Reply to Talk to me about why we should or should not use a financial advisor

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[quote=Anonymous]We use an independent advisory firm. They charge 0.85% of managed assets. They don't get commissions for pushing particular funds.

Regarding index funds, no one has talked about risk really. Basically, in investing the more risk you take, the higher the returns but also the higher the downside. For example, our adviser has us in 100/0 (equities (stocks) vs bonds) for retirement funds because we won't be drawing those for 20-30 years, but for funds we may use sooner, we're in 70/30 equities vs bonds. Then that same advisor manages a trust for an elderly relatively where I'm a trustee, and we have that in 50/50 since she may need the money for long-term care in a few years.

So if you're in all index, yes you won't have high fees, but you also face large downside if the market goes down. That's fine for long-term investing (it's cyclical) but not great if you planned to use that money 2 years from now on a home renovation and you're down 30%.

Then the "just buy 5 different Vanguard index funds" can be tricky. What if the combination of them means you're holding 20% commodities while the market in general is only 10%? That may be OK, but most people don't check across investments.

Then, let's say you want to put in another $5k. Which fund? Evenly across all?

Here's what our advisor helps us on:
- Reviews our wills and provides advice on situations like if we both die before our children turn 18. Our lawyer wanted to give it all to them right at 18, but our advisors suggested milestones age-based due to the sums involved.
- Reviews our 401k allocations from employers against our investments with them, to ensure we have proper diversification based on our risk preferences.
- Reviews insurance coverage
- Does tax-advantaged management of our portfolio, like when certain funds are down, sell them but re-buy a similar fund the next day, for tax loss harvesting purposes. No wash sale since it's a different fund.
- Reinvests dividends and new money to rebalance the portfolio.
- Helps us plan for long-term financial scenarios, like how much needed to retire and when.

Yes, we can read books to figure all this out, and we can take the time to do it. Heck, we're both MBAs and know finance.. but we'd rather spend that time with our kids and on other matters. It's worth 0.85% per year to us.

We also don't mow our own lawn, or clean our own house, or fix our own cars. We know how to do all these, but the one thing we have a fixed amount of is time, and we've chosen to allocate it to different priorities.
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