Why would you pay 1% to a financial advisor?

[Anonymous]

Access to:
- Advice on finances
- Investments available on their platform that you can't buy through an online brokerage (alts, real estate funds, private equity)
- if you have enough assets a separately managed account

It's not for everyone. Its probably not for people that read boggleheads and want to have all their investments in vti/spy - you can do that approach yourself without paying fees.

[Anonymous]

Anonymous wrote:

Anonymous wrote:I am just trying to see what we are missing. We are in our mid 50s and have a net worth of about $5 million. We have 401k’s, Roth IRAs, allocated generally on the three fund approach from Boglehead. In taxable account, we have VTI and T-Bills. We also have some I-bonds and savings in HYSA. College for kids covered by 529s and a little cash flow.

What are we missing by not having an advisor?

Missed opportunities. you really need about 10 million in investable assets to get the alternative asset allocation opportunities.

And have someone doing great diligence on all of it.

Which alternative assets do advisors have access to that DIY investors don't?

[Anonymous]

Anonymous wrote:

Anonymous wrote:The more money you have, the smaller percentage you have to pay or you can negotiate to do so. All of you should not be paying 1 percent if you have anything worth being managed. That is an old way of thinking in investment services. We use an investment firm and our money along with extended families money all is considered under the same umbrella. So we get investment services for far less than 1% because of the large amount total but our personal direct money is just a percentage of the larger pot. We still get the same services. It is very much worth it to us. Speak to investment firms and see what they can do for you. Or pool with extended family members like we did. They want your business but you have to make it worth it to them.

+1
By the time we were at a million, we were paying less than 0.5%. A good financial advisor is worth it. We do get better returns than the index market funds, have more diversity, and ours manages most financial issues for us. so they play the game of keeping our "cash" in CD/MM so we have FDIC insurance for all of it (there is a lot of it)---I don't have the time to be opening 20+ bank accounts and managing the 3-6 month CDs that come due (that has been the best returns in last year). My FA also gets access to CDs that are at higher rates than even I can get at most good online banks.

How much are you keeping in CD/MM an why? $500K for you and spouse is (1) far too much anyway beyond a short term need like real estate sale, and (2) already half of that "million".

[Anonymous]

my advisor saved my ass and that of several people i know specifically around the tax implications of startups, ISOs, AMT, etc. He convinced my CFO and founders to allow 83b elections which saved me millions in taxes.

He's referred me to excellent tax accountants and estate planners.

He keeps an eye on my accounts, talks me out of stupid stock decisions, makes sure my cash flow is sufficient. Could I do all of that myself? sure. might i get distracted and screw it up at some point? very likely. Just like I *can* do all my own cleaning and laundry and cooking and brake jobs... I usually pay someone else to do it.

No one is holding a gun to your head and forcing you to use a financial advisor, or to order take-out. My arrangement works for me.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I am just trying to see what we are missing. We are in our mid 50s and have a net worth of about $5 million. We have 401k’s, Roth IRAs, allocated generally on the three fund approach from Boglehead. In taxable account, we have VTI and T-Bills. We also have some I-bonds and savings in HYSA. College for kids covered by 529s and a little cash flow.

What are we missing by not having an advisor?

Missed opportunities. you really need about 10 million in investable assets to get the alternative asset allocation opportunities.

And have someone doing great diligence on all of it.

Which alternative assets do advisors have access to that DIY investors don't?

.
Private equity funds to name one

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:The more money you have, the smaller percentage you have to pay or you can negotiate to do so. All of you should not be paying 1 percent if you have anything worth being managed. That is an old way of thinking in investment services. We use an investment firm and our money along with extended families money all is considered under the same umbrella. So we get investment services for far less than 1% because of the large amount total but our personal direct money is just a percentage of the larger pot. We still get the same services. It is very much worth it to us. Speak to investment firms and see what they can do for you. Or pool with extended family members like we did. They want your business but you have to make it worth it to them.

+1
By the time we were at a million, we were paying less than 0.5%. A good financial advisor is worth it. We do get better returns than the index market funds, have more diversity, and ours manages most financial issues for us. so they play the game of keeping our "cash" in CD/MM so we have FDIC insurance for all of it (there is a lot of it)---I don't have the time to be opening 20+ bank accounts and managing the 3-6 month CDs that come due (that has been the best returns in last year). My FA also gets access to CDs that are at higher rates than even I can get at most good online banks.

How much are you keeping in CD/MM an why? $500K for you and spouse is (1) far too much anyway beyond a short term need like real estate sale, and (2) already half of that "million".

$10m in the market, $6M in homes. Rest (over $20M ) is in cash/bonds/cs. As there is no need to take more risk. Going to earn well over a million on those this year. At an age we don’t need to risk more in the market. Homes paid off, college fully funded. We could retire now but like working.

[Anonymous]

Even in good marriages, a third party (financial advisor) being involved can be a very good idea.

[Anonymous]

Anonymous wrote:

Anonymous wrote:I am just trying to see what we are missing. We are in our mid 50s and have a net worth of about $5 million. We have 401k’s, Roth IRAs, allocated generally on the three fund approach from Boglehead. In taxable account, we have VTI and T-Bills. We also have some I-bonds and savings in HYSA. College for kids covered by 529s and a little cash flow.

What are we missing by not having an advisor?

Missed opportunities. you really need about 10 million in investable assets to get the alternative asset allocation opportunities.

And have someone doing great diligence on all of it.

Are these “financial advisors” or fiduciaries?

How do they get paid? Hourly? % of portfolio?

[Anonymous]

My previous employer gave us free access to a financial advisor company. They ran a full Monte Carlo analysis for me when I was mid 40s. Again free. I found it enlightening in terms of future planning. Knowing what I know now I might pay a flat fee for the service today, but there are pretty decent Monterey Carlo calculators available online these days. If you haven’t done one or don’t want to bother you could ask a flat fee advisor to do that for you. But no never a percent of assets. For most of us that have 7 and low 8 figure portfolios That’s just stupid.

[Anonymous]

Anonymous wrote:my advisor saved my ass and that of several people i know specifically around the tax implications of startups, ISOs, AMT, etc. He convinced my CFO and founders to allow 83b elections which saved me millions in taxes.

He's referred me to excellent tax accountants and estate planners.

He keeps an eye on my accounts, talks me out of stupid stock decisions, makes sure my cash flow is sufficient. Could I do all of that myself? sure. might i get distracted and screw it up at some point? very likely. Just like I *can* do all my own cleaning and laundry and cooking and brake jobs... I usually pay someone else to do it.

No one is holding a gun to your head and forcing you to use a financial advisor, or to order take-out. My arrangement works for me.

+1 I have an advisor because I want my money to be professionally managed, as well as my withdrawals. I could do it myself if I had the time, expertise and interest, but I don't.

[Anonymous]

Anonymous wrote:Even in good marriages, a third party (financial advisor) being involved can be a very good idea.

Wuh?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I am just trying to see what we are missing. We are in our mid 50s and have a net worth of about $5 million. We have 401k’s, Roth IRAs, allocated generally on the three fund approach from Boglehead. In taxable account, we have VTI and T-Bills. We also have some I-bonds and savings in HYSA. College for kids covered by 529s and a little cash flow.

What are we missing by not having an advisor?

Missed opportunities. you really need about 10 million in investable assets to get the alternative asset allocation opportunities.

And have someone doing great diligence on all of it.

Which alternative assets do advisors have access to that DIY investors don't?

.
Private equity funds to name one

They underperform the market, better off with S&P 500.

[Anonymous]

Anonymous wrote:Does it make financial sense? Of course not. But people spend money on this for the same set of reasons people spend money on anything:
a) ignorance. They don’t know any better
b) self-importance/vanity. They think it makes them special.
C) laziness. They genuinely can’t be bothered with this crap, and can afford not to have to worry about it.

People spend money on worse things…

Exactly.

I would never in my life pay for either a personal trainer or a financial advisor, beyond perhaps a one-time advice session.

But not all people who do so are idiots; some just have very different preferences than I do.

[Anonymous]

My brother and I use one to manage my mother's money (she is in assisted living with Alzheimer's). They deal with RMDs, constantly reevaluate whether she has enough cash to pay her monthly costs, invests some of the other money aggressively since she will never need it. It also helps prevent any tension between me and my brother since we are outsourcing the investment decisions vs trying to agree on each little thing together.

[Anonymous]

My advisor is a fiduciary and worth every penny (under 1%). He outperforms my own attempts at investing so he basically pays for himself. Tax loss harvesting as others have mentioned is something I don’t even understand but one year I had huge gains but losses on paper. It was like magic, I have no idea how they pulled that off. Mine also has an in-house CPA and estate lawyer whose services are included as part of their fees. I’ve been very pleased.