It's true that many bogleheads tend to avoid Financial Advisors. This is because most of them do not feel Financial Advisors add value in terms of portfolio construction and management. It's also true that many boglehead use Financial Advisors. Most have spouse that are not bogleheads and they fear what would happen if they were to pass away. Just to disclose, I had setup a FA for my mom for this purpose even though I could easily manage her account. I am concern that if I pass away, she will need guidance. The FA serves not a way to increase return but as an insurance policy.
One problem with FA is that there are bad FA and good FA's. Similar to hiring a person to fix your roof, most people have little knowledge to evaluate if the contractor is competent or not. This is where you have to be a bit careful since the consequence of failure is great. When a family friend retired, he hired an investment advisor to invest his lump sum. Unfortunately, a lot of it got invested in Enron and so no more lump sum. There are a lot of advisors who's job is to sell you stuff. You think that they make money off your AUM, but they might be making money on the side. There are a lot of good FA, but you have to be vigilant. You can't even go by your friend's recommendation because they might know nothing. This makes hiring an advisor to be a risky move.
Think also from the FA's point of view. This is a business and the FA must benefit. How much money are you going to make the FA? If you have 50 million, you are the advisor's favorite client. The loss of your business means a huge hit to the advisor's bottom line. What if you have 500K or even less. Well, you probably barely worth the effort. They might sign you up in hopes that your asset will grow but they are not going to expend as much effort as the bigger client. In fact, if you create too much work for the FA, they will fire you as a customer. I tried to tread a bit carefully with my mom's advisor. They managed billions, so my mom is probably not their biggest client.
It's ironic that the people who would have the least money need an advisor the most to guide them earlier on, but they cannot afford one. Good luck in your search.
One problem with FA is that there are bad FA and good FA's. Similar to hiring a person to fix your roof, most people have little knowledge to evaluate if the contractor is competent or not. This is where you have to be a bit careful since the consequence of failure is great. When a family friend retired, he hired an investment advisor to invest his lump sum. Unfortunately, a lot of it got invested in Enron and so no more lump sum. There are a lot of advisors who's job is to sell you stuff. You think that they make money off your AUM, but they might be making money on the side. There are a lot of good FA, but you have to be vigilant. You can't even go by your friend's recommendation because they might know nothing. This makes hiring an advisor to be a risky move.
Think also from the FA's point of view. This is a business and the FA must benefit. How much money are you going to make the FA? If you have 50 million, you are the advisor's favorite client. The loss of your business means a huge hit to the advisor's bottom line. What if you have 500K or even less. Well, you probably barely worth the effort. They might sign you up in hopes that your asset will grow but they are not going to expend as much effort as the bigger client. In fact, if you create too much work for the FA, they will fire you as a customer. I tried to tread a bit carefully with my mom's advisor. They managed billions, so my mom is probably not their biggest client.
It's ironic that the people who would have the least money need an advisor the most to guide them earlier on, but they cannot afford one. Good luck in your search.
Statistics: Posted by gavinsiu — Tue Oct 22, 2024 11:41 pm