Who uses a financial advisor?

[nchunter]

S&P puts out a report each year where it measures active management vs passive and it actually measures performance against the appropriate index. Its a very interesting read when they publish it each year.

Lets just say that the number is 25% of funds beat the index after fees and taxes. So if 1 in 4 active managers beat their index after fees and taxes and you choose to hold say 8 funds in a portfolio, then the advisor has to pick the one winner out of four, and replicate that seven more times to build the portfolio. (1/4)^8 is a .0015% probability that you would choose all funds that would beat their index if 1 in 4 funds did and you choose an 8 fund portfolio. And then you'd have to repeat that process every year for an individual's investment time horizon. Or you could buy the index, plain and simple. Running through that probability is the reason many folks choose passive index investing.

I'm not saying its one size fits all for everyone so don't shoot the messenger however there is an entire industry operating out there who's entire business model depends on individuals thinking that active management and using financial advisors wins out over DIY passive index investing.

Very well said and fits my point.
The MAJORITY of w-2 wage earners could use a simple index fund and come out way ahead. Keep in mind only 12-14% of earner max out their tax advantaged space.
High net worth individuals are another matter.
If you are not maxing out your 401k and not maxing out your HSA and not maxing out you roth IRA if eligible, you are throwing money away with an advisor.

[jsctx84]

To be thorough, I posted this in the Dow thread as well.

Let me be clear and cut through the BS, as Burnadell mentioned above. I am NOT a licensed securities advisor. I AM however a strategist working behind the scenes building financial plans for an extremely successful wealth management group. For those that aren't in the industry that simply means I'm the guy crunching numbers on performance for new and existing clients and evaluating performance. I do NOT sit down with clients and SELL securities. Yes, when I registered for the forum, I plugged (or selected - not sure) in financial advisor not realizing it was viewable. Looking back, I should have explained this from the get go.

With that said, a fair analogy would simply be a finance guy at a car dealership explaining GOOD questions to ask your car salesman. I'd highly doubt he or she would catch so much flack, except from car salesman. It appears there are a few licensed advisors on here who consider their license to be the gold standard for being allowed to discuss the subject. Granted they are the only ones legally allowed to recommend product, I was careful not to do so. In my opinion, there's quite a few advantages to hearing thoughts from someone who's paycheck is not derived on selling one product over another. It's my experience many advisors do NOT see the performance of portfolios in as great of detail as someone in my position. I was very careful not to discuss products as that's not my purview, and the law doesn't allow me to (at least on the front lines). All I merely said was it was a great time to get with your advisor. I sincerely apologize if this offended anyone. Moving on.

I personally don't think you did anything wrong. Lot of police here. So many it's difficult to have discussions before they get turned into pi***ng contests.

[bollomb]

Couldn't agree more.. Kind of get what you get from the audience when someone asks financial advice on a hunting forum

[trophy8]

Couldn't agree more.. Kind of get what you get from the audience when someone asks financial advice on a hunting forum

I see you haven't been on here too long. This is far more than a hunting forum and there is a lot of very successful folks willing to help here. Of course so long as you don't act like a jackass........

[shollandatx]

I see you haven't been on here too long. This is far more than a hunting forum and there is a lot of very successful folks willing to help here. Of course so long as you don't act like a jackass........

This place is much more then a hunting forum - but in this case who was the "jackass"? Myself, a guy WITHIN the industry you inquired about, answers your questions (even offered to help) and the response is I get is ridicule because I doesn't hold a securities SALES license - which BTW isn't needed to provide you some insight.

[shollandatx]

I personally don't think you did anything wrong. Lot of police here. So many it's difficult to have discussions before they get turned into pi***ng contests.

agreed

[bollomb]

I see you haven't been on here too long. This is far more than a hunting forum and there is a lot of very successful folks willing to help here. Of course so long as you don't act like a jackass........

Doesn't matter how long Ive been on here. The guy was giving the advice you inquired about and was flamed for it? If there is something that I fail to see please let me know.

[Burnadell]

Lets just say that the number is 25% of funds beat the index after fees and taxes. So if 1 in 4 active managers beat their index after fees and taxes and you choose to hold say 8 funds in a portfolio, then the advisor has to pick the one winner out of four, and replicate that seven more times to build the portfolio. (1/4)^8 is a .0015% probability that you would choose all funds that would beat their index if 1 in 4 funds did and you choose an 8 fund portfolio. And then you'd have to repeat that process every year for an individual's investment time horizon. Or you could buy the index, plain and simple. Running through that probability is the reason many folks choose passive index investing.

Dustin, you and nchunter and others obviously know your stuff and don't need to seek financial advice from anyone. Others don't...as demonstrated countless times in numerous TBH threads. I didn't intend to knock index funds. They are there for a purpose, but they also are not adjusted for risk. They simply are what they are, and who is to say that a particular index is the correct target for a particular unsophisticated investor to shoot for? Certain people do not want the risk associated with an index fund, and they are not appropriate for everyone. I liken the S&P 500 Index Fund as being in a vehicle driving through the mountains at a rapid pace. It is just fine, making good time going up the hill, but...when the road tops out and starts going down the other side, and the brakes go out...that person is locked in for the wild ride down the mountain. If tech stocks or energy stocks, or whatever sector is getting beaten up, the index fund HAS to hold the stocks in that sector. An actively managed fund CAN reduce their exposure and reduce the risk by changing the sector allocation or bailing on over valued stocks. Indexes are excellent in those double digit up years, but the wild ride down the mountain is rough! Why settle for the average...why not try to BEAT the average...risk adjusted, of course?

The inexperienced self service investor almost always bails out of that index vehicle after getting scared...at the absolute wrong time; then, because they are still afraid of getting back in and getting bruised again, they miss the first 20% or so of the recovery! Classic case of selling low and buying high! An good advisor provides value added service by hand holding and reasoning with the investor.

The average self service investor in index funds does not achieve those average index returns because they don't stay the course throughout the market cycles. I have seen research on that very thing...and witnessed it.

No active fund beats the market indexes every single year. It is over longer periods of time that is key. As for your scenario about picking 1 out of 4 funds, I'm not sure I follow you. It is not that difficult to put together an all-star portfolio of 8 funds that have beaten their indexes over time. That is fairly simple. Then if one fund starts to underperform and for invalid reasons, replace it with another one. Would you rather place your money on the Texas Rangers...or the All-Star Team that has the best player in the league at each position. The average amateur investor does not have the ability to do that.

[44mAG]

Very well said and fits my point.
The MAJORITY of w-2 wage earners could use a simple index fund and come out way ahead. Keep in mind only 12-14% of earner max out their tax advantaged space.
High net worth individuals are another matter.
If you are not maxing out your 401k and not maxing out your HSA and not maxing out you roth IRA if eligible, you are throwing money away with an advisor.

So when people say, "you should max out your 401K as a first step", does this mean you should put the 18K limit towards your 401K every year? I understand the tax advantages, but there are a lot of people out there where that is not close to doable if they want to have some other savings to invest to use before the age of 60 (buy land, build a house, etc). Or, does this mean that you should be putting enough into your 401K as to max out your employers matching contribution,if available? Honest question as I am trying to learn.

[Artos]

T8, I use an advisor (2 actually that are partners) & pay 1% but like mentioned it's in the details...I don't understand a lot of the angles but do know I'm making more than the average in the market & my CPA thinks highly of the folks taking care of my investments.

They don't quite grasp why I do what I do with older collectible firearms...that is one area I understand well, enjoy& my chosen diversification I control. Yours could be land, cattle, etc. my only advice is to have trust/peace if you decide to use the one recommended or research others if you don't.

[trophy8]

I'm not getting into a pissing match on my own post asking for advice nor was I pointing the jackass comment towards one person. But if you feel the shoe fits then wear it.

I am not asking for a lesson here. I am asking for opinions on a financial advisor. I do not have the time to keep up with it all. I obviously do fairly well on my own. I just want to improve. I don't want to put it all in a 401k as I plan to retire early.

To those of you who have helped, thank you.

Also, Burnadell was simply stating that a sales pitch wasn't needed from obvious posts. I'm not saying anyone was right. But I do respect his opinions as I know he is a good dude. I do ask that if you want to argue about all that then do it elsewhere. Thanks

[trophy8]

So when people say, "you should max out your 401K as a first step", does this mean you should put the 18K limit towards your 401K every year? I understand the tax advantages, but there are a lot of people out there where that is not close to doable if they want to have some other savings to invest to use before the age of 60 (buy land, build a house, etc). Or, does this mean that you should be putting enough into your 401K as to max out your employers matching contribution,if available? Honest question as I am trying to learn.

You should always max out what your employer matches. It's free money. I'm no pro but I do know that haha

[Graysonhogs]

in

[Artos]

T8, I use the $$$ that would normally go in my 401 towards my gun biz...I'm the last guy to offer any sort of advice but I prefer to let my fa play with the market $$$ & make my own profit / investments outside that too.

We all handle it different...I do currently max out my ira fwiw & every bit the $0.02 I'm sharing / charging as your TBH/FA is due net 30 upon invoice date.😎

[44mAG]

You should always max out what your employer matches. It's free money. I'm no pro but I do know that haha

Yes I know that as well and have always done it. I just hear it all the time and was wondering if people were talking about that or the 18K.


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