Quote:
Originally Posted by heep223
Yours and Slava’s point in regards to paying for the financial planning side of things is a good one.
In terms of the actual investment side though, I personally think that you aren’t giving people enough credit. If a professional that has amassed enough savings for a meaningful portfolio of financial assets can’t educate themselves on the basics of creating a balanced portfolio of ETFs, and the principle of rebalancing, then ok I agree go pay an advisor 150 bps to do it for you + the 100bps (minimum) MERs of the funds that you’ll be in.
My only retail experience has been informally with friends and family from all walks of life, and I can tell you that the vast majority of them, with a bit of guidance as to where to find the proper information, have figured out how to create a basic balanced portfolio for significantly less than 50bps. That has been far more effective at achieving their goals than the gongshow that their advisors put together for them.
Here, for giggles, is a long term portfolio earning a nominal 8%, with 50bps fees vs. 250bps fees.
Lastly – I will take some responsibility for not expressing myself properly and fully in these posts, but I’d appreciate it if you could try to limit the demeaning tone in your replies, just because I’m presenting a different view than you (ie. “I just don’t know what to say to you”, “as a Charterholder that should be obvious to you”, “I am absolutely astounded that you think individual investors can manage risk as well as you”). PS that last one I never said.
PPS. I'm going to report you for improper use of the CFA designation ("a CFA").
PPPS. ^ is a bad, nerdy joke   |
You're right, I was overly harsh with some comments, but I strongly believe that telling people to avoid professional advice is bad advice. And you have continually ignored (until this post) many other aspects of said professional advice.
While I fully agree that, with some reading, effort and self-education, many people should be able to build a 'basic balanced portfolio' for themselves. However, there is more to it than that.
Tax planning, for instance, is only useful when done in advance (mostly, for the sake of this argument). Far too often I have been approached by people saying they have this massive tax bill, what should they do to reduce it (the answer being: buy a time machine).
Another issue I have brought up with your expectation that people can 'do it themselves' is that the evidence overwhelmingly shows that people over-manage, and can't stick to their plans. Emotional decisions are both normal, and devastating. Most people, including people who are more than capable of doing it themselves, fail when it comes to the discipline of sticking to their plan.
The interesting thing about who gets advice (vs who does it themselves) is that as wealth (total savings) increases, the likelihood of seeking advice also increases. In other words, as people become more wealthy, they are more likely to seek professional advice. If your suggestion that professionals can do it themselves were true in practice, wouldn't the opposite be true? Wouldn't the likelihood of people seeking professional help
decrease as their personal wealth increased?
The reason it increases (or at least one of the major reasons) is that, as wealth increases, so do the complexities of managing it. And this goes back to what Slava and I <edit: and MoneyGuy> have been saying about there being more to advice than asset allocation.
Another likely factor influencing that, I believe, is that wealth tends to increase with age and experience, and many people seek advice after having experienced 'doing it themselves'. In other words, after learning that they could probably benefit from some professional advice.