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I suspect that if those friends looked at the amount of money their adviser COULD have made for them over the years by putting them in no-load funds instead of the load funds they are currently invested in, they'd be significantly less happy with the "great" results they've achieved. Their happiness is not a testimony to the effectiveness of their adviser, but proof of their own innumeracy.
I can't swear to it -- but I don't think they've ever done that.
I think they're just too...."trust the investment expert" oriented.
If you don't think you can do it -- then you can't.
2) The person who recommended the planner just today said, she doesn't think she could have done what the planner did for them.
And it seems the approaches -- no, better to say -- the "mindset" of the people involved is just that different and at the crux of their thought process. One doesn't think she could have done what the planner did. And the other isn't convinced the planner will do soooo much better than what he can do (and has done already) that it's worth hiring the planner. That's it in a nut shell, I guess.
The one who thinks she couldn't have done it by herself is almost certainly right but I think her push to get the self-managing friend to change to a planner is misguided and probably aimed at validation of her "hand it all over to a planner" decision. It seems a cruel thing for a friend to do. Possibly some jealousy involved.
I HIGHLY doubt it. Their financial situations are totally different.
1) they go back to college as friends and so trust each other with the other's best interest
2) the one with the professional active manager, likely has more money than the single person (if for no other reason one is married, and has had two incomes sometimes)
3) the couple has inherited money from two sets of parents
4) it's just that one doesn't think she could have done it herself -- and the other has always done it himself. (and was only tempted by the "well, what if the planner COULD help me earn more?) He just likely won't pull the t r i g g e r to find out.
I think the married friend really does think the other could benefit from the professional help.
In other words, she's projecting her inadequacies. Not uncommon. Your friend just needs to realize that, take it for what it is, and move on. Anything is possible, but it's highly improbable that the investment instruments that whole life salesman push will out perform index funds after fees. Maybe they buy their actively managed Kool-Aid and maybe they don't. The one thing they're right on is at 57 it's likely time to get less aggressive in asset allocation. That has nothing to do with actively managed funds with high fees and ridiculous front-loads. If you need to pay those fees to be told what to do by a professional life insurance salesman, maybe you need to pay the fees. If you don't, you don't. They don't really provide anything of value to justify the fees for the vast majority of people beyond hand holding at a high price. For the rest, go find a fee-only financial planner planner that is actually a fiduciary. Most people don't need one. Their finances aren't that complicated.
Is this money in retirement accounts or general brokerage accounts? If it's in non tax advantaged accounts, I would be very worried about a large tax bill that could potentially come if there are a lot of capital gains and the adviser is recommending selling out of current positions in their entirety.
In other words, she's projecting her inadequacies. Not uncommon.
people are always recommending financial advisers to friends. i guess a lot of it is "projecting inadequacies to others." they feel they cant do it so they assume their friends cant either. i also think it is partly generational. my dad always knew more than most about finances but even still he always used advisers and i see his investment knowledge is much more basic than i expected before i knew better. i think the younger generation isnt satisfied with the opacity of the old financial world. they want online access and they want to see everything. they want to know what is going on, not just trust some crusty fellow with an expensive suit. these advisers make things more complex than they have to just to justify their existence.
but for the most part, people are going to be happy with them. they are salespeople so they know how to sell themselves. they are also dealing with low information customers that can be easily fooled by quickly throwing out unfamiliar terms and concepts.
Last edited by CaptainNJ; 12-08-2017 at 05:33 PM..
^^ not that you know the numbers exactly, but from what you gather -- looking back was what the advisor did for your dad -- more than your dad could have done -- or just more than your DAD thought he could manage his way to.
-- did your dad get results from the advisor that were worth what he paid for that expertise....
^^ not that you know the numbers exactly, but from what you gather -- looking back was what the advisor did for your dad -- more than your dad could have done -- or just more than your DAD thought he could manage his way to.
-- did your dad get results from the advisor that were worth what he paid for that expertise....
its hard to say. my dad has always been pretty risk averse. he never really did too well with investments and part of that is his own preferences. i know at one point he had me sit with his advisers at one of their meetings and i saw a booklet with his investments. it was a lot of different things that i feel they spread it around to overly complicate things. my dad doesnt really know whats going on either. he think he does. he now believes that he benefits from access to "private equity" deals and throws out some ridiculous numbers for how well he is doing. while he knows more than the average person, he is lacking a lot of understanding of investing. this allows the people to manipulate his perception. my ultimate assessment would be that they do a good job of investing his money but it could easily be done without the fee and the fee adds up to a lot of money.
but he does like to have people to talk to and beat up on. he likes feeling like a big shot and they do that when they bring 3 or 4 people to discuss his finances. when the market is down, he likes to be angry at his advisers. he has an old guy mentality and so he gets other benefits from having them. they also offer advice regarding estate planning and other more complicated stuff. i actually joined a meeting on an estate planning matter and then afterwards called my dad's adviser to tell him how much i hated his advice. so im not particularly thrilled with them. i think they were looking out for themselves at the expense of my dad (and myself and brothers).
i think they were looking out for themselves at the expense of my dad (and myself and brothers).
That in a nutshell is what's wrong with a "trust in the financial experts" approach to investing. Most financial planners are NOT fiduciaries. They are NOT legally bound to put their clients' best interests first, and too many of them don't. And by the time you know enough to tell the difference between a financial adviser who will act as a fiduciary and a shark in a suit, you generally know enough to handle basic investing on your own.
Just FYI the advisor in the case of the original post -- IS a legit fiduciary.
Doesn't mean they don't have a vested interest in getting your business, but at least they're duty bound (no groans) to act in their client's best interest. (So I understand)
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