# The Value of Financial Advisors **URL:** \ **Category:** In My Humble Opinion\ **Created:** [November 20, 2024, 1:04pm UTC](https://boards.straightdope.com/t/the-value-of-financial-advisors/1010506 "2024-11-20T13:04:07Z")\ **Posts on this page:** 20\ **Page:** 6
**Author:** ![DSeid](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/dseid/32/20194_2.png) [@DSeid](https://boards.straightdope.com/u/DSeid)\ **Post date:** [November 23, 2024, 8:10pm UTC](https://boards.straightdope.com/t/the-value-of-financial-advisors/1010506/109 "2024-11-23T20:10:35Z")
The way I thought of it presented to @Dinsdale really is the reality check for me. Heck, let’s be more generous and start with a 5% annual withdrawal from the funds to live off of. Plus 60K SS. Which may be more than you’ll pull depending on earning history and when you start. Your $2M portfolio then gives you $160K a year. _11% of your annual retirement budget_ to the advisor! That’s a big expense for an hour _maybe_ of rebalancing each year and picking an allocation mix with a degree of volatility risk you are comfortable with. ---
**Author:** ![JackieLikesVariety](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/jackielikesvariety/32/296_2.png) [@JackieLikesVariety](https://boards.straightdope.com/u/JackieLikesVariety)\ **Post date:** [November 24, 2024, 1:48am UTC](https://boards.straightdope.com/t/the-value-of-financial-advisors/1010506/110 "2024-11-24T01:48:23Z")
> [@DSeid](#): > > The main question I am going to have is: what value do you offer over my putting these into a basic basket of a few low cost index funds and rebalancing to target allocations annually myself? well, yes, but it’s a bit confrontational for me _at this point_. I am not ready to move the money yet and as someone pointed out somewhere (might have been reddit) when I ask something like that it will set off whatever spiel the salesman has learned by heart. Eventually it will come down to me getting enough info (not from him, probably) to decide that for myself. I want to find (and pay for) the best advice for setting things up and then decide if I can “rebalance” annually myself. ---
**Author:** ![JackieLikesVariety](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/jackielikesvariety/32/296_2.png) [@JackieLikesVariety](https://boards.straightdope.com/u/JackieLikesVariety)\ **Post date:** [November 24, 2024, 1:52am UTC](https://boards.straightdope.com/t/the-value-of-financial-advisors/1010506/111 "2024-11-24T01:52:14Z")
> [@OldOlds](#): > > make sure you ask about commissions. Some high-fee investments pay a commission to the FA, which is an incentive for him to put you in those investments, even if they aren’t in your best interest. thank you ---
**Author:** ![Dr\_Paprika](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/dr_paprika/32/3042_2.png) [@Dr\_Paprika](https://boards.straightdope.com/u/Dr_Paprika)\ **Post date:** [November 24, 2024, 2:19am UTC](https://boards.straightdope.com/t/the-value-of-financial-advisors/1010506/112 "2024-11-24T02:19:44Z")
On the whole, I would say financial advisors are worth it under a few conditions: - You have substantial amounts to invest - Your investing knowledge is nil to moderate - You do not want to spend ample time on this - You have more complex tax or estate issues - You can get advice for reasonable rates It is probably true that most advisors are not better than index funds. But good ones pull back into cash equivalents before crises, know local tax laws, help avoid bad decisions, offer peace of mind, can explain economic issues and clarify tangential planning issues. In Canada, not all advisors are fiduciary, but I think they should be. Also, some people can call themselves advisors with little training. Of course you want an advisor that knows and obeys the law, and has knowledge and access to a wide variety of financial products, not just their own bank or group. It is true that paying 1% eats into profits. But if they make 9% consistently, that would be a price I would be willing to pay for the convenience and security. If you are paying 3%, the mathematics is quite different. ---
**Author:** ![Mighty\_Mouse](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/mighty_mouse/32/7776_2.png) [@Mighty\_Mouse](https://boards.straightdope.com/u/Mighty_Mouse)\ **Post date:** [November 24, 2024, 2:22am UTC](https://boards.straightdope.com/t/the-value-of-financial-advisors/1010506/113 "2024-11-24T02:22:26Z")
> [@Dr\_Paprika](#): > > But good ones pull back into cash equivalents before crises Is there ANY evidence of this? ---
**Author:** ![Dr\_Paprika](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/dr_paprika/32/3042_2.png) [@Dr\_Paprika](https://boards.straightdope.com/u/Dr_Paprika)\ **Post date:** [November 24, 2024, 2:31am UTC](https://boards.straightdope.com/t/the-value-of-financial-advisors/1010506/115 "2024-11-24T02:31:19Z")
Not much. Many financial advisors talk about how you can’t time things, being in it for the long haul, recessions are needed from time to time… etc. These things _are_ hard to time, and obviously impossible to time exactly. You would have missed out on some boom years by closely following things like the Shiller Index. But it is worth trying when the exuberance is particularly irrational. For some reason Buffett is selling stocks for cash when he could be investing in cryptocurrency or Trump Social. He was a billionaire, last I heard. (Shrug.) ---
**Author:** ![DSeid](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/dseid/32/20194_2.png) [@DSeid](https://boards.straightdope.com/u/DSeid)\ **Post date:** [November 24, 2024, 4:11am UTC](https://boards.straightdope.com/t/the-value-of-financial-advisors/1010506/116 "2024-11-24T04:11:18Z")
Well if they can’t time the market they aren’t a true good one! ---
**Author:** ![Shalmanese](https://avatars.discourse-cdn.com/v4/letter/s/45deac/32.png) [@Shalmanese](https://boards.straightdope.com/u/Shalmanese)\ **Post date:** [November 24, 2024, 6:27am UTC](https://boards.straightdope.com/t/the-value-of-financial-advisors/1010506/117 "2024-11-24T06:27:10Z")
> [@Dr\_Paprika](#): > > But good ones pull back into cash equivalents before crises Any investor who did this would have advised you to pull out to cash when COVID hit and looked like a total genius when the market dropped 30% in a week and then a total idiot as the market went on to have phenomenal performance in the next year. And that’s assuming they had the magical foresight to be early. The reason why the market dropped was because so many advisors were telling their clients to pull out, which means you would have pulled out right at the lows and watched frustrated at the sidelines at the market climbing steadily higher week by week as millions of Americans died. Don’t go with any FA that promises above market returns, that’s how they sucker you into the insanely high fees. Go for the ones that focus on sensible, boring investments and mainly are there to keep you from making obviously dumb moves. ---
**Author:** ![octopus](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/octopus/32/3716_2.png) [@octopus](https://boards.straightdope.com/u/octopus)\ **Post date:** [November 24, 2024, 6:52am UTC](https://boards.straightdope.com/t/the-value-of-financial-advisors/1010506/118 "2024-11-24T06:52:34Z")
About that market timing… good ones would have had cash on hand (or equivalent) to buy more high volatility items, such as equities, during a crisis when said equities are on sale by panicked sellers. Where do you get that sort of advice and planning for a reasonable fee? 1% is not reasonable in my opinion as a 30 year stretch at that rate can be quite a drag. [How A 1% Investment Fee Can Wreck Your Retirement](https://www.forbes.com/sites/robertberger/2021/02/05/how-a-1-investment-fee-can-wreck-your-retirement/) Now whether or not the service is worth that sort of lost future wealth is for each individual to decide for themselves. Personally, it isn’t for me. ---
**Author:** ![Dr\_Paprika](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/dr_paprika/32/3042_2.png) [@Dr\_Paprika](https://boards.straightdope.com/u/Dr_Paprika)\ **Post date:** [November 24, 2024, 2:04pm UTC](https://boards.straightdope.com/t/the-value-of-financial-advisors/1010506/119 "2024-11-24T14:04:56Z")
I don’t disagree with any of that. But if you retire with five mil instead of four mil, your retirement is hardly ruinous. If your advisor performs when things are less rosy, this may make them worth it. You can make money investing in meme stocks, tulips or NFTs, but that does not make them great investments for most - and if you do not know that maybe you need better advice. You can also greatly increase your wealth by not paying taxes. _“You say, Steve, how can I be a millionaire and never pay taxes?” Martin’s reply was to tell the tax man, “I forgot!” Two simple words!_ ---
**Author:** ![DaveUnknown](https://avatars.discourse-cdn.com/v4/letter/d/94ad74/32.png) [@DaveUnknown](https://boards.straightdope.com/u/DaveUnknown)\ **Post date:** [November 24, 2024, 4:47pm UTC](https://boards.straightdope.com/t/the-value-of-financial-advisors/1010506/120 "2024-11-24T16:47:39Z")
I was just watching an Amanpour & Co. clip from this past week with a guest from the Financial Times discussing Trump’s policies, etc. Ok, fine… but in the comments were a lot of : “I am worried about my financial future, caution is warranted. hence I will advice you [sic] I am thinking about obtaining a financial advisor…” followed with “yes that is most wise. I recommend a financial advisor such as… knowing today’s culture The [sic] challenge is knowing when to purchase” naming names, and otherwise bizarre bot/spam type comments and sort-of dialogue. I am not saying this is the source of this whole thread, just a bizarre coincidence. ---
**Author:** ![Dinsdale](https://avatars.discourse-cdn.com/v4/letter/d/97f17d/32.png) [@Dinsdale](https://boards.straightdope.com/u/Dinsdale)\ **Post date:** [November 24, 2024, 5:36pm UTC](https://boards.straightdope.com/t/the-value-of-financial-advisors/1010506/121 "2024-11-24T17:36:16Z")
Well, congrats, guys. You’ve got me thinking I might as well dump our current guy. In my situation, I’m not entirely sure there is any BEST approach. Instead, just a wide range of good approaches. And the strategy I see is to choose the one you are the most comfortable with - however you define your comfort. And right now, paying 1% to any guy is not providing me the comfort it once did. ---
**Author:** ![snowthx](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/snowthx/32/10660_2.png) [@snowthx](https://boards.straightdope.com/u/snowthx)\ **Post date:** [November 24, 2024, 7:06pm UTC](https://boards.straightdope.com/t/the-value-of-financial-advisors/1010506/122 "2024-11-24T19:06:56Z")
> [@Dinsdale](#): > > And right now, paying 1% to any guy is not providing me the comfort it once did. Yeah, same here. I’ve got some thinking to do. My 401K has been doing great, and that’s all me with no advisor. My one portfolfio the FA is proposing a change to “wealth management” which eliminates individual fund fees and fees for trades, but is 1.5% fee annually. ---
**Author:** ![Dewey\_Finn](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/dewey_finn/32/4222_2.png) [@Dewey\_Finn](https://boards.straightdope.com/u/Dewey_Finn)\ **Post date:** [November 24, 2024, 7:12pm UTC](https://boards.straightdope.com/t/the-value-of-financial-advisors/1010506/123 "2024-11-24T19:12:59Z")
That 1.5% fee is almost certainly more than you’re paying now unless you’re trading constantly and/or have high fee funds. ---
**Author:** ![CoolHandCox](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/coolhandcox/32/16233_2.png) [@CoolHandCox](https://boards.straightdope.com/u/CoolHandCox)\ **Post date:** [November 25, 2024, 7:35pm UTC](https://boards.straightdope.com/t/the-value-of-financial-advisors/1010506/124 "2024-11-25T19:35:01Z")
> [@DSeid](#): > > A few thousand annually to assuage me of anxiety that I am missing something out of ignorance? I think this captures my thoughts very well. The rest is not a response to you directly, but fleshing out what I think there are basically two layers to the “is it worth it” question: 1. **The excel spreadsheet answer**. Here, it’s always pretty clear what the right answer is. E.g., Don’t pay a FA money for something you can do yourself, etc. etc. This simple answer however lacks all reality and emotion. 2. **Your personal comfort level**. This is equally as valid as No. 1. It doesn’t have to make financial sense, as long as it’s a rational choice. My personal anxiety of knowing I can probably do something myself and save money, but worrying whether I did it right or the best or or at the right time, or whatever, is not worth it _for me_. I will gladly pay someone else to transfer my worry and anxiety to. Even an amount that other people think is not worth it. Another example could be paying off your house mortgage if you have the money to do so. The excel spreadsheet says don’t do that because you have low interest rates and you can make more money long-term by investing. But we are all different. A person might be much more comfortable just paying it off and not having to worry about it each and every month for years on end. Years of no worry. So it is actually “worth it” to pay if off and lose the money you would have made investing. It cost you money, but you did get something for that lost money = no worry/no debts, etc, all rational ways to handling your personal money over the course of a few decades that is your life. ---
**Author:** ![JackieLikesVariety](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/jackielikesvariety/32/296_2.png) [@JackieLikesVariety](https://boards.straightdope.com/u/JackieLikesVariety)\ **Post date:** [November 25, 2024, 8:24pm UTC](https://boards.straightdope.com/t/the-value-of-financial-advisors/1010506/125 "2024-11-25T20:24:36Z")
> [@Dr\_Paprika](#): > > In Canada, not all advisors are fiduciary that’s what I think, they all SHOULD be. the Amerprise guy I inherited along with money is a CFP and when I read on their website it says > At all times when providing Financial Advice to a Client, a CFP® professional must act as a fiduciary, and therefore, act in the best interests of the Client. > **[Code of Ethics and Standards of Conduct](https://www.cfp.net/ethics/code-of-ethics-and-standards-of-conduct)** > > CFP Board's Code and Standards — effective 10/1/19, with an enforcement date of 6/30/20 — is critical to the public's trust and confidence in CFP® professionals. I’m going to ASK if he is when we have a phone meeting tomorrow but does this mean he already is “a Fiduciary” ? because if so, why isn’t it listed along with CFP on his bio at Ameriprise or on LinkedIn? in other words, I want to know before our meeting if he is or not. ---
**Author:** ![Munch](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/munch/32/5281_2.png) [@Munch](https://boards.straightdope.com/u/Munch)\ **Post date:** [November 25, 2024, 8:32pm UTC](https://boards.straightdope.com/t/the-value-of-financial-advisors/1010506/126 "2024-11-25T20:32:47Z")
> [@JackieLikesVariety](#): > > because if so, why isn’t it listed along with CFP on his bio at Ameriprise or on LinkedIn? Because it’s not really a job title, job description, or certification. Definitely ask - he’ll say he is, since his CFP requires it. His compliance officer likely doesn’t give a crap though - they are there to protect Ameriprise, not your advisor from the CFP board. ---
**Author:** ![Dewey\_Finn](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/dewey_finn/32/4222_2.png) [@Dewey\_Finn](https://boards.straightdope.com/u/Dewey_Finn)\ **Post date:** [November 25, 2024, 8:32pm UTC](https://boards.straightdope.com/t/the-value-of-financial-advisors/1010506/127 "2024-11-25T20:32:48Z")
And yet lots of those advisors who charge one percent of assets under management are fiduciaries. So that’s not necessarily the only thing to look for. ---
**Author:** ![JackieLikesVariety](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/jackielikesvariety/32/296_2.png) [@JackieLikesVariety](https://boards.straightdope.com/u/JackieLikesVariety)\ **Post date:** [November 26, 2024, 5:36pm UTC](https://boards.straightdope.com/t/the-value-of-financial-advisors/1010506/128 "2024-11-26T17:36:01Z")
> [@Dewey\_Finn](#): > > assets under management AUM! I know what it stands for, now, and to ask how much it is (right?) what else do I need to know about it? ---
**Author:** ![Dewey\_Finn](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/dewey_finn/32/4222_2.png) [@Dewey\_Finn](https://boards.straightdope.com/u/Dewey_Finn)\ **Post date:** [November 26, 2024, 5:37pm UTC](https://boards.straightdope.com/t/the-value-of-financial-advisors/1010506/129 "2024-11-26T17:37:40Z")
It does help when those who use acronyms like AUM spell them out, especially when introducing them into the conversation. [Previous page](https://boards.straightdope.com/t/the-value-of-financial-advisors/1010506.md?page=5) [Next page](https://boards.straightdope.com/t/the-value-of-financial-advisors/1010506.md?page=7)