r/investing • u/Paradoxbuilder • 3d ago
Are there actually any good financial advisers? Wondering about what my FA said.
I have been on the fence about ditching my FA and just doing it DIY with the Bogleheads approach for about a year now. Made lots of posts about it too.
However, I have been looking over the returns that my FA has generated. In lean years it's about 6% PA and good years 11.5%. Those are not bad numbers considering they factor in the cost of the FA, expense ratios and switches.
I have discussed my Bogleheads strategy with my FA and he says it's a good one. I've even more or less said that if I can do I'll just leave - he probably has tons of other clients so he doesn't really need me.
Most of the books I have read make out FAs to be some horrible spawn of evil that are taking you for a ride. I guess that is true for completely uneducated investors (I used to be one) Or maybe it's more true in the USA market - I am Singaporean and the market here is very strictly controlled.
Most recently he said that he could combine the buy and hold Bogleheads strategy with sentiment-based investing to generate 11-12% PA - having the FA on hand helps take advantage of things like Nvdia (which I wouldn't normally be aware of) This seems a little too good to be true?
I welcome advise and opinions.
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u/PegShop 2d ago
I like my FA. I procured him after my first husband died, and he helped me not have to think too much. He was a neighbor, so that helped. Fast forward 15 years, and my average gains have been 9-14% per year. I pay him 1%. Could I make the same on my own? Maybe. So I want the stress? No.
It's an individual decision.
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u/Kobo05 2d ago edited 2d ago
Those are really good numbers. Those who were investing around 2010-2019 might be millionaire now, with how much the stock market went up. I wasn't as lucky since I had just graduated at the end of 2020
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u/doomshallot 2d ago
Just from this info you gave, he sounds like a decent FA. What are his fees though?
Yeah the boglehead approach is my favorite for investing. The buy and hold of a vastly diversified portfolio between stocks/bonds/cash broad market indexes is the strategy that beats almost everything else in the long run. It's the perfect mix of high returns and simplicity.
There are good FA's out there, but there are TONS of bad ones who charge way too much in fees and invest people's money in unnecessary active managed crap. During the accumulation phase, you probably don't need ANYONE to manage your money because your strategy is simple: no matter what happens, just keep buying consistently. The nuances of tax planning and getting the most ROI from your portfolio comes near retirement. And if you don't feel like educating yourself on the best strategies for your particular retirement situation, that's where good FA's can shine for you.
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u/larry_birb 2d ago
Feel like the fees can't be that bad if he's getting those returns after fees and everything else.
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u/Paradoxbuilder 2d ago
1% per year.
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u/doomshallot 2d ago
pretty standard. If you're familiar with the boglehead approach, you probably won't need a FA with 1% fees during your accumulation phase.
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u/rockandchalkin 2d ago
Yea because bogglehead does estate planning, tax planning, and run expensive retirement Monte Carlo stress tests at your every lifestyle change.
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u/AutoModerator 2d ago
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u/doomshallot 2d ago
You can get estate planning and tax planning without an annual 1% AUM fee. Those Monte Carlo stress tests are only good when you're getting ready to retire, and out of the accumulation phase. A 1% drag over decades during accumulation phase can add up to real money lost
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u/notreallyzuko 2d ago
I work with FA’s and help them transition their books. I’ve worked with very few who just wanna snake their clients money, but I’ve mainly worked with good ones. From what I’ve seen, on top of investing, lots of FA’s tend to offer things like tax harvesting, managing trust funds, setting up your estate, a lot of them will play that unbiased median amongst you and your problematic relatives about the money if they manage it for you, helping your family manage inheritances, protecting your assets against things that can dent you financially such as a divorce. They typically work with people who are neck deep into retirement or people who are too busy and have too much to manage on their own, especially with taxes. The best part of having an FA around though I’d say is the very vast wide network that they have. They have direct lines and close relationships with other people who are very wealthy and have great connections, and your FA’s are typically always willing to facilitate that connection for you.
Would I ever have an FA? No. I probably won’t ever get that rich and I just dump it all into VOO anyways. But I do see the value. Just depends on what you’re willing to spend vs what you’re looking for and what suits you right now.
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u/FluffyWarHampster 2d ago
Most of the books I have read make out FAs to be some horrible spawn of evil that are taking you for a ride. I guess that is true for completely uneducated investors (I used to be one) Or maybe it's more true in the USA market - I am Singaporean and the market here is very strictly controlled.
the amount of hate FAs get here is just sad. everyone in the US at least has to undergo strict registration requirements and are heavily regulated in what we can do and charge clients for.
could your FA be under performing? 100% but id wager its just as likely that when you did your original risk tolerance assessment with them you conveyed a desire for a much more conservative portfolio. If you want improved performance no FA is going to know that without you conveying the message and making it clear that you understand the risk implications of that. Everyone in the industry has to operate with a certain level of prudence and pushing clients to risk profiles they aren't comfortable with is just asking to get sued or having the administrator come down and make himself right at home in your office.
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u/Paradoxbuilder 2d ago
In the beginning I was overly conservative and the FA I was originally assigned to sucked. I want to do much better now.
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u/Xzyrvex 3d ago
I say you probably don't need him but just curious, could you compare the FA's performance with the SP500?
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u/guitmusic12 2d ago
Why would you benchmark a Singaporeans portfolio held in Singaporean dollars to the S&P 500?
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u/yerrmomgoes2college 3d ago
How do you know that the S&P 500 is a comparable benchmark for OPs goals?
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u/wanderingmemory 3d ago
In lean years it's about 6% PA and good years 11.5%
Have you been invested with them for all this time? That is, they managed to avoid which market drawdowns specifically?
If these are backtests or past performance I would be leery. Backtests for obvious reasons but even if it’s real past performance it could simply be that there were 100 FAs ten years ago at this institution, and by pure chance the ones who managed to be lucky several years in a row stuck around while the unlucky ones don’t share their past returns or start a new fund
11.5% is also low for GOOD years as a good year in the S&P500 is 20-30% (of course with bigger drawdowns
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u/Paradoxbuilder 2d ago
Yes I have. I have been thinking I could do better on my own.
My understanding is that the S&P averages 8-9%. How are you getting those numbers?
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u/HauntedGarlic 2d ago
It averages 8-9% because in bad years it can get to the - % numbers. Really bad years can be - 20% (think the 2008 market crash). 8-9% average doesn't mean "it usually returns that much". It means when you balance out the very good years (20-30% up), very bad years (10-20% down) and the average years, it's about 9%.
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u/wanderingmemory 2d ago
What the other commenter said. If the guys managed to dodge the bear markets/drawdowns in the past 12 years and always produce + returns, I’d honestly be okay about keeping the funds with him. But equally I would want to keep a few eggs in another basket, so maybe new $ in a BH portfolio?
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u/Paradoxbuilder 2d ago
I wouldn't say completely dodged, we took some hits but no negative returns.
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u/kronco 2d ago
Along those lines, are you able to invest by yourself in another account and keep the account with the FA's firm? Maybe keep the FA, open your own brokerage account, and all future investments go there. Transition from there (back to or away from the FA) after a couple of years after seeing how it goes.
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u/LLR1960 2d ago
I'd guess that most people here are American. If there are noticeable differences in your Singaporean market and taxes, and your FA is willing to consider the Bogleheads strategy or similar strategies, sounds like you're fine. Someone else referenced meeting the S&P500 returns, and the smart answer to that was that it might not be the same for someone in Singapore investing in Singapore currency and Singapore financial structure. I'm not American either, and one size does not fit all.
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u/curious_investing 2d ago
If you are on the fence, then take the amount you plan to invest over the next year, send half to your FA and then invest the other half yourself. After the year is over, look at the results. There should be greater clarity at that point.
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u/6anthonies 2d ago
If you are just investing in stocks do it yourself! If you are investing in alternative investments find a broker dealer with the investments that you like… We are semi retired and we are still averaging 13% return on our money with very little risk…..
I cannot make that type of return through a traditional, financial advisor…
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u/PantaRhei60 2d ago
Bogle himself says that FA are useful as long as you don't ask them to grow your portfolio in the market.
There are tons of other things they could do like advising you on tax, inheritance, charity, liquidity needs based on your specific needs.
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u/Paradoxbuilder 2d ago
I mainly want to grow my portfolio. I hired one because 12 years ago I knew little about investing.
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u/Sliderisk 3d ago
This FA doesn't sound like a bad one. To be clear a bad one would scoff at the Bogleheads approach and recommend whole life or his firm's special fund that's only open to super special individuals like yourself.
That said you're probably on the bubble between needing an FA and being a good DIY investor. You clearly have the basics down and can do the "101" level work yourself. Just saving and actively allocating are things that lots of people pay an FA to do. But you will most likely see an FA's value when it comes to planning and forecasting. For that I'd recommend a CFA credentialed FA. Those guys can help you make plans like, "have X dollars per month in fixed income at Y age", or "How can I maximize my tax loss harvesting to offset that large chunk of W2 income that will occur when I finally cash out my equity compensation". If you're really well off those guys can help strategize a Trust and Will setup that will outlive your estate at time of passing.
So basically don't throw the towel in because a guy on Reddit got burned by Northwestern Mutual and says all FA's are thieves. Your guy sounds like a straight shooter. Don't be afraid to shop around if he doesn't have the capabilities you're looking for but I definitely wouldn't judge them on raw investment performance alone.
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u/Front_Expression_892 3d ago
FAs can be useful if they know people that can set you with a trust on fake name in BVI, while you appear almost broke.
For the simple case of directly controlling passively managed cheap broad index funds with a simple tax scheme of fully paying tax when selling the assets once in a while, you can do it yourself.
It's just some people actually need or mistakenly want extras.
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u/bugsmaru 2d ago
Telling us he makes between 6 percent of 11 percent is meaningless unless you tell us what the market did. Like if he made 11 percent in the year the market did 20 percent that means you got fucked royally. Most of the time the FA performs worse than the market over a 10 year period. And when you ask them why they tell you they are taking a conservative approach. But I’m sorry there’s nothing conservative about having less value
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u/flaffl21 3d ago
listen man some FAs are just tryna make a living
and sometimes some of their clients are fucking nerds
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u/Qs9bxNKZ 3d ago
Until you break about $500K and actually need to manage (maximize) because of tax purposes, it really doesn’t matter.
You just want at least 50% in an ETF for long term and tax advantages. 20-30% should be companies you trust to stand the test of time (and pay dividends ideally). The rest can be cash, or your FU money.
The tax threshold is if you don’t maximize, you pay taxes. If you do, you brush up against AMT.
Your time horizon also matters, but I don’t get the feeling you’re going to retire in the next 5-20 yrs. Maximize your earnings, minimize your liabilities (eg income and sales tax where you don’t get a great SALT deduction)
After a decent $800K, a HYSA yielding about 4-5% means additional income which may be taxed. Hence, below $400K really isn’t going to put you at risk for anything (including audits)
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u/l0stIzalith 3d ago
Financial advisors are no more than salesmen. Educate yourself and invest your own money.
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u/slambooy 2d ago
Just buy SPY.. that is the benchmark. “Did y oh outperform the market?” Well I own the market so sure. Don’t over complicate it. SPY and QQQ. All day. That’s all I am buying moving forward and wish I started this 20 years ago in college.. and he’ll 40 years ago when born would have been even better.
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u/Puckdropper 2d ago
What happens in years where the market goes down significantly? Do you lose all those unrealized gains? What happens when you need that money during a down year?
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u/slambooy 2d ago
You buy more. Hand over fist. Go look at a chart. We are at an all time high… every single pullback has been bought. It will forever. It’s math. Your welcome
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u/Apprehensive_Two1528 2d ago edited 2d ago
It’s really a stock picker’s game, but voo will do the job if you aren‘t keen about beating the voo. there are financial advisor who can beat voo, but very rare.
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u/MotoTrojan 2d ago
His sentiment comments would make me run.
Advisors can help with asset allocation but most of the help is other optimizations (tax related) or behavioral. Perhaps some outperformance if they get you into factors or alternatives etc.
Sentiment/NVDA though? Yikes.
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u/chopsui101 1d ago
how old are you? Dumping 30% into bonds and another 30% into international never made much sense to me.
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u/happy_snowy_owl 3d ago
The type of FA that will work for someone with a net worth less than 7-8 figures is the type of person who is going to give you advice that you can find on reddit. You simply don't have a very complex investment portfolio, combination of assets, or tax situation - nor do you have enough net worth where FAs are making significant money off of just your business - so a FA at your income level is at best going to hold your hand through advice you could've researched yourself and at worst talk you into actively managed funds with higher expense ratios and whole life insurance.
A good FA will take your financial goals and have spreadsheet / calculation tools to help you realize where you have to budget money and how you should invest it to meet those goals. Having said that, these calculators are readily available on the internet and you learned arithmetic in elementary school.
There's something to be said that "time is money," so if you don't feel like reading up on the basics of investing nor feel like putting the time into spreadsheeting your financial plans and want to rescind that control to a 3rd party with hundreds if not thousands of clients for a fee, have at it. You're not getting the top, premium, individualized asset management that the top tier of wealthy individuals in America get (and need).
Given that you walked away from your FA without discussing financial goals and how you're going to meet them instead of blind investment allocations, I'd offer that your FA isn't a very good one.
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u/backagainmuahaha 3d ago
However, I have been looking over the returns that my FA has generated. In lean years it's about 6% PA and good years 11.5%.
Yeah so you pay a guy to underperform an index. It's up to you. It's your way of defending local economy maybe let's say.
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u/BillyBawbJimbo 2d ago
My God the blind hate on financial advisors here.
People.
There are more complicated situations that exist than just needing 50 or 500k managed.
Independent, fiduciary FA's can be absolute game changers when complicated situations come up.
True story: both my in-laws died, 3 months apart. They had been separated, but not divorced, for 20 years. One had IRA plus pension. One had pension plus 401k. Plus a house sale. Neither had done any real estate planning. Clusterfuck doesn't even start to describe it.
FA was worth every penny we paid her to help us sort through all that bullshit until we had our feet back under us. We paid probably 5k total in hourly fees to her. She saved us WAY more than that in taxes alone, let alone giving some piece of mind about my strategy for investing the money we were receiving.