Anonymous wrote:What mistakes do you think individuals who manage their own money without an advisor make that using an advisor would prevent?

I'll need more specifics of that question but I'll give 3 brief generalizations...

1. Not evolving the portfolio as goals and time horizons change.
2. Making emotional and myopic decisions that may not coincide with the endgame.
3. The most important, I believe, which plays into the first 2 - Not having a targeted, personalized, and comprehensive financial plan in place.

Remember the commercial with the two neighbors, I think it was ING? One man is carrying his "number" and the other person says he is just throwing money at it? It seems far too many people just throw money at their retirement and go with cookie cutter advice without having a plan specifically tailored to their individual goals and objectives.

Anonymous wrote:

OTAlexFA wrote:

Anonymous wrote:Why don't I just put my money in index funds rather than you? Will your fee + the returns outperform index funds + fees?

Index funds are great; they just aren't a cure-all.

i would disagree with you here. almost nobody can beat the market over a long timespan, so it makes little sense to do anything BUT invest in index funds. all this jazz about timing the market and "hedging" against downturns is a recipe for losing your ass.

I never try and time the market (except during earnings seasons for myself). I recommend building in hedges to your portfolio to where you're not 100% exposed to downcapture. If by "losing your ass" means you underperform a couple of percentage points, I'll offer that peace of mind everytime. See 2001 and 2008.

If you want to leave it all out there, by all means, that is your option and I won't argue with your comfort level.

Anonymous wrote:It means he/she charges a fee, but also takes a cut of assets under management. That's the only way a financial advisor can make any money.

Let me clarify this statement. There is no "but also". The fee is just the percentage. I'm not like an attorney where I charge hourly consultation or retainer fees. If we find a solution that utilizes me or my firm, then we charge based upon the platform used. If it is fee based, then that percentage of AUM is all encompassing.

Does that make sense or muddy the waters further?

Anonymous wrote:

OTAlexFA wrote:

Anonymous wrote:Are you a fee only adviser?

No. Majority yes, entirety no.

What does this answer mean?

The majority of business that I do is fee-based. It means that I charge an annual percentage of your AUM (Assets Under Management), whether it's 1.5%, 1.00%, or less, depending upon your commitment level. Most advisors want this type of arrangement. I do have clients that do not want that type of fee structure so they are charged per transaction, instead.

Fee-based obviously allows for more activity and re-balancing without charging a commission each time we make a move.

Anonymous wrote:Why don't I just put my money in index funds rather than you? Will your fee + the returns outperform index funds + fees?

This one feels like a trap.

In a bull market? Maybe not. Index funds are outstanding when everyone is making money. However, are you going to tactically manage those passive funds? If not, you can guess what happens when the market "corrects" (a term I don't like). You'll get virtually 100% of the market growth now and then virtually 100% of the downcapture, as well. There's no hedge. As most of us know from math, if you lose 20%, it takes 25% of gains to get back to even.

Index funds are very popular, particularly on DCUM, I've seen. I like them. I use them. The question is, does it fit your strategy? What's your time horizon? What's your goal? Index funds are great; they just aren't a cure-all.

Anonymous wrote:Can you explain how you will outperform the market over a period of 25-35 years, when studies repeatedly have shown that the vast majority of people are unable to do so?

How is someone better off with you as opposed to investing in low-cost index funds - say 60% domestic stocks, 30% foreign stocks, and 10% bonds and rebalancing as they age?

Here comes the big curtain reveal - ready?

I will never outperform the market. Period.

Frankly, it's not my job to. In fact, the only way I will even attempt to is if I have a client/investor that wants me to invest "dumb money." Dumb money is basically someone giving you a sum and saying, "Do what you can with this." I don't work that way. I can attempt that with a sleeve of a portfolio, if a client requests. I can attempt it with my OWN money.

To attempt to outperform the market, you need to be fully invested at the highest risk tolerance and taking a lot of chances. A stockbroker may try that for you. An advisor likely will not. My job is long-term planning and reaching goals that we set together. If someone ever asks me, "What can you do if I gave you X amount of dollars?" I tell them to go to an online broker (E-trade, TD, Scott, et al.). That's not my game.

Anonymous wrote:Are you a fee only adviser?

No. Majority yes, entirety no.

Anonymous wrote:do you think it makes sense for people to put all their money with one advisor they trust (the funds themselves are diversified), or to keep a number of people on hand?

my money is managed by different people at different places - i just feel more comfortable that way - but there's no 'one person' who knows my whole portfolio (with a financial background, of course DH and i do). hope this makes sense.

Completely makes sense. I have no problem whatsoever having multiple people that you trust managing your money. Obviously, those advisors might tell you something different, I'm sure, because they'd like to have all the assets. The only concern I see is having those individuals in the dark about your entire portfolio. I think your most trusted advisor should know everything that you have so that way an accurate financial plan can be created for you, even if you have zero plans to move more assets to him/her. They should understand that, as well. However, a good doctor will want to know all the symptoms before issuing a diagnosis, right?

Anonymous wrote: why should I pay you to lose money

If anyone has lost you money in the market in the last 5 years, please fire them. With rational investing, I'm not 100% sure if that would even be possible, really. Outside of that, advisors can help take the emotion out of investing for you. The market will inevitably go down. It's your advisor's job to keep you on track and not make potentially bad knee-jerk reactions/decisions.

DCUM -

My friend turned me onto this site a couple of weeks ago so I have been lurking reading some posts. There is some really great advice and some band-aids that will help some folks in the interim, but also other recommendations I disagree with. I know there is a staunch anti-advisor sentiment in many of these posts, which I can understand. I'm just here to hopefully dispel some myths about the industry and lend some professional insight where available.

I know I may be facing some animosity but I'm ready! If there are any quick questions you have that won't need another thread, feel free and ask here.

Happy planning and investing!