need it no matter how much money you have. KISS.

If you have one or more of the above though, it might make sense, especially to use tax-advantaged strategies thta the masses don't know about and to find a few alt investments that can balance out a portfolio. But don't expect them to find the golden goose or to beat the market. They won't.

[Anonymous]

We use Brown Advisory and the actual investment strategy is only part of what they provide for their fee. A lot of the kind of wrap around advising has been really helpful. But of course it’s not necessary.

[Anonymous]

Anonymous wrote:Let's say you had something like $15 million and aren't an investment expert but know some of the basics (i.e., diversification to protect against major losses). should you use a wealth advisor? The fees can be between 0.5% - 1.0% annually regardless of whether the portfolio goes up or down. That can range between $75k - $150k per year in this example!

My perspective. About 10 years ago, some company stock vested and I decided to have it (and a few miscellaneous balances we had at that time) manged by a financial advisor. The money they managed represented about 20% of my net worth at that time. I track balances each quarter and I noticed that even with all their management, their accounts did not really beat any of my self-managed accounts. When the market fell, theirs did too (and their assurance at the time of signing up was how they'd anticipate market downturns, hedge it and other such BS). I have since cancelled their contract and self-manage all of my investments.

I've heard other advisors provide additional services - estate financial planning, tax strategy advice, etc. Mine did not do that for the 1% fee they were charging.

If I were in your shoes, here's what I'd do.. Interview a few advisors to understand the services they will provide for the fee (not just offer). Make sure they talk in terms of your life goals vs returns (you should be more focused on getting a certain threshold return each year vs. beating the market). Ask them how they reacted to market downturns - 2008/9, 2011, 2015, 2017 and 2020. Ask for evidence.

Understand their fees. They have thresholds. E.g. 1% below $1M in assets, 0.75% for assets under $2M, etc. Fees are negotiable. Don't pay more than 0.5%. Start them off with just the bare minimum to get the lowest fee. Say $2M to get the 0.5% fee. If you are happy, move more money to them over time. Or just copy their portfolio and implement it yourself with the rest of your money.

The real value of an advisor is not in their portfolio but their financial advice.

[Anonymous]

Anonymous wrote:NP (and not a financial advisor). It depends on your financial situation. If it is simple - a tax advantaged retirement program and a taxable program, no RE, not a business owner, not a lot of money to donate/charity, not a big pot that you plan to give to your kids, etc, you don't need it no matter how much money you have. KISS.

If you have one or more of the above though, it might make sense, especially to use tax-advantaged strategies thta the masses don't know about and to find a few alt investments that can balance out a portfolio. But don't expect them to find the golden goose or to beat the market. They won't.

Good points. But I would add that alternative investments like commodities and hedge funds don't usually live up to the hype. Even strategies like factor based investing sound great, but tend to fail to deliver any type of meaningful benefit. The same thing goes for most tax-advantaged strategies. Everyone with a iphone has access to this info, so it's not exactly a secret. Financial advisors, much like academia, have a vested interest in making things confusing and are constantly coming up with new studies and tactics to justify their jobs. Today is a new day, and the biggest advantage rich people have is their capacity to take risk, not their access to superior investing products.

[Anonymous]

No. Absolutely not. We've had a strategy that has worked for us for the past decades and the "wealth advisors" we've consulted have always told us to do very stupid things, so we just thanked them and walked away, and kept doing exactly what we thought was right.

Also note that these people are not wealthy themselves... which should tell you everything you need to know!

[Anonymous]

It does for us because we have enough things to do without having to pay attention to the stock market and our portfolio. Plus, they have more access to certain funds that the general public does not.

[Anonymous]

My father recently passed away. His investment manager has been extremely helpful to us in navigating the legal and accounting sided of things. I have never used one myself but might think about it.

[Anonymous]

Anonymous wrote:NP (and not a financial advisor). It depends on your financial situation. If it is simple - a tax advantaged retirement program and a taxable program, no RE, not a business owner, not a lot of money to donate/charity, not a big pot that you plan to give to your kids, etc, you don't need it no matter how much money you have. KISS.

If you have one or more of the above though, it might make sense, especially to use tax-advantaged strategies thta the masses don't know about and to find a few alt investments that can balance out a portfolio. But don't expect them to find the golden goose or to beat the market. They won't.

You can use an accountant and/or a fee-based planner for that. Why not spend $5-10K on advice ONE time and go from there.

Here's an analysis showing that Trump would have $400M more in assets if he had just stayed in the market. People think too short-term, which this points out. Short term he was doing better, long term >> nope.

https://www.forbes.com/sites/danalexander/2021/10/11/its-official-trump-would-be-richer-if-he-had-just-invested-his-inheritance-into-the-sp500/?sh=5c2a3be1c486

[Anonymous]

13:54 OOPs. Market = S&P 500 index fund

[Anonymous]

Anonymous wrote:It does for us because we have enough things to do without having to pay attention to the stock market and our portfolio. Plus, they have more access to certain funds that the general public does not.

The most effective strategy is to NOT pay attention to the stock market. The last thing you want to do is make changes to your asset allocation due to underperformance. My emerging markets and international mutual funds have been getting slaughtered by S&P 500 for a good 10 years. But diversifying and sticking to your guns has proven to be the most effective strategy. Your last sentence used to be true, but now there is a relatively low cost ETF for pretty much every asset class.

[Anonymous]

NO, don't fall for it OP.

[Anonymous]

Anonymous wrote:It does for us because we have enough things to do without having to pay attention to the stock market and our portfolio. Plus, they have more access to certain funds that the general public does not.

The trick is to buy and hold and not look too often at what the stock market is doing, PP. Investing doesn't actually take time. It takes basic industry knowledge, which is different, and which a financial advisor does NOT have more than you.